Czechia bounces back to join EU's 'top 10 healthiest economies'

The Czech Republic has rejoined the top 10 healthiest economies in the EU, ranking ninth in the latest Czech-made Prosperity and Financial Health Index. The last time it held this position was in 2022 before a rise in inflation caused a drop.

The analysis, co-authored by the Europe in Data portal and Česká spořitelna bank, attributes the improved ranking to reduced inflation and stabilized public debt. The study also considers factors like GDP growth and housing prices.

In 2023, inflation decreased to 2.7 percent, a sharp decline from 15 percent in 2022. This brought inflation closer to the Czech National Bank's target, boosting the country’s overall economic position.

Public debt also saw improvement. Although the nominal public sector debt exceeded CZK 3 trillion last year, economic growth helped reduce its relative level to around 42 percent of GDP. This places the Czech Republic among the EU’s three least indebted countries, well below the eurozone average, which is nearly double.

“Some Czech companies are returning to domestic ownership, and there is more investment by Czech companies abroad. As a result, Czech capital is growing stronger and balancing out the previous outflow of profits,” Martin Wichterle, owner of the Wikov engineering group, said as part of the study.

However, issues remain. “Housing affordability and environmental concerns continue to hold down our overall score,” said Tomáš Odstrčil from the Europe in Data portal, highlighting obstacles to further improvements in the ranking.

Economic growth is still a challenge. David Navrátil, chief economist at Česká spořitelna, explained: “The Czech economy has not experienced significant growth since Covid-19. We are at 80 percent of Germany’s GDP, and our GDP per hour worked is only 60 percent of Germany’s.” This means Czechs must work one-fifth longer to compensate for lower productivity.

The country also faces obstacles to growth, including a decline in per capita consumption relative to purchasing power; this means Czechs' money is worth less. Since 2019, it has fallen from 84 percent to 74 percent of the EU average. 

The study also notes that the country’s export value-added (producing goods with minimal additional worth) is the seventh-lowest in the EU, indicating a reliance on assembly work rather than innovation, technology, and expertise. These factors hinder long-term economic progress.