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Czech Republic overview

City in Czech Republic

The European Bank for Reconstruction and Development will resume investment in the Czech Republic after the Bank’s Board of Directors approved a request by its government to help with the recovery from the coronavirus pandemic.

Our re-engagement will be temporary and not exceed a period of up to five years. It will be limited in scope and focus on the private sector. It will complement support provided by the European Investment Bank and the European Union (EU).

A joint assessment by the EBRD and the Czech government has identified as areas of engagement the provision of direct and private equity to strengthen companies that have suffered revenue losses as a result of the pandemic and those that have found new growth opportunities.

The Bank will invest venture capital to support innovative, high-growth local small and medium-sized enterprises that have limited access to finance. Further development of the local capital market will also facilitate the financing of the real economy.

The green energy transition remains a high priority of the Czech Republic’s agenda. The intensity of the energy sector is nearly twice the EU average and the country is one of the largest greenhouse gas emitters in Europe, with 75 per cent of its heating produced from coal. The EBRD can offer its know-how in strengthening the regulatory environment for renewable energy and support energy efficiency investments with dedicated credit lines to address these challenges.

The EBRD originally stopped investing in the Czech Republic at the end of 2007 following the country’s request to graduate from being a recipient of the Bank’s funds.

However, the Czech Republic always remained a shareholder of the EBRD and the Bank continued to manage its portfolio there and supported Czech companies in other EBRD countries of operations.

The new approach will be reviewed in 2024.

As well as being a country of operation, Czech Republic is also a donor to the EBRD with a total contribution of €23.1 million in donor funds to support the Bank’s operations. 

The EBRD’s latest strategy for the Czech Republic was adopted on 15 September 2021.

EBRD forecast for the Czech Republic's real GDP growth in 2023 -0.1%

EBRD forecast for the Czech Republic's real GDP growth in 2024 2.5%

The economy continues to suffer from the negative effects of high inflation. Despite the economy avoiding a technical recession (two quarters of consecutive negative growth), GDP declined by 0.6 per cent in annual terms in the first half of the year. The contraction was caused by subdued domestic demand as private consumption declined for the fifth quarter in a row year on year. Nevertheless, positive quarterly growth of household consumption in the second quarter suggests that abating inflation bodes well for a gradual recovery. Exports also recorded a quarterly decline in April-June 2023 after strong growth in the previous three quarters, reflecting potential weaknesses ahead. On a positive note, investments rebounded in the second quarter. Inflation remained high at 8.8 per cent in July 2023, but is on a clear downward path. Real wages fell by 3.1 per cent in the second quarter of 2023. Financial conditions will remain tight as upside risks to inflation are strong. The Czech economy is expected to grow by 0.1 per cent in 2023 as the second half of the year could bring some rebound of consumption amid a still tight labour market. Weakening foreign demand is a key downside risk to the forecast. In 2024, amid easing monetary policy, growth is expected to return towards its potential, at about 2.5 per cent. 

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