Czech Republic overview

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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.

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 2022 2.5%

EBRD forecast for the Czech Republic's real GDP growth in 2023 0.5%

GDP grew robustly at 4.2 per cent year-on-year in the first half of 2022, but the economy remains one of the most vulnerable in the region in the current environment, owing to very high inflation, energy security risks, and a potential recession in the EU economy. Growth in 2022 has so far been driven by a rebound of investment and private consumption, although household spending stalled in the second quarter. Inflation reached 17.5 per cent in July 2022, taking its toll on household income, as real wage growth declined by a significant 9.8 per cent in the second quarter. The central bank has raised its two-week repo rate to a 20-year high of 7 per cent to help counter rising inflation. Industrial production growth has seen monthly fluctuations this year and will be affected by higher energy prices, and further trade and supply disruptions. In terms of energy security, the Czech Republic is one of the most exposed economies in the face of the shutdown of Russian gas imports. Moreover, most of the energy price increases are yet to be channelled to consumers, further inflating prices, while the government is yet to introduce significant support measures. GDP growth is still forecast at 2.5 per cent for 2022, as the economy will likely fall into a technical recession over at least the next two quarters. Therefore, given the overall slowdown of the economy in late 2022, GDP growth is forecast at just 0.5 per cent in 2023.

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