The Czech Republic: a strategic hub in global supply chains
The Czech Republic is solidifying its position as a strategic hub in the global supply chain thanks to its central location in Europe, skilled workforce, and competitive costs. Key sectors such as automotive, electronics, and manufacturing attract leading companies that choose the country as a base for production and distribution.After post-Covid stagnation, the Czech economy has gradually resumed growth, driven by household demand recovery. This dynamic, bolstered by supply chain diversification due to recent geopolitical tensions, could further benefit in 2025 from increased foreign demand and new private investments. The transition to digital and sustainable technologies, such as automation and IoT, strengthens the country’s role as a reliable nearshoring hub (A business strategy that involves relocating part of the production or business operations to countries near the target market, rather than distant countries as in the case of offshoring) and supports more resilient growth.
According to Trading Economics, the Czech GDP grew by 0.4% in Q3 2024, slightly above the preliminary estimate of 0.3% and maintaining the previous quarter’s rate. This marks the fourth consecutive quarter of expansion, supported by increased household consumption (+0.5%), particularly domestic spending (+0.7%). However, government consumption (-0.1%) and gross fixed capital formation (-1.2%) decreased. Net external demand positively contributed to GDP, with exports (+1.9%) and imports (+3.2%) both rising.
Year-on-year, the economy grew by 1.3% in Q3 2024, accelerating from +0.6% in the previous quarter and aligning with preliminary estimates. The Czech agricultural sector contributes 2% of GDP and employs 2.75% of the workforce, primarily producing sugar beets, potatoes, wheat, barley, and poultry. The industrial sector accounts for nearly 40% of GDP. Alongside traditional industries like automotive, steel, metal processing, chemicals, engineering, food, textiles, and glass, high-value-added segments such as biotechnology, life sciences, precision engineering, nanotechnology, and specialized IT have seen growth.
Services remain the economy’s backbone, generating about 60% of GDP. Eurostat data highlights the crucial role of the automotive industry, including component production, representing 26% of manufacturing and 23% of total exports, employing over 180,000 people. The Czech Republic ranks second globally in per capita passenger car production, third in the EU for vehicle production, and tenth globally. The sector includes almost 200 component suppliers, mainly foreign-owned through acquisitions and greenfield or brownfield investments. Besides traditional manufacturer Skoda (part of VW), Toyota and Hyundai plants produce about 1 million cars annually.
The electronics sector has a long tradition, spanning component production to consumer electronics and aerospace radar. It heavily relies on imported materials and components, employs nearly 150,000 workers in over 15,000 companies, and uses a variety of technologies. One-third of the world’s electron microscopes are produced in the Czech Republic.
Engineering is another sector where the Czech Republic excels, with international companies conducting R&D through local subsidiaries. Major investors include ABB, Parker Hannifin, Ingersoll Rand, and Honeywell. FDi Benchmark ranks Czech scientific institutions among the best in the CEE region, comparable to Western countries. This is the country’s third-largest manufacturing sector, employing over 126,000 workers.
Closely tied to the automotive and electronics industries, the plastics sector plays a significant role, accounting for about 6.5% of total industrial production.
The Czech Republic also boasts one of the most advanced biotechnology sectors among new EU members, with over 500 business entities. Success areas include human and veterinary drug development, diagnostics, fermentation technologies, and biotechnology for waste management and environmental protection. The Czech government has prioritized developing new pharmaceutical treatments and diagnostics, investing over €2.5 billion in the past decade to enhance research infrastructure.
The Czech Republic is particularly open to international trade, with an export-to-GDP ratio of 74.8% (2022), one of the highest in Europe, and imports exceeding €180 billion annually. About 80% of Czech exports go to other EU member states, positioning the country among the EU’s top performers.
2023 export and import data:
Main export partners:
Germany – 32.8%
Slovakia – 7.7%
Poland – 7.3%
France – 4.9%
Austria – 4.2%
Italy – 4%
Main import partners:
Germany – 20.9%
China – 17.6%
Poland – 8%
Slovakia – 4.4%
Italy – 3.9%
Sources: https://www.erstegroup.com/en/research/report/en/SR407494 ; https://ec.europa.eu/eurostat/web/main/home ; https://www.easylink.cz/cz/market/ceska-republika/
