Czech Republic’s Economic Boom Credited to High Tech, Low Taxes

Czech President Milos Zeman arrives for the Warsaw NATO Summit on July 8, 2016 in Warsaw, Poland. NATO member heads of state, foreign ministers and defense ministers are gathering for a two-day summit beginning later today. (Photo by Sean Gallup/Getty Images)
Sean Gallup/Getty Images
THOMAS D. WILLIAMS, PH.D.

The Czech Republic, riding a high-tech-driven economic boom, announced major new investments Thursday as part of the country’s expansionist, free-market economic strategy.

Having elected populist President Miloš Zeman to his second term this year, the Czech Republic has been experiencing solid growth and rising standards of living, with an expanding economy and attractive fiscal policy that are drawing sustainable foreign investment.

An opponent of European Union (EU) migrant quotas and a supporter of a Brexit-like referendum on Czech membership in the EU, Zeman is considered a Eurosceptic, despite earlier support for both the EU and the common currency (euro).

As of 2018, the Czech Republic’s “stable macroeconomic situation” and long-term growth forecast based on a steadily rising GDP have been supported by a growing high-tech industry, according to an analysis by Deloitte, the UK-based accounting and professional services network.

Deloitte found that 2017 was marked by “renewed acceleration of economic growth,” with an annual growth in GDP of 4.3 percent. “Growth in household consumption accelerated to 3.9%, namely owing to the low unemployment rate and faster-growing salaries,” Deloitte added.

While 60 percent of the Czech economy’s gross added value comes from services, Prague announced on Thursday that “Czech and foreign companies plan to invest more than 65 billion koruna ($2.9 billion)” in the near future.

This economic boom in the high-tech sector, comprising 106 separate investments, is due in large part to the Zeman government’s continued tax incentives, which have proven highly successful worldwide.

Passed in 1998, Resolution 298 on proposed investment incentives led to tax breaks on foreign investments of at least $10 million. The basic economic philosophy of attracting investors by letting them keep more of what they earn has helped lift the Czech Republic out of its dismal economic state under decades of Soviet domination.

The Czech government now grants investment incentives for high-tech companies who produce at least 50 percent of their product domestically. Such enticing benefits make the country enticing to foreign investors.

Thursday’s press release credits the nation’s economic boom, which is bringing in capital from Japan, Austria, Germany, and Spain, to these “favorable investment incentives.” Of the 106 new projects, 26 involve new companies setting up shop in the Czech Republic, and 80 consist of existing companies expanding their operations.

The 80 cases of expansion are forecasted to add 53.5 billion koruna to the economy, and the 26 new firms are expected to bring an additional 12.1 billion koruna in economic development. The largest scheduled investment is Siemens, which plans to invest seven billion koruna, including a new development center in Ostrava.

Vaccine production, paper mills, and a Škoda Auto expansion are among the other big names headlining this new high-tech economic project.

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