Overview

Czech Republic


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A formerly communist country that had a ‘velvet revolution’ and a fairly painless transition to a market economy

The Czech Republic has two main geographical areas. The largest, to the west, is Bohemia, a broad, elevated plateau of plains and low hills centred on Prague and ringed by mountains. Beyond the mountains to the east lies the second main area, the Moravia Valley centred on Brno, whose eastern boundary is formed by the Carpathian Mountains that separate the country from Slovakia.

Ethnically the population is fairly homogenous. But throughout the country there are also small numbers of Slovaks, who moved here when the country was part of Czechoslovakia, and also some Roma, or gypsies, whose lifestyle exposes them to both economic and racial discrimination.

Until the 1980s, the Czech Republic had a young population, but falls in the birth rate are causing the population to age rapidly.

Levels of human development are fairly high for a formerly communist country. In the past, health standards were reasonable, though lifestyles were unhealthy: high fat consumption and smoking reduced life spans. Over the past decade, however, life expectancy has increased.

This is a broadly based industrial economy—though between 1990 and 2006 industry as a proportion of GDP fell from 48% to 28%. Previously it concentrated on heavy industry such as engineering and steel, but more recently some manufacturers have been exporting intermediate goods, particularly to Germany. Lighter industries such as food processing have also been expanding.These changes have however widened regional disparities. Unemployment is now highest in former coal and steel areas such as northern Moravia.

Privatization of state-owned assets took place rapidly. In 2005 the private sector accounted for more than 85% of GDP. Transferring the ownership in this way did little to transform the management of enterprises and many have since stagnated. But some businesses acquired an injection of expertise from foreign companies: the reputation of Skoda cars, for example, was transformed when it was taken over by Volkswagen.

The agricultural sector accounts for only about 4% of GDP and is now entirely in private hands, either as commercial farms or cooperatives. Now that they are in the EU, Czech farmers have greater price support.

Meanwhile, many more people are working in services, particularly in retailing where many of the large stores are now part of foreign-owned chains such as Tesco. Others work in activities catering for 6 million tourists a year. Prague is the main tourist attraction and most new jobs have been created there or in the surrounding regions—heightening the regional disparities.

From a velvet revolution to a velvet divorce

From 1918 to 1938, and from 1945 to 1992, what is now the Czech Republic was united with Slovakia. As Czechoslovakia, their joint transition from communism in 1989 was so smooth it was termed the ‘velvet revolution’. Within the Czech lands, the democracy movement was called the Civic Forum, one of whose leaders was the writer Václav Havel. Civic Forum won most of the Czech seats in the election of 1990 while a corresponding movement in Slovakia won the seats there. The new parliament elected Havel as president.

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