ECONOMY

Under Soviet control, the former Czechoslovak economy was subject to a particularly high level of state control, lacking even the small-scale private enterprise that existed to some extent in all other Eastern European economies. In the aftermath of the ‘Prague Spring’, especially, economic development was concentrated for political reasons on heavy industry at the expense of traditional strengths in light and craft-based industries. In the immediate post-Soviet era at the beginning of the 1990s, these inefficient and, in some cases, redundant industrial monoliths appeared to be a considerable impediment to the growth of the economy. The other problem was a dearth of natural resources – the country relied heavily on the former Soviet Union for most of its raw materials, particularly oil.
After a period of political and economic crisis, which ended with the separation of the Czech and Slovak Republics and a dispute with the Soviets over oil supplies, the Czech government pushed ahead with a rapid program of market reforms, including a program of mass privatization and a major overhaul of the country’s financial system. The Government identified priority industries for development. These included: aircraft and vehicles, electronics, nuclear energy, gasification of coal, transport and communications, as well as traditionally strong light industries such as textiles, leather, ceramics and glass, and a variety of agricultural and service industries.
Although more than three-quarters of economic output is now in private hands, the State retains a major influence through minority shareholdings and state-owned banks (which in turn own parts of major corporations) in the economy. The results have been fairly good, with the exception of a mild recession during 1997-98. The Czech Republic has recorded steady growth within, on the whole, a sound fiscal and monetary environment. Annual growth is now slowly climbing, at 2.9 per cent. The country joined, along with nine other countries, the European Union in May 2004. Trade links with Austria and Germany in particular, and with the EU generally, have grown substantially. The Czech Republic has already acquired membership of the IMF, World Bank and the European Bank for Reconstruction and Development.