Overview

The United States and the Czech Republic forged a close relationship during the beginning of the last century, when America pledged its support for Czech independence. Though this friendship stalled during the period of Soviet influence, it reemerged as the Czech Republic again claimed its political independence and joined the economic ranks of the European Union at the close of the 20th century. Today, this nation that sits at the heart of Europe has emerged as one of the region's most prosperous and industrialized economies. The Czech Republic's strategic location, well-developed infrastructure, and skilled labor force has allowed this small nation of 10.5 million citizens to punch above its weight and become an important regional and international manufacturing hub and consumer market. Economic growth is largely based on inflows of FDI and growth in exports. With about 80% of GDP linked to export orders, particularly to Germany, the economic health of the Czech Republic relies heavily on the strength of its neighbors. After experiencing robust growth of 6% from 2005-7, the Czech Republic felt the impact of the global economic slowdown in 2009 as growth dropped to -4.2%. Though unemployment figures still hover around 9%, 2010 has seen an economic rebound for the country as export orders of industrial goods to Western Europe increased, and GDP growth was reported as 2.5% in 2010 (Ministry of Finance). Estimates for 2011 range from 1.2% to 2.8%, depending on the source (the Ministry of Finance estimates 2.2%). Over the first twenty years of Czech independence, foreign investment has played an important role in boosting Czech productivity, creating new jobs and raising wages and domestic consumption. The result is the Czech Republic has become a major hub for automotive and electronics manufacturing in Central Europe. The U.S. has played an important role in this regard, and is the largest non-European investor in the country. In addition to new manufacturing facilities, a growing number of American companies are establishing R&D and shared-services support centers. This trend would support the current government's goal of transforming the country from a manufacturing base to one of research and development, with more firms tapping into the Czech knowledge base and designing and developing technologies here.

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