The Prosperity Index 2024

In the overall comparison of the prosperity of the 27 EU countries in the latest Czech Prosperity Index, we fell one place year-on-year to 16th place. Across the ten pillars of prosperity, such as the economy, education and research, the labor market, and the environment, it is generally true that the Nordic countries offer the best living conditions. However, even they are not without their problems. Sweden, for example, has long boasted the strongest economy, the best access to education and research, and a high-quality environment, but it is slipping towards average in terms of infrastructure and security. 

After Sweden and Denmark, neighboring Austria has also made it onto the symbolic winners’ podium for the first time, having managed to increase its standard of living across almost half of the indicators year-on-year. “The opposite process occurred in Czechia, where we fell in six out of ten pillars, which brought us closer to the eastern countries, which occupy positions at the opposite end of the comparison,” explains Tomáš Odstrčil, Europe analyst at Data. These are mainly Greece in last place, Bulgaria in second-to-last place, and Slovakia in 25th place, which rounds out the trio of least prosperous countries according to last year’s data. Falling one place is not such a problem in the overall picture, but in 2021 we were still in thirteenth place, which already points to a potential threat.

The unavailability of housing affects young people the most

In the Czech Republic, housing has long been the most problematic area. Its price, the length of the building permit process, high household expenses, and expensive new buildings make it impossible for Czechs to live according to their wishes. We rank among the six worst countries in each of these indicators. The situation is not helped by the greatest fragmentation of municipalities across the EU, and while in previous years we could at least rely on the affordability of rental housing compared to owning our own, in 2024 we fell to the average in this respect, according to the Numbeo website. 

According to Martin Lux from the Institute of Sociology of the Czech Academy of Sciences, the housing crisis affects young people the most. “Young people, or rather all those who do not have their own housing and whose families cannot help them in this regard. Without financial support from their families, owning their own home is increasingly becoming an unattainable dream. And rental housing does not offer much security yet.”

The harsh impact of the housing situation on young people is also confirmed by Tereza Hrtúsová, an analyst at Česká spořitelna. “Roughly three-quarters of households in Czechia live in their own homes. A recent survey by the Czech Statistical Office showed that 92% of households in Czechia are satisfied with their housing. The situation is worse when it comes to the availability of housing for people who want to buy their own apartment or house. The current situation on the housing market poses the greatest threat to young people who are unable to obtain their own housing with the help of their families, whether through inheritance or financial assistance. The second group is seniors, especially those who live alone in rented accommodation at market prices.” Furthermore, according to the analyst, the renewal of the housing stock does not correspond to demand and population growth. “There are no mechanisms or restrictions on the purchase of real estate by citizens within and outside the EU. Investment apartments also often remain empty. A mere change in building regulations will not ensure the availability of decent housing for young working families,” adds Tereza Hrtúsová.

However, there are also several indicators showing that we have improved in terms of housing. Investment in residential construction has increased significantly, which has led to an increase in the number of houses and apartments per thousand inhabitants. However, growth in the housing stock does not always mean that housing will become cheaper. For example, in Denmark, where there are roughly the same number of apartments per capita as in Czechia, buying your own home costs about half as much – 7 annual salaries compared to 13. This is one of the reasons why we rank 23rd in the standard of living pillar. 

The solution is certainly not simple, and it is definitely not enough to solve just one problem. It is necessary to approach the issue of housing comprehensively, as Martin Lux suggests: “In addition to faster building permits and deregulation in the area of housing construction, it is also necessary to balance state support for owner-occupied and rental housing – for example, by abolishing the tax deduction of interest on housing loans , strengthen security in rental housing, significantly increase taxation on vacant and speculatively held residential properties through higher property taxes or capital gains taxes, analyze the concentration of land holdings intended for development and the concentration of capital in the production of building materials and construction, and intervene in cases of proven market failure, and, last but not least, support greater housing construction by municipalities, cooperatives, and the non-profit sector in the area of affordable rental housing,” explains the sociologist.

It should be added that there are also significant regional differences within the Czech Republic. That is why we have expanded the Prosperity Index to the level of Czech micro-regions, where we have also focused, for example, on the number of completed apartments in individual municipalities with extended powers. Central Bohemia performs best in this respect, especially Poděbrady, where, according to data from the Czech Statistical Office, there are 18.76 completed apartments per thousand inhabitants. However, the micro-regions in the South Moravian Region are also strong, especially Pohořelice, which came second in this comparison, Slavkov u Brna, and Mikulov.

Czechia lacks renewable energy sources

Czechia also suffers from poor environmental conditions and is unable to create good conditions for business, ranking 22nd in both areas. In terms of the living environment, we are troubled by high emissions, particularly from heating, land use, and forestry (although according to this year’s data, the situation is improving) and the overall calculation of greenhouse gas emissions per capita. “The main reason for high emissions per capita is the fact that we have the second highest share of industry in GDP in the EU, and these are largely energy- and emission-intensive industries. At the same time, fossil fuels still account for a high share of energy production and consumption, and Czechia remains one of the largest exporters of electricity in the EU,” explains Veronika Krejčí, spokesperson for the Ministry of the Environment.

According to the Ministry of the Environment, progress should also be made thanks to high investments in the environment, the use of public transport, and individual programs to support energy-saving measures, such as Nová zelená úsporám (New Green Savings).

Electricity prices, lack of startups, and insufficient market capitalization harm the business environment

In terms of the business environment, the market faces a lack of startups, foreign companies that take a high share of added value, low capitalization of the Prague Stock Exchange, which discourages potential investors, and a generally low rate of new business creation. If we focus on where the largest number of entrepreneurs in Czechia are located, Prague clearly leads in terms of per capita figures, with 152 entrepreneurs per thousand inhabitants, and micro-regions in the Central Bohemian Region such as Říčany, Černošice, and Sedlčany are also doing very well. However, Jilemnice in the Liberec Region, where the ratio is 131, is also worth mentioning.

Entrepreneurs have also been hit hard by rising electricity prices, which have tripled in three years. One way to achieve cheaper electricity may be the aforementioned introduction of renewable sources. “Building their own electricity sources, most often photovoltaics today, can reduce companies’ electricity bills, but also ensure security of supply. However, it is important to think about such investments comprehensively and not rely on rooftop solar panels when you have large gaps in energy efficiency,” says Kateřina Novotná, editor-in-chief of the Byznys a udržitelnost (Business and Sustainability) portal, adding, “Sustainability can certainly go hand in hand with business, and many companies are going down this path regardless of legislative requirements. Startups, for example, often have sustainability in their DNA, but small steps in large companies are also important. Small changes, such as greater use of secondary raw materials or reducing packaging, ultimately have a big impact.”  

Czechia experienced the biggest decline in digitization and infrastructure

The most significant change compared to the previous year occurred in Digitization and Infrastructure, where we fell from tenth place in 2023 to sixteenth place. However, it should be added that some of the variables monitored were adjusted, either by the institutions that collect the primary data, or we had to replace the data source with another one due to the termination of the survey. 

For example, in the area of public administration digitization, the methodology for evaluating the Digital Economy and Society Index (DESI) was changed, which moved us from a slightly below-average 17th place to the penultimate position with a score of 487.3 out of 700 points. Estonia, which economists often use as a model we could aspire to, scored 660.6 points in this category for comparison.

The highest number of fiber optic connections per capita is found primarily in regions with a history of mining

A regional view of fiber optic internet reveals a surprising finding. The highest number of active connections per capita is not found in Prague, but in certain micro-regions of post-mining regions. Český Těšín and Havířov in the Moravian-Silesian Region and Kadaň in the Ústí Region are among the municipalities with extended powers where the proportion of connections per capita is highest, but other micro-regions in these regions and in South Moravia are also doing well. “There are several reasons for this,” says Zdeněk Bumbálek, adding, “First and foremost, these are the most populous areas of the Czech Republic after Prague and the Central Bohemian Region, which increases the attractiveness of these regions for the construction of modern telecommunications infrastructure. The structure of the housing stock also plays a key role: these regions have a high concentration of housing cooperatives, where the process of obtaining consent for the construction of an FTTH network is significantly easier than in cities with highly fragmented ownership, where it is necessary to negotiate individually with a large number of owners or homeowners’ associations.” According to Zdeněk Bumbálek, European subsidies directed to these regions for infrastructure renewal are also a key factor.

Higher high-speed internet coverage can significantly help these regions, as Zdeněk Bumbálek confirms. “It not only enables a better quality of life for residents, but also the development of business, access to digital services, education, and remote work. If this trend continues and is supported by targeted investments, it could be an important tool for increasing prosperity and reducing disparities between regions.”

The most significant improvement was in the area of financial health

However, there are also areas in which we have improved significantly. One of the most notable is financial health, where we moved from 13th place in 2022 and 12th place a year later to 9th place in a comparison of 27 EU countries. This is due to a combination of several factors, including the fact that we improved in most indicators, or at least remained at the original values. 

The most significant shift in ranking occurred in the area of savings. In other countries, price increases and inflation had a more dramatic impact on the savings of local residents, which pushed the relatively stable pockets of Czechs closer to the top of the comparison. A similar scenario was repeated for other financial health indicators—we are able to pay our bills on time, and few of us suffer from social and material deprivation, for example.

“The household savings rate rose above its long-term average during the coronavirus pandemic, especially among higher-income households. The maintenance of higher savings rates in subsequent years can be explained to some extent by interest rates, which remained higher than in other EU countries,” explains Tereza Hrtúsová from Česká spořitelna.

We are at the top of the EU in health and safety

There has also been a slight but significant shift for Czechia in the area of health and safety. Since the first year of the Prosperity Index, Czechia has been on the podium, and with each passing year we have moved closer to the top, which we actually reached last year. We owe our top ranking to our effective protection against cybercrime, very low infant mortality, and relatively accessible medical care. 

However, being number one does not mean that the situation regarding safety and healthcare has been resolved. We still have the 15th highest percentage of obese people, and if we add the overweight population to that, we fare even worse. Furthermore, only eight EU countries invest less than we do in defense, and we are thoroughly average in terms of healthy life expectancy (61.8 years) and GDP invested in healthcare (8.5%).

Although, according to Petr Smejkal, a member of the think tank Minister of Health and chief epidemiologist at IKEM, awareness of healthcare is developing in the right direction, putting it into practice often remains a dream for the future. “Healthy life expectancy is an integral part of professional and public debates – this is a positive and necessary first step. However, in order for us to actually live longer and healthier lives in Czechia, we need to bring the healthcare system up to a level appropriate for the 21st century. Every area – prevention, digitization, and sustainability of financing – is equally important. The most important thing, however, is that progress actually happens. First and foremost, with regard to the users of the system – patients and doctors, or healthcare professionals,” concludes Petr Smejkal.