13. 6. 2024

The Prosperity Index 2023

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The Prosperity Index 2023

The Czech Republic dropped two places in the EU Prosperity and Financial Health Index year-on-year. The most significant decline was recorded in the area of the economy

The Czech Republic dropped from 13th to 15th place in the EU in the overall assessment of the second edition of the Prosperity and Financial Health Index. We are doing best in health and defence, but lag behind in housing. Year-on-year, the Czech Republic’s economic performance is the worst, mainly due to high inflation and low value added. The summary results of the analysis for 2023 were announced at the reVision of the Czech Republic conference. The conference is organised by the Second Economic Transformation Association, which advocates strengthening the Czech economy and raising it to rank among the most advanced countries in the world.

In the first year of the Prosperity and Financial Health Index, the Czech Republic ranked 13th on average in the EU comparison. The data analysis showed not only the strengths of the Czech environment, such as health and safety and solidarity in society, but also the reserves that the Czech Republic has to deal with. Although there has been a positive year-on-year shift and improvement in a number of indicators, we have dropped two places in the overall ranking. The fall below the EU average is mainly due to a decline in the economy or in education and research.

5th highest inflation is knocking the legs out from under the Czech economy

The Czech Republic recorded the biggest year-on-year decline in the economic pillar. “We were dragged down mainly by inflation, where the Czech Republic fell from an above-average eighth place to 23rd place. Our inflation of nearly 15% was surpassed by only four EU countries, and although inflation across Europe managed to slow down and return to its original levels in the second half of the year, the Czech Republic was not fast enough,” explains Tomáš Odstrčil, Europe in Data Analyst. However, he adds that the inflation rate stabilised at 2 percent at the beginning of this year, which is exactly in line with the CNB’s inflation target.

The Czech economy’s most fundamental problem is low value added, which has been a problem for a long time. Whether we compare it with total output or with the value added of exports. “Value added is created mainly on the research and development side of the product and on the marketing and sales side. Unfortunately, we still rely on a subcontracting economy based mainly on production. We have to go through a transformation to our own products and services. It is not an easy path, but it is the only possible one, and we are trying to define and support this path,” explains Martin Wichterle, owner of Wikov Industry and ambassador of the Second Economic Transformation.

On the other hand, the positive aspects of the Czech economy are its diversification, thanks to which we have the third-highest economic complexity, or the sixth-lowest national debt. However, in this area we have also deteriorated. While in 2022 it was the fourth-lowest debt, last year it was the sixth lowest and according to the latest data this year we are ranked 8th. Debt has therefore gradually climbed from 37.7% to 44.2% in three years.

According to Česká spořitelna analyst Tereza Hrtúsová, the question is whether we should even try to curb the growth of debt. “Obviously, debt that is caused by ‘wasteful’ spending and inefficient use of funds is bad. But if we take into account the growth of debt, which is backed by funds invested in the future of the Czech Republic, it is an opportunity that we should take advantage of. The gap between Prague and the other regions of the Czech Republic would not be so deep if the transport infrastructure was functional. And we do not have that now, given the state of D1 and the railway infrastructure between Prague, Brno and Ostrava.”

Czechs save for their own housing for an average of 15 years

In the long term, we have the worst results in indicators that show the state of housing. In this pillar, the Czech Republic ranked 22nd in the EU comparison. The worst results were achieved in the fragmentation of local government, the length of construction procedures and the affordability of housing. On average, Czechs save for their own housing for 15 years and over 6% of Czechs spend excessively on housing, which puts us in 15th place in this indicator.

However, even in these pillars, there are examples of what works well in the Czech Republic. In the case of housing, this includes the quality of buildings – we have the fifth-lowest proportion of households with leaks and only 0.1% of households are not equipped with sanitary facilities. At the same time, rented housing costs more than in 24 other EU countries.

91.5% of households have access to the internet, but high-speed internet is lacking in many places

There was a positive shift of two places in the areas of digitisation and infrastructure. Year-on-year, the number of households with internet access increased to 91.5%. However, high-speed coverage remains an issue, and this is now a focus of Czech operators. “Our priority in internet coverage is primarily building a fibre-optic network, which is key to the development and digitisation of the Czech Republic. However, we often encounter complex legislative processes or obstacles from municipalities, which significantly delays the entire construction,” explains Martin Orgoník, director of external relations and sustainability at T-Mobile.

We have also seen a shift in the digitalization of state administration indicators. “Currently, the projects supported by the National Renewal Plan have already been implemented or are gradually being implemented, and in addition to the expansion of renewable energy infrastructure, it is the support for the availability of connectivity and the associated digitalization and automation that is noticeable. Despite the relatively strong conservatism of Czech society, large digitisation projects such as the Citizen Portal or Data Boxes have been positively received and deployed, which have contributed significantly to this trend, and I believe that most users positively value these possibilities,” says Markéta Kryková from the subsidy consulting company enovation.

Czechs suffer from high obesity and low healthy life expectancy

The Czech Republic has the best health and safety record. Last year, we ranked third in this area. This is mainly due to the availability of medical care, which only 0.2% of the Czech population cannot access for financial or capacity reasons. We are also doing well in terms of cybersecurity or relatively low infant mortality.

However, even this pillar is not without its problems – we are plagued by a high proportion of the population that is obese or lives healthy years. Kateřina Hellebrandová, Director of the Ministry of Health, points out that “Czechs spend an unnecessarily large part of their lives in illness. On average, they live 62 years in health, compared to the EU’s champions – the Swedes – 72 years. The difference of 10 years is alarming. It is necessary for the Czech nation to take responsibility for its own health and for the state to help it as much as possible, e.g. by more systematic multi-agency support for prevention, including health literacy, taxation of unhealthy food and drink, etc. The Czechs are at the top of the alcohol and sugary drinks consumption scale, we smoke a lot, we do not eat much fruit and vegetables and we are one of the most obese nations in Europe. We already know that at least 20% of all adults will be obese by 2030, that is 2.651 million people in the Czech Republic at high risk of developing diabetes and other diseases. The healthcare system does not have the personnel or the economic capacity to bear this. It is necessary for every one of us to realise this, including politicians and legislators, and for the Czech nation to begin to recover.”

Czech science is harmed by too much bureaucracy

In the area of science, where the Czech Republic has also fallen behind, the removal of obstacles to linking research centres with business by the state would help, according to Alexandra Kala. “We can do not only excellent science, but also bureaucracy. This discourages entrepreneurs and does not promote real cooperation between science and business. But without them, Czech science will not create products and services with higher added value,” concludes the owner of Profimed and ambassador of the Second Economic Transformation Association.