The Prosperity Index 2025

In the latest Prosperity Index comparison, Czechia takes 14th place out of the 27 EU countries. It is the best result since 2022, when the country finished 13th overall. As is traditionally the case, the most successful nations were the Scandinavian countries, led by Sweden and Denmark. This year they were joined by Finland, which took the “bronze position” from Austria. The group of consistently successful countries throughout the survey is rounded out by the Netherlands, which — thanks to an identical point score — shares 4th–5th place with Austria. “What the most prosperous countries have in common is a relatively strong economy and quality of education and research, but otherwise their results are relatively different,” points out Tomáš Odstrčil, an analyst at Evropa v datech, adding: “While Sweden holds the top spot in the environment thanks to low emissions, the use of renewable resources or high forest cover, the Netherlands ranks as low as 23rd in the state of the environment. On the other hand, it can boast the best labour market, the strongest digitalisation and well-managed financial health.”

At the opposite end of the ranking there were no year-on-year changes. Greece, which lags behind Bulgaria, has held last place ever since the first edition of the Index, while in 25th place you will find Slovakia. “Czechia managed the post-crisis period with lower debt than Slovakia and maintained relative macroeconomic stability, but at the cost of high inflation and a fall in real wages. Slovakia, by contrast, made greater use of fiscal expansion, which led to faster growth in public debt. The Polish economy is showing strong growth, but it is facing rising fiscal deficits and structural challenges in productivity and investment efficiency,” explains Tereza Hrtúsová, an analyst at Česká spořitelna.

The economy is catching its breath. Can we stop the outflow of capital?

Czechia’s return to the overall European average was secured year-on-year above all by the pillar focused on the state of the economy. It jumped five places and, in 9th position, Czechia has thus returned to the top ten healthiest economies in the EU. The key factor was the easing of galloping inflation. While not long ago it was running in double digits, its fall to 2.7% moved the country from second-to-last to ninth place.

Even more interesting, however, is the shift in the ratio of gross national income (GNI) to GDP. This indicator shows how much of the wealth produced actually stays in the pockets of Czech citizens and companies. Over the course of a single year this share rose from 95% to 99%, which catapulted Czechia from 22nd to 13th place in the EU. According to experts, this signals that Czech capital is growing stronger, domestic firms are investing abroad, and the outflow of dividends abroad is being curbed. “The stock of Czech firms’ investments abroad reached EUR 74 billion in 2024. For comparison, the significantly larger Poland (both in population and economy) stood at EUR 48 billion. This shows that Czech capital is beginning to have global ambitions, which is a necessary condition for moving up the supply chain towards higher margins,” says David Navrátil, chief economist at Česká spořitelna.

The pleasure of the macroeconomic figures is, however, spoiled by a look inside Czech businesses. Czechia remains predominantly a subcontractor economy. While the country has very strong exports of high-tech products, in most cases this involves only their assembly. The share of gross value added in total output is the 3rd lowest in the entire EU. It is precisely this much-repeated characterisation of Czechia as an “assembly plant” that is the main obstacle preventing the country from catching up with the developed West and reaching the much-discussed “German wages.” “And yet Czechs are among the most hard-working nations. The number of hours worked per capita is even higher than in the USA. Nevertheless, this performance is not visible in added value, in margins and in profitability,” points out David Navrátil, adding: “Czechia must make use of its strength, namely the ability to manufacture almost anything and at high-tech quality. That is a skill the world may envy us for, especially in a time of geopolitical upheaval and the growing importance of resilience and strategic autonomy. But to this skill we have to add a strong digital layer in the form of significantly higher digitalisation, robotisation, automation and rapid adoption of AI. This mix will allow us to prosper even in a world of polycrisis,” David Navrátil adds.

The road to a stronger economy may lead through timely embrace of the decarbonisation trend and greater cooperation between science and business

A way out is seen by Alexandra Kala, founder of Profimed and an ambassador of the Second Economic Transformation in connecting science and business. “In the 1990s and the years that followed, the Czech economy made the most of its potential, which depended heavily on a high-quality workforce that was cheap. But that no longer holds. We have no mineral resources, geopolitically we are not a significant player, and the only way for us to be relevant and to prosper is to do business that no one else can do. And the way to get there is to bet on the transfer of science into practice — that is, connecting science and business. Unique projects, unique products, unique services that arise from this connection are what we have to do. And it should have happened far sooner.”

Embracing global trends in good time and making use of one’s own strengths is also important according to another ambassador of the Second Economic Transformation, Michal Kurka. “Our strongest asset is our industrial history and present. Thanks to that, Czechia is among the top countries that can benefit from the global megatrend of decarbonisation. It is changing the physical environment; more efficient processes require new technologies, and those we know how to make,” explains the owner of Sentinel Capital, adding: “At present, ‘clean tech products’ make up a little over a fifth of our exports. Within five years, according to growth trends, that will be a full third of our exports, and the total volume will even double. We are well placed; we just have to make use of our potential and focus even more on breaking away from the subcontractor model and betting on production with higher added value.”

New legislation could help narrow the gap in pay between men and women

The risk of “sleeping through the times” is also reflected in the labour market. Czechia has long boasted the lowest unemployment in the entire EU (2.6%). This seemingly excellent result is, however, a double-edged sword. Low unemployment does not push firms towards innovation and the introduction of new technologies, because it is still more advantageous for them to maintain a model based on cheaper labour.

A major warning sign is also the deepening of inequalities — the gap in pay between men and women (the so-called gender pay gap) actually rose slightly to 18%, which places Czechia at an abysmal 25th in the EU. “This is a combination of several factors that reinforce one another,” points out Eva Primus Kovandová, president of the Business & Professional Women organisation, and goes on to explain: “Women in Czechia do not earn less because they are paid worse for the same work, but mainly because they are concentrated in fields and positions that are systemically paid worse. The Czech economy is strongly industrial and technical. Men more often work in fields such as IT, engineering, energy or automotive, which are paid above average. Women, by contrast, are more represented in education, healthcare, administration or social services — that is, in professions that are essential for society but financially undervalued. Another factor is the low representation of women in company leadership and in the best-paid managerial positions.”

Change is to be brought only by new legislation that introduces greater pay transparency and that should enter into force as early as 7 June, with firms expected to comply from the beginning of next year. As Eva Primus Kovandová warns, however, it will not be a cure-all. “Legislation on its own will not remove the gap. But it can open up the topic and set clear rules of the game. The real impact, though, will depend on how actively firms approach it and whether the deeper, structural causes can also be addressed — for example the undervaluation of certain professions or the low representation of women in leadership. Once firms start to address this topic systematically, they often ‘tidy up’ their own internal processes in the process. Something may come to light that they were not even aware of before, such as inconsistencies in pay or unclear rules for career advancement. And that is precisely where the value of the new legislation could lie — helping to set a clear direction, increase transparency and open up topics that were previously overlooked.”

Security in a time of war: strong in cyberspace, weak in armaments

The only area in which Czechia completely dominates within the EU and defended first place is the Development of Health and Safety. This result was helped by an excellent level of cybersecurity and high availability of medical care (according to the data it is unavailable to only 0.5% of the population). “Being number one in cybersecurity in a global comparison is an obligation, but at the same time it is no accident. It is the result of long-term, systematic work — from developing legislation through building technical capacities to educating both professionals and the general public. A strength of the Czech Republic is also intensive international cooperation and the interconnection of the state, the private sector and academia, thanks to which we have a better overview of current threats and can respond to them in time,” explains Jakub Neščivera of the National Cyber and Information Security Agency (NÚKIB), adding that awareness of cyber risks among the Czech population is gradually growing. “For example, more users can recognise phishing today than before. At the same time, however, attacks are becoming ever more sophisticated, so the key remains continuous education and strengthening the resilience of society as a whole.”

Czechia’s readiness to fight cybercrime is also confirmed by Ondřej Kapr of the Criminal Police and Investigation Service Office. “First and foremost, we take cybercrime seriously and try to prepare for situations that may arise before long, especially in connection with the development and involvement of artificial intelligence. At the same time, we are aware of the gradual trend of crime moving into cyberspace. Being prepared also means knowing the current threats and responding to them quickly. In detecting and evaluating new threats, the cooperation we have established with the banking sector, mobile operators and other entities has proved very valuable. Thanks to this, we are able to react in time, describe the problem methodically, immediately warn the public through police channels and, above all, cooperate on preventive measures that can help ensure that an attack never reaches a potential victim at all,” explains Ondřej Kapr, adding that almost anyone can become a victim of cybercrime. “We are well aware that prevention plays a key role here, yet it often runs up against various social narratives — for example the claim ‘It can’t happen to me.’ The opposite is true, however. Even very intelligent people become victims, people who simply overestimated their own abilities and underestimated the perpetrators,” Ondřej Kapr warns.

Despite improving preparedness, cybercrime in Czechia is gradually rising. “Crime committed in cyberspace currently makes up 13.7% of all reported crime. The biggest leap occurred above all between 2021 and 2022,” Kapr quantifies, adding that the increase is driven mainly by large-scale attacks by organised groups with elaborate fraud schemes that are constantly being refined. “The rise in the number of recorded offences may also be due to the fact that a perpetrator in cyberspace need not have the same moral inhibitions as they would in the real world. They simply do not see the direct consequences of their actions — and not only the moral ones, but also the financial ones. And those have reached considerable values in recent years. For example, in fraudulent phone calls carried out under the guise of a fake banker or police officer, the average damage per victim comes to more than CZK 700,000. Since the start of the year we have recorded roughly 900 such individual offences.”

Czechs want to top up neglected defence

In the context of current geopolitical events and the war in Ukraine, however, the Index reveals one fundamental weak point. Within the EU, Czechia has the 16th highest defence spending. According to Eurostat data for 2023, the country spent only 1.2% of GDP on its army (and, according to newer data, 1.3% of GDP in 2024), which contrasts sharply with neighbouring Poland, for example, which — thanks to vigorous rearmament — climbed to 2nd place in the EU in overall security. Although the current government declares an effort to remedy this enormous debt and reach the 2% of GDP threshold, in the European comparison Czechia still lags behind, and experts warn of the dismal preparedness of the ordinary population for crisis situations.

Czechs, moreover, support bringing spending up to the NATO level. This is confirmed by Jiří Táborský of the STEM analytical institute: “The latest data show that 17% of the population is in favour of reducing the current level, and these are people who are often markedly anti-establishment in their orientation. The largest share of the population — specifically 27% — would prefer us to reach the Alliance average, which is currently 2.8% of GDP. A further 17% would like a more pronounced increase given the security situation and the number of years we have, in their eyes, neglected defence. A quarter would prefer to hold the 2% of GDP threshold for as long as possible, and 14% have no opinion on it. In other words, a clear majority is against cutting, almost half is in favour of an increase, and the rest are for stagnation, a decrease or have no opinion.”

Healthcare, although highly accessible, also conceals a ticking time bomb. In healthy life expectancy the country has fallen to 15th place — the average Czech lives only 62 years in good health. Experts warn that the current set-up, in which the prevention of lifestyle diseases is neglected, is financially unsustainable in the long term.

Unaffordable housing prevents Czechs from living as they would wish

The most critical point of the entire Prosperity Index remains the Standard of Housing. In this area Czechia ranks 23rd — the fifth worst result in the entire EU. The financial affordability of housing continues to deteriorate. An average flat in Czechia today costs 13.6 annual salaries (the 2nd worst figure in the EU). The frantic rise in prices is, moreover, hitting ordinary family budgets. One tenth of Czech households spend more than 40% of their total income on housing. Rising prices have driven people into rentals, which — although in the European comparison they come out as the fifth most favourable — paradoxically do so only because owner-occupied housing has become an utterly unattainable luxury for many. And yet Czechs are among the nations that strongly prefer owning their home. “According to our survey last year, 92% of the Czech population wishes to live in a house or flat of their own,” adds Tomáš Odstrčil of Evropa v datech.

The combination of high housing costs and expensive energy feeds through into the overall financial health of Czechs (here the country dropped from 9th to 10th place). What is troubling is the fact that more than 60% of low-income households have no financial reserve whatsoever for unexpected expenses. “Within the EU we rank in the worse half of countries, roughly in 16th place. The best-off are countries such as Denmark or Malta (around 40% of low-income households without a financial reserve), while at the opposite end of the ranking is Greece, where this share amounts to more than 80%. Overall, however, the financial situation of Czechs has improved, and they are also more optimistic about the future,” explains Tereza Hrtúsová of Česká spořitelna, adding: “In this year’s survey, 51% of respondents said that they manage easily on their income, and 62% are able to save something. A third of people then expect their financial situation to improve over the next three years. The financial situation of households is, however, largely influenced precisely by whether they live in a property of their own or are paying off a mortgage or rent. Real estate in Czechia is attractive both in business and investment terms; the question remains whether that is as it should be and whether there is even any will to do something about it.”

Digitalisation and education as the path to the top

If Czechia wants to compete again with Europe’s elite in the future, it must focus on innovation, digitalisation and education. In the area of eGovernment and the digitalisation of public administration the country has indeed made significant progress (a jump of five places to 21st position), but it continues to lose out on the simplicity of processes — in most cases pre-filled forms at government offices remain something we can only reminisce about. The good news is that the digital literacy of adults is growing, with advanced digital skills already held by over 35% of the population (8th place in the EU).

For digitalisation to function well, however, strong infrastructure is important. And when it comes to high-speed internet coverage, according to Eurostat Czechia has catching up to do. Although in overall internet coverage the country is among the EU average (almost 95% of households have access), in high-speed internet it is second from last. Operators are indeed working on speeding up the network, but according to Zdeněk Bumbálek of T-Mobile this is a lengthy and complicated process full of administrative and economic obstacles. “We are building our own FTTH optical network from the ground up. It is a physically and organisationally demanding construction: every street, every apartment building and family home requires new excavation, new optical fibre and new connections. Our goal — optical internet available to 2.4 million households by 2031 — is the result of a combination of our own construction and cooperation on construction with a whole spectrum of partners, from large operators to smaller local players.”

The biggest obstacle to construction, however, is not technology or finance, according to T-Mobile, but administration, coordination and the dismissive attitude of some municipalities. “Every project requires planning permission. The permitting process itself takes months to years and adds an enormous degree of uncertainty to planning. Moreover, Czech towns quite logically strive to ensure that streets and pavements are not dug up repeatedly by various investors at short intervals. The result is coordination among telecommunications operators, energy distributors and other investors. This coordination is, in principle, correct — for the town and its citizens it is much better if the excavation is done once for everyone — but in practice it means that the start of construction is not solely in the operator’s hands. If another investor postpones their project or changes its scope, the whole project comes to a halt, even though T-Mobile is ready to build. This dependence on external decisions is one of the most complex elements of planning and the most significant reason why the number of households actually connected in a given year can fluctuate substantially compared with the original plan,” adds Zdeněk Bumbálek, director of the FTTH network construction programme at T-Mobile.

Education is underfunded and Czechs often do not want to keep learning

Education as such suffers from underfunding (spending on education has fallen to 4.5% of GDP), and the reluctance of adult Czechs to continue learning and retrain is also a problem. We rely on what we learned at school, which in the era of artificial intelligence and rapid technological change is unsustainable.

The business environment is being improved by a shrinking VAT collection gap and a stronger Prague Stock Exchange, but the startup ecosystem is bleeding. Almost half (43%) of promising Czech startups with billion-crown valuations are fleeing abroad, according to the Czechia Dealroom platform, due to a lack of venture capital. Bureaucracy also remains a brake on development — whether it is the notoriously lengthy building permit process holding back the construction of flats, or the blocking of the energy transformation, where the construction of wind power plants has been practically stagnant for an entire decade and is at the forefront of the political disputes of almost every government.

“Barriers to growth in Czechia begin already at the level of the individual,” points out Tereza Hrtúsová of Česká spořitelna. “Our belief that we can influence and develop our abilities through learning is low compared with, for example, the Nordic countries. In Czechia only 53% of students have a growth mindset; in Denmark or Estonia it is around 80%. And yet our economy is among the healthiest and we have something to build on. But if we want to turn this potential into lasting prosperity, we have to change our thinking towards a growth-oriented one, both at the societal and the personal level,” the analyst concludes.