After a quarter century of effective economic change, the Czech Republic finds itself searching for a new growth model. Relative success, with per capita GDP nearly double compared to 1993 and households having 600% more in the bank than they did two decades, was built by a skilled workforce manufacturing at lower costs than western European competitors. “That model is exhausted,” says David Marek, chief economist with Deloitte in Prague.
Until recently Poland, the Czech Republic and Slovakia were seen as the countries with the best governing standards, the most solid banking systems, the most open to foreign investors and with generally predictable politics. There used to be a pretty easy split between the good and bad halves of central Europe but today it is becoming increasingly difficult to tell them apart.
Petr Necas's determination to drive down the Czech Republic's budget deficit has been so strong that he sparked a political crisis which almost unseated his government and has many economists blaming him for the country's lengthy recession.