The Prosperity Index 2022

The Czech Republic ranked on average thirteenth in the ten pillars of the Prosperity Index. The table is led mainly by the Nordic countries – Sweden is first, ranking no worse than thirteenth in any of the pillars. Denmark and Finland are also on the imaginary podium. On the other hand, at the very bottom of the table, is Greece and, by extension, the Balkans. The result consists of ten pillars, which contain a total of 116 data indicators for each of the 27 EU countries. The project tracks prosperity in each country, with a particular focus on the Czech Republic.

The Czech Republic is among the premier countries of the former Eastern bloc

The countries of the former Soviet bloc stand out negatively on the Czech Prosperity Index map. Even in 2022, the often abysmal difference between the prosperity of the West and the East is abundantly clear. Outside of Estonia, the Czech Republic finishes thirteenth best in the entire Eastern bloc, while our Slovak neighbors are third from last in the EU comparison. Even so, this seemingly positive result means there is much room for improvement in almost every area examined.

“Next year, we could move to an even worse position,” suggests David Navrátil, chief economist at Česká spořitelna. “For example, the economic pillar will be negatively affected by above-average inflation or the absence of fiscal reforms and, therefore, the still above-average pace of government borrowing. The financial health pillar is also likely to deteriorate, as more households will face financial problems due to inflation, but also due to an increase in unemployment. Investments in economic modernization, as well as energy efficiency, will be key to our medium-term positioning. And investments in e-government, primarily the ability of the state to make decisions based on data. Maintaining, or at best accelerating, investment in these areas would be a very positive stimulus for the country’s future prosperity.”

According to the Rector of Charles University, Milena Králíčková, it is crucial to invest in education as well. “Children and young people are the future of our country and a condition for its progress. That is why investing in their skills, knowledge and development must be our priority.”

An environment at breaking point

The biggest gaps are in our approach to the environment and its condition. In two indicators of this pillar, we rank last in the EU. The proportion of land affected by drought is the highest in the EU, we have a high proportion of greenhouse gas emissions per person and our forests, massively affected by bark beetle, are not able to absorb them sufficiently. Our overall ranking of 23rd in the state of the environment is all the more surprising because we invest almost the most in it as a proportion of GDP in the EU. At the same time, we do not waste water and our emissions from transport (unlike those from heating or industry) are relatively low. 

However, the problem remains that we do not recycle enough, and there is much room for improvement in the use of renewable resources. Moreover, the high proportion of harmful particles in the air is also reflected in the sad statistics on deaths. For every 100,000 inhabitants in the Czech Republic, there are 31 deaths caused by air pollution. “Despite all the problems, the Czech Republic is one of the best places to live in Europe. Unfortunately, we may soon start to slip. An economy based on cheap labor with low added value is unsustainable. Welfare state funding is about to collapse. And if I had to single out one thing, it’s the absolutely dismal state of the environment,” confirms David Klimes, host of the Prospero podcast, which is part of the Prosperity Index.

Czechs have been saving for their own housing for more than 15 years

The Czech Republic would also benefit from a major improvement in housing, where we rank 21st. Although our current housing is of relatively high quality (most households are leak-free, we are able to heat and only 0.1% of households are not equipped with sanitary facilities), the problem arises when acquiring new housing. 

This is due to the length of the building procedure, the cost of new construction, the low number of houses and flats per 1,000 inhabitants and the high housing costs. All these circumstances lead to the fact that 15.5 annual salaries are needed to purchase a new dwelling in this country. This is the worst result in the entire Union. According to Milena Králíčková, Rector of Charles University, “We could certainly have done better last year if we had a longer-term vision in some areas of public administration. Unfortunately, we still lack the ability to prepare a realistic and practically applicable longer-term strategy in some areas.”

Health and safety

However, in the ten pillars of the Czech Prosperity Index, we also found a handful of areas where we are doing better than average. Our greatest success so far has been in the last pillar, which is health and safety. This time, we came in third compared to the rest of the EU, with only Lithuania and Germany ahead of us. “We have been going from crisis to crisis for a couple of years now and if we have managed to cope with them, it is mainly thanks to the ability of the Czechs to pull together in difficult times, great companies often replacing the public sector and islands of positive deviations in the public administration and well-functioning parts of the state such as the Czech army or doctors and medical staff,” says Radek Špicar, vice-president of the Confederation of Transport and Industry.

However, even in the health and safety pillar, the situation is not ideal. The availability of healthcare and the low level of crime in the Czech Republic are at a good level, but if we focus on the physical health of the Czechs or investment in defense, we are at the opposite end of the comparison. Obesity is a case in point, where the Czechs are eighteenth. “But if we take into account overweight, which combines the stages of obesity and overweight, we fall to the penultimate place in the European Union,” explains Tomas Odstrčil, Europe in Data analyst. Over 58% of the population is overweight.

The state of the economy

We fared slightly worse than in health and safety, but still above-average, in the first pillar of the Index, which was the state of the economy. Here, the Czech Republic ranked ninth, helped mainly by the high complexity of the economy. This indicator explains in simple terms how “straddled” a country’s export market is and how resilient it is to environmental influences. The Czech Republic is ranked second in the EU in terms of economic complexity, and we also perform very well globally, where we are ranked eighth. The value of our public debt compared to GDP has not fared badly either.

If you were to look for an area in the economic pillar that still needs to be substantially improved, it would be, in particular, the low added value of exports, for which the Czech Republic is often referred to as the ‘assembly plant of Europe’. This is also reflected in the ratio of gross domestic product to gross national income. “The Czech Republic generates considerably more than the Czech population receives through profits and wages. The difference does not only lie in the outflow of dividends abroad, but also, for example, in the setting of low intra-company (or intra-group) costs and prices for goods, services, software, development or licenses going from Czech subsidiaries to foreign parents, or advantageous loans for foreign owners from their domestic companies (and vice versa),” explains Tereza Hrtúsová, an analyst at Česká spořitelna.

According to the vice-president of the Confederation of Industry and Transport, the Czech Republic needs politicians in the coming years who will not shy away from decisions that are quite controversial in this country. “We need more politicians with the courage to embark on unpopular but necessary steps such as preparing for the adoption of the euro or structural reforms of pensions, healthcare and education,” concludes Radek Špicar.