Czech companies are confronting a rapidly shifting geopolitical and economic landscape that poses significant challenges for their growth and investment strategies, according to David Havrlant, Chief Economist for the Czech Republic at ING. As global tensions rise, from the Russia-Ukraine conflict to trade pressures involving China and the US, Czech firms are adopting cautious but adaptive approaches amid heightened uncertainty.
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The country's fixed investment declined by 1.7% in the first quarter of 2025, reverting to levels last seen in mid-2022. Havrlant highlights that "a lack of clarity about Czech industry's role and prospects, along with the dismal outlook for European competitiveness," discourages bolder investment decisions.
Central to these challenges is the absence of a coherent European energy strategy. Havrlant notes, 'Europe lacks a viable energy strategy, with current energy prices providing a significant disadvantage compared to other countries with industry-focused energy policies.' Energy-intensive industries, including metallurgy, chemicals, and heavy manufacturing, are particularly vulnerable, with many relocating outside Europe due to high costs and unstable supply.
Internal trade barriers within the European Union remain a critical hurdle. Despite the ideal of free movement of goods and labour, Czech exporters face 'persistently burdensome administration associated with introducing new goods for intra-European export,' which hinders competitiveness.
Czech firms also struggle with an unlevel playing field in global trade. Havrlant emphasises that 'there is still little action in the direction of setting fair conditions for European producers,' who face dumping practices from subsidised Chinese imports and the risk of trade wars linked to ongoing US tariff negotiations. This global uncertainty affects investment plans and supply chains.
In response, Czech businesses are increasingly employing 'more sophisticated hedging strategies' around exchange rates and interest rates, maintaining buffer inventories, and diversifying suppliers. There is also a growing shift in perspective, companies are paying more attention to global economic trends beyond Europe, particularly in the US and China, as Havrlant states, 'There is nowadays a greater appetite for an elaborate story about what might happen in the US or China, rather than just in Germany.'
The report calls for a renewed European initiative: 'Europe's attitude must adjust accordingly' to the realities of global competition, with stronger economic foundations, swift responses, and bold policymaking to safeguard industrial competitiveness.
The Czech industrial base remains cautious but determined, facing an uncertain future that demands resilience and agility to secure its place in the global market.
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