In 2025, Czechia ranked sixth among the world’s best performing economies according to The Economist magazine. Compared to last year’s 18th place, this represents a significant leap. However, as highlighted by Vladimír Vaňo, Chief Economist at Wealth Effect Management, the key factor behind this jump was not a widespread transformation of the economy, but primarily the extraordinary performance of the Czech stock market. The Prague Stock Market Index rose by more than 47%, significantly outperforming not only Wall Street but also most European and Asian markets. This indicator played a decisive role in the ranking.

The positive picture of the Czech economy is also supported by other factors. GDP growth for 2026 is expected to reach around 2.5%, more than twice the pace of neighbouring Slovakia. Unemployment remains very low at about 4.5%, and the Czech National Bank has been successful in combating inflation – average inflation is projected at around 2.5%, with core inflation at just 1.4%. According to Vaňo, this justifies Czechia’s position among the ten best-performing developed economies out of the 36 evaluated.

Compared to Central and Western Europe, Czechia this year also outperformed economies such as Germany and Luxembourg. Although the Czech industry is heavily linked to Germany, which is experiencing an economic slowdown, Czechia still benefits from the so-called convergence effect – catching up faster with more developed economies, higher productivity, and an inflow of investments. At the same time, it remains vulnerable due to its industrial focus, particularly in the automotive sector, high energy costs, and relatively low added value in manufacturing. The effects of U.S. tariffs and global changes in the automotive industry may also be fully felt only in the coming quarters.

A tight labour market and an aging population present further structural challenges. While low unemployment is positive, it also limits labour availability and can constrain future growth. In this context, Vaňo sees significant potential in the rapid adoption of artificial intelligence, which could increase productivity and partially offset the labour shortage. However, he also points out housing affordability as an issue that could restrict workforce mobility if economic restructuring becomes necessary.

Vaňo describes artificial intelligence as a Silent revolution, comparable to the mechanization of the 19th century. In the short term, AI may replace routine and less-skilled jobs, but in the long run, it is expected to create new opportunities, boost productivity, and support the development of new industries. Key to this process will be reskilling, education, and the ability of companies and governments to respond to change. According to Vaňo, AI is arriving at the right time, precisely when Europe is facing demographic decline and a shortage of labour.

Prepared by the team CzechTrade Scandinavia.

Source: https://english.radio.cz/economist-ranks-czechia-among-worlds-leading-economies-2025-8872028