Why foreign investors trust the Czech Republic

EPA/FILIP SINGER

Petrochemical refinery, northern Bohemia, near Most city, Czech Republic.

Why foreign investors trust the Czech Republic


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Investor confidence is so high in the Czech Republic that only four other countries – Japan, Switzerland, Germany and the Netherlands – have lower 10-year borrowing costs, according Bloomberg.

Since joining the European Union 12 years ago, its economy has doubled in size, unemployment has fallen to the lowest in the EU, and its currency has jumped by about a fifth against the euro. The largest businesses have been sold and are generating billions of dollars in revenue every year for owners such as Volkswagen AG and Societe Generale SA.

“Czech politicians have respected and welcome foreign investment in a way that hasn’t really happened elsewhere in the region,” said Peter Attard Montalto, an economist at Nomura Plc who follows the region from London. “There is a fundamental degree of trust by investors in Czech institutions and rule of law.”

As reported by Bloomberg, the country is rebounding from recession with growth accelerated to an annual 4.7% in the third quarter, the third-fastest pace in the EU. That, combined with a narrowing budget deficit, is attracting more capital. Foreign holdings of Czech domestic bonds jumped 36% in the year to November 30, government data show. That compares with Poland’s 5% increase and a 21% decline in Hungary during the same period.

The Czech Republic, a land-locked nation of 10.5 million, appears to have cemented its position as central Europe’s biggest draw for capital as populist governments consolidate their control in Hungary and Poland.

 

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