Czechia continues slide down world economic freedom index

Czechia has dropped four places to 22nd in the latest Economic Freedom of the World Index, compiled by the Canadian Fraser Institute think tank. The country's economic freedom has been steadily decreasing since 2016, with the exception of 2021.

The index evaluates 165 countries based on five indicators: the size of the state sector, the rule of law, international trade, overall legal regulation, and the country's currency and inflation environment. The data for the latest index is based on 2022 figures. 

Czechia improved slightly in four of the five evaluated categories, but performed significantly worse in the area of the inflationary environment, where average annual inflation reached 15.7 percent in 2022.

The crown has also been struggling – by October 2022, the Czech crown weakened to USD 1: CZK 24.8; a marked depreciation from CZK 21 in mid-June 2022.

Despite the decline, the Czech Republic remains one of the economically freer countries in the Central European region, with neighbors Slovakia ranking 45th, Hungary 55th, and Poland 70th. 

To the west, Germany and Austria outperformed Czechia, ranking 16th overall. Impressively, though, Czechia was more economically free than Austria (23rd). 

According to the Institute of Liberal Studies (ILS), which oversaw the ranking’s creation, countries with greater levels of economic freedom are more prosperous, live longer, and have more civil liberties. In countries with high economic freedom, only 1 percent of the population lives in extreme poverty, compared to 30 percent in countries with low economic freedom. The difference in life expectancy between the most economically free and the least free states is 15 years.

The ILS notes that economic freedom is “essential” for a country's prosperity and well-being, and the Czech Republic's downward trend is a cause for concern. Despite the recent worsening, 10 years ago Czechia had been in an even worse position – ranking 42nd overall.

In a separate ranking that evaluates similar criteria, the 2023 Prosperity Index, compiled by bank Česká spořitelna and the Europe in data portal, found that Czechia’s economy fell three places and now ranks 12th overall in Europe.

According to the ILS, the most economically free country in the world is Hong Kong, whereas Venezuela ranked last.