Czechia is a prosperous market economy that boasts one of the highest GDP growth rates and lowest unemployment levels in the EU, but its dependence on exports makes economic growth vulnerable to contractions in external demand. Czechia’s exports comprise some 80% of GDP and largely consist of automobiles, the country’s single largest industry. Czechia acceded to the EU in 2004 but has yet to join the euro-zone. While the flexible koruna helps Czechia weather external shocks, it was one of the world’s strongest performing currencies in 2017, appreciating approximately 16% relative to the US dollar after the central bank (Czech National Bank – CNB) ended its cap on the currency’s value in early April 2017, which it had maintained since November 2013. The CNB hiked rates in August and November 2017 – the first rate changes in nine years – to address rising inflationary pressures brought by strong economic growth and a tight labor market.Since coming to power in 2014, the new government has undertaken some reforms to try to reduce corruption, attract investment, and improve social welfare programs, which could help increase the government’s revenues and improve living conditions for Czechs. The government introduced in December 2016 an online tax reporting system intended to reduce tax evasion and increase revenues. The government also plans to remove labor market rigidities to improve the business climate, bring procurement procedures in line with EU best practices, and boost wages. The country’s low unemployment rate has led to steady increases in salaries, and the government is facing pressure from businesses to allow greater migration of qualified workers, at least from Ukraine and neighboring Central European countries.Long-term challenges include dealing with a rapidly aging population, a shortage of skilled workers, a lagging education system, funding an unsustainable pension and health care system, and diversifying away from manufacturing and toward a more high-tech, services-based, knowledge economy.