The Babis government, launched in January 2026, presents a mid-to-long-term economic roadmap following a change of government after four years.
Focus on maintaining nuclear power expansion, continuing investment in transportation infrastructure, establishing AI gigafactories, and expanding PPPs.
The investment attraction system is scheduled to strengthen indirect incentives, such as accelerated depreciation and tax benefits.
Background and Direction of Economic Strategy Formulation
The new government of Andrej Babis, which took office in January 2026 following a successful change of government after winning the general election in October 2025, officially announced the 'Country for the Future 2.0' (February 20), a mid-to-long-term roadmap for improving national competitiveness. Through this strategy, the government presented a mid-to-long-term roadmap to transform the Czech economic structure into a high-value-added sector in response to the growth slowdown accumulated since the pandemic, the energy crisis, and the weakening competitiveness of the EU as a whole.
In particular, the new government determined that the Czech Republic's existing growth model, which relied on low-cost and low-wage production amidst an industrial structure heavily weighted towards manufacturing, had reached its limits due to rising electricity rates, supply chain restructuring, and labor shortages. Accordingly, it set a goal to redefine the Czech Republic as a high-value-added nation within Europe and to raise its per capita GDP based on purchasing power parity (PPP) to the level of the top 10 European countries by 2030. To achieve this, it designated the private sector as the core engine of growth and structured its strategy around five key areas—human resources, innovation, infrastructure, finance and investment, and the business environment—specifically outlining target timelines and implementation tasks for each sector.
Key Strategic Contents
1) Human Resources – Responding to labor shortages and enhancing labor productivity
The human resources sector has focused on establishing a foundation to alleviate labor shortages while simultaneously increasing productivity. First, the plan is to rapidly supply the necessary workforce by improving the quality of education, restructuring curricula to align with industry demand, and strengthening retraining. Furthermore, by 2029, the plan aims to digitize employment administration to fully transition communication between the government and employers online and reduce the administrative burden by consolidating corporate submissions into a single report.
In terms of labor supply and demand, the plan sets a goal to shorten the processing time for foreign worker residence permits to 30 days for highly skilled workers and 60 days for mid-to-low-skilled workers by 2029, while digitizing the procedures. Furthermore, to increase the participation of domestic labor in the labor market, the plan intends to simplify administrative procedures for part-time work and overhaul part-time and flexible work systems, such as job sharing, by 2027. (Target: 15% share of part-time employment by 40)
In addition, the plan is to gradually raise the minimum wage to at least 47% of the average wage by 2030 (42% as of 25) to induce a transition from low-wage competition to a productivity-centered structure.
2) Innovation – Expansion of investment in R&D, digital transformation, and AI
The Czech Republic, whose current R&D spending (1.8% of GDP) falls below the EU average (2.2% of GDP), plans to accelerate technology development and commercialization by expanding joint government-private investment. It aims to gradually increase total R&D spending to 2.0% of GDP by 2027 and 2.7% by 2035, and has set a goal of entering the top 8 of the European Innovation Scoreboard by 2035 (currently ranked 15th). To achieve this, the country plans to specify requirements for R&D tax breaks by 2028 and simplify visa procedures to attract research and innovation talent by 2029.
In the development of digital government, plans are underway to implement user-centered online public services by 2030 and to prioritize the digitization of key sectors such as taxation, transportation, construction, and business licensing by 2029. Additionally, the full utilization of the EU digital identity wallet by 2027, the establishment of a public administration portal (centralization of services) by 2029, and the establishment of an integrated ministry platform by 2030 will be pursued sequentially.
The government has announced a goal to provide intensive support for the artificial intelligence (AI) sector by establishing a dedicated system, doubling the number of AI experts and data scientists by 2030, and raising the level of AI adoption in public administration to that of a leading European nation (top 5). In particular, the Czech government is considering participating in a project to build an 'AI Gigafactory' (high-performance computing complex) worth 100 billion Czech Koruna ($4.783 billion) in the Zbraslav district of Prague. The financing structure under discussion involves the private investment firm CRA (Ceske Radiokomunikace) investing 70 billion Czech Koruna ($3.327 billion), while the Czech government and the European Commission* each provide 15 billion Czech Koruna ($713 million). Construction of the 'Prague Gateway DC,' which could serve as foundational infrastructure, began in September 2025 and is currently underway. The government's decision on whether to provide 15 billion Koruna in support is expected to be made soon based on the results of the final economic analysis.
Support is available through the €200 billion Invest AI fund established as part of the European Commission's (EC) AI Continent initiative (future application and approval required); discussions are currently underway with other countries, including Poland, for a joint application to this end.
3) Infrastructure
① Energy – Nuclear PowerExpansion of renewable energy and expansion of the power grid
In the energy sector, it was assessed that rising electricity rates and declining supply stability are increasing the burden on industries and households, while also weakening the Czech Republic's position as an electricity exporter. Accordingly, the policy of expanding low-emission power sources based on large reactors, Small Modular Reactors (SMRs), and renewable energy will be maintained; however, to ensure grid stability, adjustable power sources such as gas power generation will be expanded, and the possibility of the temporary use of coal until alternative power sources are established has been left open.
In the nuclear power sector, the construction of the new Dukovany nuclear power plant will proceed as originally planned, with the goal of starting construction in 2029 and conducting the first reactor test operation in 2036, while maintaining a 60% participation rate for Czech companies in the construction process. In addition, preparations for the new Temelin nuclear power plant will continue, and the goal is to establish conditions for the first construction of an SMR by 2034.
In addition, there are plans to allow the construction of at least 4 GW of gas power (or combined heat and power) by 2030 and to establish infrastructure, such as the renewable energy feed-in tariff system, to enable the expansion of at least 10 GW of renewable energy facilities. Furthermore, a legal framework for the development of hydrogen infrastructure will be established by 2028, and pilot projects for low-carbon hydrogen production will be launched.
The expansion of power grids and storage facilities will also be pursued simultaneously. The goal is to increase cross-border transmission capacity by 1 GW, double major transmission lines, and expand energy storage capacity by 2 GW by 2030. Regarding gas supply, the plan involves diversifying procurement sources by securing LNG transport capacity in the long term, as well as reinforcing the grid to prevent power outages through measures such as connecting with Germany, duplicating major transmission lines, and constructing new substations.
In terms of electricity rates, plans are underway to restructure the electricity rate system by 2027 and alleviate the burden of electricity costs on businesses and households by 2026 through measures such as the transfer of renewable energy surcharges to the state. Additionally, to strengthen state control over power production, plans are being considered to acquire the private stake (currently 70% state ownership) in the Czech Electricity Company (CEZ) by 2029 using the company's own funds.
② Transportation – Accelerating the completion of expressways and railway networks
The focus of transportation infrastructure is on prioritizing the completion of unfinished sections of major trunk networks to enhance connectivity with neighboring countries and resolve logistics bottlenecks. Regarding expressways, analysis indicates that an average of approximately 45 km of new roads must be opened annually to complete the nationwide network by 2035. Accordingly, plans are underway to connect Expressway D3 to the Austrian border, complete the expansion of the Prague outer ring road, construct the connecting section between D1 and D11, and complete D35 and D7 by 2027. Subsequently, between 2029 and 2030, the completion of D11 and its connection to Poland, the completion of D6, and the expansion of D1 in the Brno region are expected to proceed.
The plan is to improve transportation conditions by upgrading railways to high speeds capable of operating at 200 km/h on some lines, constructing third lines (additional tracks) in congested areas, and continuing freight transport capacity expansion and electrification projects. Furthermore, establishing a master high-speed rail network connecting Dresden, Prague, Brno, and Ostrava by 2040, and completing the modernization of the TEN-T, have been presented as mid-to-long-term goals. In addition, a dedicated team will be formed to increase the proportion of Public-Private Partnerships (PPP) in transportation infrastructure, and the evaluation and support system will be reorganized.
③ Raw Materials – Establishment of Key Mineral Supply Chains and Expansion of the Circular Economy
To strengthen the raw material supply chain supporting its industrial base, the Czech Republic is focusing on domestic projects for key minerals such as lithium and manganese (including Çinovec lithium and Hvaletice manganese). Produce∙Processing system The government plans to expand domestic processing capabilities by improving raw material productivity by 30% by 2035, meeting 20% of construction aggregate demand with recycled materials by 2030, and establishing at least two core metal processing facilities. In addition, from the perspective of the circular economy, the government plans to increase the use of recycled construction materials in public procurement to at least 20% by 2030 and promote the introduction of a 'Digital Pass' for material tracking and reuse by 2028.
4) Investment – Expansion of Indirect Incentives and Streamlining of Approval Procedures
In the investment sector, institutional improvements are being pursued with the goal of creating a predictable investment environment, such as shortening approval periods, and enhancing value added through local investment. Moving away from simple subsidies, the aim is to induce voluntary reinvestment by companies through tax benefits and administrative innovation, and to reduce the scale of overseas capital outflow by more than 50% compared to the current level by 2030.
To attract large-scale strategic investments, a Fast Track system will be introduced by 2028 for large-scale projects exceeding 10 billion Czech Koruna (approximately $4750 million), with plans to shorten the approval period for large-scale investments from the current average of 3 to 5 years to within 12 months. In addition, a one-stop service model will be implemented to unify communication channels between investors and the government.
Starting in 2028, we plan to implement an Accelerated Depreciation system to expand the treatment of initial investment costs and support the improvement of cash flow. In addition, we plan to establish support measures by 2027, such as tax credits for investment costs and state-level joint funding support, for companies participating in the Pan-European Strategic Industry Project (IPCEI)*, including semiconductors and batteries.
* IPCEI (Important Projects of Common European Interest): A pan-European cooperation initiative supporting the internalization of supply chains within Europe and the securing of technological sovereignty for sectors such as semiconductors and batteries.
In the sector of public investment, the plan is to procure at least 10% of total national investment through Public-Private Partnerships (PPP) by 2030 to strengthen the role of private capital. To this end, standardized project evaluation methodologies and a central project database will be established by 2028 to enhance investment transparency and efficiency. Furthermore, to promote balanced regional development, the policy aims to expand the autonomy of local governments in attracting investment by creating special economic zones and regional investment funds.
5) Public finance∙Business Environment – Restoration of fiscal soundness and reduction of corporate administrative burden
In the field of public finance, the principle of managing the fiscal deficit limit to 3% of GDP or less was presented to restore fiscal soundness, and measures such as maintaining the Czech Koruna currency system and pushing for the reintroduction of Electronic Revenue Registration (EET)* by 2027 were also mentioned. In the field of the business environment (administration and regulation), the reduction of bureaucracy and digital government were presented as key solutions. An entrepreneur portal will be launched by 2028, and the introduction of an integrated reporting system and the overhaul of regulations and internal rules will be pursued with the goal of reducing the administrative burden on businesses by 20% by 2029.
EET (Electronic Evidence tržeb) is an electronic sales registration system that requires businesses to report and record cash-equivalent sales to tax authorities online; as the previous system was abolished in 2023, its reintroduction is being pursued.
Financial Planning and Expert Evaluation
The Czech government estimates that a cumulative total investment of approximately 3 trillion Czech Koruna (about $1427 billion) is required by 2030 to implement the strategy, and plans to focus public finances on acting as a leverage (catalyst) to mobilize private and external funds rather than expanding direct spending. Accordingly, the government plans to distribute the fiscal burden by designing financing strategies centered on expanding private investment, self-investment by state-owned enterprises, and utilizing EU funds.
Meanwhile, while the Czech industrial sector and economic experts generally agree on the overall direction of the strategy, they identify financial mobilization and execution capabilities as key variables. Although the industry and Chambers of Commerce view the "private-led growth" approach positively, they emphasized that success or failure will depend on whether the composition of public and private financing and the expansion of PPPs actually function in the future. Some media outlets have also pointed out that the financial plan is somewhat abstract, noting the uncertainty regarding the short-term feasibility of public sector funding measures. Furthermore, experts have noted that the plan to nationalize the Czech Electricity Company (CEZ) through the acquisition of private equity could lead to increased debt, reduced investment capacity, and impacts on the capital market, even if it is premised on the use of CEZ's own resources.
implication
The national economic strategy of the new Babis government in the Czech Republic, launched in 2026, focuses on moving away from a low-growth trend and transitioning to a high-value-added industrial structure. In particular, as it places emphasis on energy infrastructure (nuclear power, renewable energy, and expansion of the power grid), transportation infrastructure (high-speed rail, highways, etc.), digital transformation, and AI development, it is expected that opportunities for Korean companies to expand will extend not only to the power sector, including nuclear power, but also to fields such as transportation infrastructure, ICT, and eco-friendly energy solutions.
In terms of investment entry, the expedited issuance of high-skilled worker visas and the introduction of rapid review for strategic investments are considered factors that enhance the predictability of the investment environment; however, increases in the minimum wage and the expansion of indirect support (reduction of direct subsidies) could act as variables that increase cost burdens. Accordingly, companies considering entering or expanding investments in the Czech Republic will need to monitor future changes in the indirect incentive system, such as accelerated depreciation and R&D tax credits.