The territory that is now known as the Czech Republic was part of the Austrian, or Hapsburg, portion of the Austro-Hungarian Empire until the end of World War I in 1918. It then became a part of the Czechoslovak state. During the 1930s, Czechoslovakia was an industrial powerhouse. The Czechoslovak industries, including machine and automotive manufacturing, were among the world's most developed.
After World War II, Czechoslovakia fell under the political and economic influence of the Soviet Union. The communist economy included state ownership of enterprises, state-led central planning of economic activities, and artificial price controls . After some Czechoslovak leaders attempted to introduce some political, cultural, and economic liberalization , the country was invaded by the troops of neighboring communist countries under the direction of the Soviet Union (1968). This intervention put a stop to liberalization, when the government attempted to
A series of anti-government protests took place in the late 1980s. By 1989, the more liberal policies of the Soviet Union toward Eastern Europe, as well as the weakening of communist governments in neighboring East Germany, Hungary, and Poland, made it impossible for the Czechoslovak communists to stay in power. In November and December of 1989, the communist government stepped down. Free elections for parliament were held in 1990, and Václav Havel was elected president. The government quickly made economic reforms based on free market principles. In addition, the government began the process of privatization .
From 1990 to 1992, these reforms were more popular in the Czech Republic (which had a larger industrial base) than in the Slovak Republic. Under Czechoslovakia's federal structure, which gave both republics independent power, the newly-elected prime ministers of the Czech and Slovak republics negotiated the divorce of Czechoslovakia. The Czech Republic and the Slovak Republic became separate sovereign states on 1 January 1993. After an initially strong performance, the Czech Republic experienced some setbacks, most notably in 1997 when the country experienced an economic crisis and a political scandal that forced out the prime minister.
The Czech Republic's strongest economic sectors are in the areas of industry and services. Its primary industrial products include iron and steel, machinery and equipment, motor vehicles, chemicals, armaments, textiles, and glass and ceramics. In the service sector, commercial, financial, and insurance companies are important.
The Czech Republic is famous for its beers, which are exported throughout the world. Other agricultural products include potatoes, wheat, and sugarbeets. Since freeing up its international trade in 1990, the Czech Republic has imported items such as machinery, consumer goods, raw materials and chemicals, and some foods. Along with uranium, some of the country's natural resources include coal, timber, and fuels, which remain important energy sources, though some energy must still be imported from Norway and Russia. The Czech Republic experienced a sizable amount of Western investment during the 1990s.
As a NATO member since 1999 and a prospective member of the European Union (EU), the Czech Republic has been quite successful in reorienting its trade away from the East, and towards the West. It has received aid from international organizations such as the World Bank, the International Monetary Fund (IMF), the European Bank for Reconstruction and Development, and the European Investment Bank, in the form of loans and grants. In 1994, the Czech Republic polished its world image by paying some of its IMF debts ahead of schedule. The country's estimated external debt for 1999 was $24.3 billion. While organized crime has a notable presence in nearly all of the countries of east-central Europe, the Czech Republic is less affected by such activities than its neighbors.