The economic system in Prague has changed dramatically since the Velvet Revolution in 1989. The planned economy has been shifting to a free market economy rapidly. In 1991, Vaclav Klaus, the Prime Minister of the Czech Republic, adopted a program through which quick privatisation of public enterpresises would be achieved by distributing share "coupon" vouchers among the public. This program resulted in a 30% crash in industrial output temporarily but soon afterwards, there was a significant increase in foreign investment in Prague which is exactly what Prague needed to boost its economy. With this foreign investment, the increase in unemployment which took place during the crash in industrial output decreased and was at a remarkably low rate of 0.3% in 1997.

Since 1989, tourism has begun to play an enormous part in Prague's economy. It has increased Prague's appeal to foreign investors, made Prague increasingly familiar to the general public and changed the dynamic in the city because of its newfound internationalism. (Read more about tourism in Prague.) Prague's appeal to foreign investors has been significant and Prague has been called a "frontier for new businesses."