Living standards in the Czech Republic have risen sharply in the three decades since joining the OECD, thanks to its open access to trade and investment, stable institutional framework and educated population. According to a new OECD report, policy should now focus on ensuring fiscal sustainability in the face of an ageing population while reviving productivity growth.
Latest OECD Economic Survey of the Czech Republic states that economic growth is expected to accelerate to 2.1 % and 2.5 % in 2025 and 2026, respectively. Headline inflation will continue to decline, reaching 2.3 % in 2025 and 2.0 % in 2026.
Despite this positive outlook, downside risks remain. Geopolitical tensions could increase energy prices and disrupt supply chains. A sustained slowdown in trading partners, especially Germany, or rising trade barriers would weigh on the Czech export-oriented economy.
"Improving educational outcomes for all students and expanding opportunities to retrain and upskill workers, as well as strengthening innovation and entrepreneurial dynamism, will be key to reviving the Czech Republic's economic growth," He told OECD Secretary-General Mathias Cormannwhen he presented the analysis in Prague together with Czech Prime Minister Petr Fiala. "Fiscal consolidation should continue over the medium term to restore fiscal buffers and prepare for longer-term expenditure pressures, including population ageing and environmental transition."
Reforms have been adopted to improve the sustainability of the pension system and should be fully implemented. Furthermore, linking the statutory retirement age to life expectancy would dampen expenditure growth. Modifying family benefits by reducing the length of parental leave and shifting from cash family benefits to affordable and quality childcare would encourage mothers with young children to return to work.
Productivity growth stalled after the pandemic, creating a significant productivity gap compared to the OECD average. Better targeting of business support for R&D to young and small enterprises and further development of capital markets would help to overcome financial constraints.
Strengthening the ecosystem for start-ups, improving product market regulation and streamlining insolvency procedures would increase business dynamism and make it easier for productive and innovative businesses to enter the market and scale up.
School performance is generally good, but there are large gaps in educational attainment. Expanding affordable, high-quality childcare capacity would boost children's future educational outcomes, especially for children from vulnerable backgrounds, and provide equal opportunities for all. Improving teachers' working conditions, including promoting a greater diversity of career paths, can help attract and retain high-quality teachers.
Skills shortages and mismatches between the skills on offer and those required are serious problems. Reforming the VET system could better align graduates' skills with labour market needs. Increasing efforts to raise the level of tertiary education and expanding opportunities for retraining and up-skilling of adult workers would help improve the ability of the workforce to adapt to changing skills requirements.
The transition to zero net emissions will require a cost-effective package of mitigation measures, together with measures to mitigate impacts on vulnerable communities and strengthen the climate change adaptation framework.
Effective carbon prices are too low in sectors outside the EU Emissions Trading Scheme to meet climate targets. The planned phasing out of coal from the energy mix by 2033 is essential to achieve net zero emissions and will require accelerating the deployment of renewable energy sources. Stronger incentives for housing renovation are needed to reduce the energy and emissions intensity of the building sector.
Take a look Czech Economic Survey Overview with key findings and graphs (this link can be used in media articles).
OECD/ gnews.cz - RoZ
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