4th March 2019

2019 European Semester: Czechia: Continued economic growth offers a valuable opportunity to intensify structural reforms

The newest European Semester country report issued by the European Commission assesses Czech progress on structural reforms and outlines macroeconomic prevention and correction measures taken by the Czech government in the past years.

According to the analysis, continued economic growth offers a valuable opportunity to intensify structural reforms. Economic growth remains solid but may soften somewhat in the coming years. Public finances are sound but long-term sustainability is less favourable. The performance of the labour market is very good but labour shortages are becoming more acute, spurring wage increases. The overall picture of relatively low inequality and the continued rise in living standards masks some increasing regional disparities. Focusing investments in education and upskilling, domestic innovation, and transport and digital infrastructure would strengthen the potential for long-term growth. 

 

The report lists key structural issues to be addressed:

  • Recent pension measures have helped to improve the adequacy of pensions but lack safeguards to ensure long-term sustainability of public finance. Pension related measures taken in recent years have worsened the long-term budgetary outlook by around 2 percentage points of GDP by 2070.
  • The affordability of housing is deteriorating due to increasing prices. Both house prices and the volume of mortgage lending have grown fast since 2016.
  • Despite its good performance, the Czech labour market has a high level of labour shortages and persistent structural issues, including underused labour market potential of women.
  • Low investment, the limited attractiveness of the teaching profession and socio-economic inequalities are negatively affecting the level of education achieved. 
  • The lower investment in transport infrastructure can increase regional disparities.
  • The country has not yet created a fully functioning innovation ecosystem based on domestic research and development. 
  • Most regions have unused potential and require tailored support based on their specific needs. 
  • A large administrative and regulatory burden may hurt further investment.
  • Despite progress, public sector performance and government effectiveness continues to be a challenge.  

 

>> Read full country report. 

 

At the EU level, the European Commission finds that productivity levels remain subdued, population ageing is intensifying and rapid technological change is having a significant impact on labour markets. Real household income remains below pre-crisis levels in some Member States. Youth unemployment has been significantly reduced, but is still unacceptably high in some Member States. At a time of more pronounced global uncertainty, it is crucial that EU Member States step up their action to boost productivity, improve the resilience of their economies and ensure that economic growth benefits all citizens.

 

The report in Czech.

Members of the American Chamber of Commerce in the Czech Republic