Saturday, 15 March 2025
Czechia has made significant economic progress since joining the Organisation for Economic Co-operation and Development (OECD) three decades ago, benefiting from its open trade policies, stable institutions, and a well-educated workforce. However, an ageing population, slowing productivity growth, and fiscal sustainability challenges require further policy action, according to the latest OECD Economic Survey of Czechia.
The OECD forecasts that economic growth will accelerate to 2.1% in 2025 and 2.5% in 2026, while inflation is expected to decline to 2.3% in 2025 and 2.0% in 2026. However, risks to this outlook remain, including geopolitical uncertainties, potential disruptions in supply chains, and slowing demand from key trade partners like Germany.
OECD Secretary-General Mathias Cormann, presenting the report in Prague alongside Prime Minister Petr Fiala, emphasized the need to improve education, workforce skills, innovation, and business competitiveness to sustain long-term growth. He also called for continued fiscal consolidation to prepare for rising public spending pressures, particularly related to population ageing and the green transition.
Recent pension system reforms should be fully implemented, the report states, while linking the retirement age to life expectancy could help contain future spending. Adjustments to family benefits, such as shortening parental leave and shifting towards greater investment in childcare, would support higher female workforce participation.
The OECD highlighted that productivity growth has stalled since the pandemic, widening the gap between Czechia and other OECD economies. Supporting research and development (R&D) funding for small and young firms, improving access to capital markets, and simplifying business regulations could foster greater economic dynamism. Additionally, streamlining insolvency procedures and strengthening the start-up ecosystem would help innovative businesses expand.
In the education sector, while Czechia’s overall school outcomes remain strong, disparities persist. Expanding access to affordable, high-quality childcare could improve long-term educational outcomes for children from vulnerable backgrounds. The OECD also recommends enhancing teacher working conditions, including offering more career progression opportunities, to attract and retain qualified educators.
Skill shortages and mismatches in the labour market remain a challenge. The OECD suggests reforming vocational education and training to better align graduates’ skills with employer needs. Increasing tertiary education attainment and upskilling opportunities for adult workers would further enhance workforce adaptability in response to changing labour demands.
On climate policy, the OECD calls for a cost-effective mitigation strategy to support Czechia’s transition to net-zero emissions. The planned phase-out of coal by 2033 is considered essential, requiring faster deployment of renewable energy sources. Stronger incentives for housing renovations are also recommended to reduce energy consumption and emissions in the building sector. The report further notes that carbon pricing in sectors outside the EU Emissions Trading System is too low to meet climate targets, suggesting adjustments to make pricing more effective.
The OECD’s findings underline the importance of targeted reforms in fiscal policy, workforce development, business competitiveness, and climate strategy to ensure sustainable economic growth and long-term resilience in Czechia.
Source: OECD
