Economic Policy Reforms 2023

Czech Republic

See more data for Czech Republic on the related dashboard.

Product and labour markets functioning

Performance gaps

• Procedures to obtain construction permits and to start a business are cumbersome and lengthy, inhibiting the entrepreneurial drive and the green transition.

Recommendations

• Streamline permitting processes and regulations in construction and reduce the time and number of procedures for starting a business.

Digital transition

Performance gaps

• Evidence points to high basic digital skills. Yet, the economy lacks information and communication technology specialists, with the share of female ICT specialists particularly low. Czech firms are slow to adopt more sophisticated technologies, lagging behind in using AI and big data, holding back their digital transformation.

• Coverage of very high-capacity networks is low, and access to internet broadband connection is unequal across regions and cities. Quality of public administration – at the local level in particular – could be strengthened by greater use of digital technologies and e-government.

Recommendations

• Strengthen specialised digital and IT skills by modernising education, including VET, and better adapting it to adult learning.

• Increase funding and capacity to boost investment in digital infrastructure and technologies.

• Continue rolling out of eGovernment and offer training to local public officials.

Inclusiveness, social protection, and ageing

Performance gaps

• Population ageing will result in steep future rises in public spending. Yet, Czech workers retire too early. Early retirement is still possible from the age of 60 and employment rates fall sharply after this age.

• Childbirth has a large impact on labour market activity of mothers and the gender wage gap is sizable. Family cash benefits and tax breaks are generous while access to high-quality public childcare support is low, particularly for children under the age of three.

Recommendations

• Continue raising the retirement age and link it more tightly to increases in longevity. The minimum age of early retirement should also be increased.

• Keep expanding the supply of affordable and high-quality childcare facilities. Lower untargeted family cash benefits and gradually reduce the maximum duration of parental leave.

Climate transition

Performance gaps

• Extensive use of coal for electricity production and heat generation contributes to high greenhouse gas emissions. Reliance on heavy industry coupled with older and poorly insulated dwellings make the Czech economy highly energy intensive.

• Current environmental policies are not stringent enough to effectively curb emissions. Effective carbon rates are among the lowest in the OECD. Tax exemptions are applied on various fuels, which decreases end-use prices and limits incentives to save energy or to switch to cleaner fuels.

Recommendations

• Scale up investment in renewable and low-emissions energy sources and boost energy efficiency, notably in the residential sector, including by drawing on the NextGenerationEU financing.

• Introduce an explicit carbon price (with a pre-announced price trajectory) to cover all emissions for sectors outside the EU’s ETS.

Overall performance