18 March 2014

OECD: Czech Republic is recovering, but more must be done to jump-start income convergence with euro area countries

The Czech economy is finally coming out of a prolonged recession but must take further steps to speed up income convergence towards the euro area countries, according to the OECD's latest Economic Survey of the Czech Republic.

The Survey, presented in Prague by OECD Secretary-General Angel Gurría and Czech Prime Minister Bohuslav Sobotka, underlines the need for reforms to raise the economy’s growth potential, which has been hit by falling investment and slowing productivity.

“The economic recovery is finally underway. A return to a higher growth path is possible, but getting there will require a new economic model", Mr Gurría said during the launch [full speech]. “The challenge facing the Czech Republic today is to complement the successful export-oriented manufacturing sector with a more vigorous domestic economy.”

The OECD suggests three pillars for strengthening the domestic economy: creating a more competitive environment, boosting skill use in the labour market and improving the transition from school to work.

The Survey shows broad scope for boosting competition across the economy, which will improve the business environment while offering consumers greater choice and lower prices. Measures to expand the private services sector include, notably, lowering barriers to entry in professional services. 

Toughening competition policy – through better enforcement of anti-cartel rules, reducing  delays in contract enforcement and allowing more private litigation – would promote a more open and business-friendly environment. Similarly, improving oversight and regulation of network industries would encourage new entrants and drive down prices for consumers.

The transition to a market economy has led to important changes in the labour market with job creation in new sectors and occupations as well as high job losses. Not all have managed to find new jobs and long-term unemployment is a serious problem, the OECD said. Targeted policy action is needed to boost skills and ensure a better school-to-work transition.

Full press release

Overview

Full survey

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