Economy

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

 

18/03/2014 - 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. “The challenge facing the Czech Republic today is to complement the successful export-oriented manufacturing sector with a more vigorous domestic economy.” (Read the full speech)

 

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.

 

To secure labour market relevant training, employers should be encouraged to provide training to young unskilled workers through tax subsidies or targeted reductions in social security contribution. The implementation of a youth minimum wage linked to training should also be considered.

 

To boost female labour market participation and help reconcile family and working lives, the government should improve the provision of affordable and high-quality early childcare facilities. Conditional on this development, it should also reduce the maximum duration of parental leave and replace part of the parental allowance with a childcare voucher system.

 

An Overview with the main conclusions is accessible in pdf format on the OECD’s web site at http://www.oecd.org/eco/surveys/economic-survey-czech-republic.htm.


For further information on the Survey, or to set up interviews, contact Lawrence Speer in the OECD Media Office (+33 1 4524 9700).

 

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