GDP growth will slow to 0.3% in 2023, before picking up to 2.4% in 2024. In 2023, high energy prices, tight financing conditions and weak sentiment will hold back private investment, and still elevated inflation will constrain private consumption. Private consumption will pick up in 2024, underpinned by growing real wages. Inflation will start falling from currently high levels but will only approach the 2% target towards the end of 2024. The unemployment rate will remain low, close to 3%.
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Read full country noteSpillovers from Russia’s war of aggression against Ukraine have derailed the Czech Republic’s post-pandemic recovery and further disrupted the impressive catch-up with OECD average incomes seen in the previous two decades. Inflation is high and a tight macroeconomic policy stance is needed to restore price stability. Fiscal pressures have risen. Reforming pensions and taxes could help maintain fiscal sustainability. The Czech labour market remains strong. The unemployment rate is low, and the employment rate and job security are high. However, severe labour and skills shortages are a major obstacle to growth. Bringing more mothers to work and increasing labour participation of older workers can help in this regard. More equitable provision of education and skills, effective lifelong learning and attracting and retaining skilled foreign labour would ease skills shortages and spur growth. The Czech economy remains highly energy intensive, still relies heavily on coal and records high greenhouse gas emissions. Major investments are needed to alter the energy mix and to improve energy efficiency. More ambitious environmental policies and an improved investment climate could help make growth more sustainable.
The recovery offers an opportunity to focus on productivity-enhancing investment and upskilling, including better targeting of R&D support and improved business environment.
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Read full country note2021 Structural Reform Priorities