This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of the Czech Republic were reviewed by the Committee on 14 October 2020. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 6 November 2020.The Secretariat’s draft report was prepared for the Committee by Urban Sila and Christine de la Maisonneuve under the supervision of Mame Fatou Diagne. The Survey also benefited from contributions by Adéla Kelnerová, Kass Forman, Carissa Munro and Emilie Cazenave. Statistical research assistance was provided by Corinne Chanteloup and editorial assistance by Sylvie Ricordeau. The previous Survey of the Czech Republic was issued in July 2018.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at http://www.oecd.org/eco/surveys

The Czech Republic is experiencing a strong second wave of the coronavirus pandemic. The first wave was effectively contained in April, and the lockdown was soon lifted but the number of cases and deaths rose rapidly in autumn, much exceeding the magnitudes from the first wave. The government again declared a state of emergency and a lockdown was reintroduced, with restrictions on events, education and the retail and hospitality sectors.

As most of the world, the Czech Republic is battling the social and economic consequences of the new coronavirus pandemic (Figure 1.1). The government reacted swiftly by introducing strict containment measures in March, and much of the social and economic activity – domestic as well as international – was brought to a halt during March and April. While the first wave of the outbreak was effectively contained, the Czech Republic is undergoing an even stronger second wave. Recovery, which started as soon as the initial lockdown was lifted in April, is now stalling due to a renewed lockdown and restrictions on certain activities. Uncertainty remains elevated and economic growth is expected to resume only slowly over the coming years.

Incomes and poverty vary significantly across regions in the Czech Republic and inter-regional gaps have grown over time. The population is ageing and declining in many rural areas, reducing the school-aged population and increasing the demand for public services such as health and long-term care, while at the same time putting pressures on resources to deliver them. The highly fragmented territorial administration of the Czech Republic does not help in this regard. There is a very high number of municipalities, which makes coordination difficult. In addition, the small size of many municipalities results in low capacity at the local level and a lack of economies of scale that compromise service quality and raise costs.