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 at a meeting of the Economic and Development Review Committee on 5 June 2018. The draft was revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 22 June 2018.The Secretariat’s draft report was prepared for the Committee by Falilou Fall and Daniela Glocker under the supervision of Piritta Sorsa. The draft has benefitted from valuable background research by Ales Belohradsky, seconded from the Ministry of Finance of the Czech Republic. Statistical research was provided by Béatrice Guérard. Assa Fofana formatted and produced the layout.The previous Survey of Czech Republic was issued in June 2016.

Economic prospects are good. The economy is thriving.Strong demand and exports are driving growth.Economic growth will slow due to labour shortages but remain above its potential.Poverty and inequality wellbeing indicators are good.Low productivity is limiting convergence towards OECD living standards.GDP per capita has been increasing but convergence towards OECD living standards is slow. Better skilling, R&D and innovation are needed for the upgrading of the economy. Better skilling is necessary to increase labour productivity and innovation to maintain the price competitiveness and to favour upgrading in value chains. Increasing labour force participation of women with young children would reduce labour shortages.An acceleration of immigration procedures and facilitation of immigrants’ integration could reduce labour shortages. The Czech Republic has to address the challenges of an ageing society. Ageing will weigh on public finances.Retirement age should be tightly linked to life expectancy. Financing of health and long-term care can be expanded making all types of income contributing. There is room to improve the delivery of health care. The Czech health care system performs well along several dimensions but can be improved. Indicators for the quality of care and outcome performance are missing in the management and regulation of the health care system. The delivery of health care could be improved through better management of hospitals; and putting more incentives in the remuneration scheme of health providers. The efficiency of the delivery of primary care is suffering from lack of co-ordination.

Since the early 1990s, the Czech Republic has progressed successfully towards the average OECD incomes. Building on its geographical location and strong industrial base, the country has opened its markets and attracted foreign direct investments. Following the Velvet Revolution in 1989, the economy has become highly integrated in global value chains. Growth has been strong, though volatile. Following slow growth in the wake of the 2007 financial crisis, the Czech Republic has resumed its convergence towards OECD and EU average incomes. The economy is thriving, driven by internal and external demand. Per capita GDP reached 82% of the OECD average in 2017 or 88% of the EU average ().

Recommendations in previous Surveys

This chapter assesses the performance and emerging key challenges of the Czech health system, and provides recommendations to adapt the system to remain effective and financially sustainable in the context of an ageing society. The system is doing well in terms of health outcomes compared to other CEE economies that inherited similar health systems after the transition and has been converging to OECD averages. However, benchmarking the Czech health system to countries with comparable institutional setting points to potential for efficiency gains. The chapter also discusses how various disincentives in the system create inefficiencies on the supply and the demand side of health care.