With the Czech economy’s export-driven recovery slowing, swift implementation of new reforms is needed to ensure sustainable, inclusive long-term growth and better resilience to external shocks, according to the OECD’s latest Economic Survey of the Czech Republic.
The report, presented in Prague today by OECD Secretary-General Angel Gurría and Czech Prime Minister Petr Necas, shows that the ongoing recovery has been weaker than in neighbouring countries, constraining the pace of convergence in income levels with more prosperous European countries. Worsening trade performance and declining domestic demand will limit economic growth to 1.6 percent in 2012, down from 2.1 percent this year, with significant downside risks linked to the continuing international slowdown and the outlook for the euro area.
To counter these risks and boost economic activity, the OECD encourages the Czech Republic to maintain momentum behind reforms aimed at enhancing competitiveness and long-term growth. The reform programme should build on existing efforts to improve the business environment, strengthen the education system and promote innovation in line with the recently adopted Competitiveness Strategy.
“Growth and improvements in living standards will depend on the transition to a more innovative, skill-based and energy-efficient economy,” said Mr Gurría.
A special chapter of the Survey underlines the need to strengthen the country’s fiscal framework through the introduction of an explicit debt target and the establishment of an independent institution to monitor and assess the state of public finances. The chapter also provides guidance for phasing in planned reforms in the health care and pension systems, including the creation of a new, voluntary, defined-contribution retirement pillar.
The OECD calls for economic transformation to foster energy efficiency and reduce greenhouse gas emissions. Market-based instruments should be strengthened, excise tax rates on fossil fuels should be harmonised and support for renewable energies should be streamlined, all of which can improve incentives for changing the way producers and consumers use energy, the OECD said.
Source : OECD Press Release
