Czech Republic needs new reforms to boost productivity and accelerate convergence with the most advanced countries | WPN World People News

The Czech Republic needs new reforms to boost productivity, improve economic growth and accelerate convergence toward the levels of income and well-being seen in the most advanced European countries, according to a new OECD report.

The latest Economic Survey - Czech Republic, on 6 June presented in Prague by OECD Secretary-General Angel Gurría and Czech Prime Minister Bohuslav Sobotka, underlines the strength of the Czech economy as well as the progress achieved over the past two decades. The Survey, which coincides with the 20th anniversary of the Czech Republic’s accession to the OECD, projects GDP growth of 2.4% this year and 2.6% in 2017.

“The Czech Republic is doing well, with strong economic growth, low unemployment, healthy public finances and high levels of well-being,” Mr Gurría said. “While GDP per capita is the highest among the countries of Central and Eastern Europe, convergence toward the OECD average has stalled. To accelerate the catching-up process, the Czech Republic needs to better utilise the domestic drivers of productivity growth, which means allowing successful firms to grow, supporting domestic innovators and ensuring value-for-money from public spending.”

The Survey points out that productivity growth has slowed markedly in recent years, curbing the rise of incomes and limiting advances in well-being. New reforms are needed to raise domestic innovation and improve the framework conditions that contribute to productivity growth. This should include steps to boost business R&D spending, notably by curbing the complexity of R&D policies and the innovation system, the Survey said.

Improving access to finance for SMEs and start-ups, raising skills across the labour force – with a focus on vulnerable groups – and removing high entry and exit barriers – notably steep bankruptcy costs – would boost dynamism across the economy and make growth more inclusive. Further improvements to competition policy would help successful firms growth, the Survey said.

A more effective public sector will reinforce productivity growth. Reforms should seek to boost competition in public procurement processes and improve coordination of infrastructure investment projects. Joint provision of services needs to be increased, to compensate for the small size of local government authorities, while the use of performance indicators on the efficiency and quality of services would support reforms.

The Survey discusses the challenges of increasing employment and improving social cohesion, notably concerning reconciling work and family life for parents. Removing the substantial obstacles to the employment of women with children will be key to sustaining the size of the labour force as population ageing puts increasing pressure on public finances, the Survey said.

Source: Organization for Economic Co-operation and Development