Czech republic-2016-oecd-economic-survey-fostering-prosperity-for-all

2016 OECD ECONOMIC SURVEY OF THE CZECH REPUBLIC

Fostering prosperity for allPrague, 6 June 2016

@OECD@OECDeconomy

www.oecd.org/eco/surveys/economic-survey-czech-republic.htm

2

The economy is growing again

GDP growth

Source: OECD Economic Outlook database.

-6

-4

-2

0

2

4

6

8

-6

-4

-2

0

2

4

6

8

2001 2003 2005 2007 2009 2011 2013 2015 2017

% %%

Projections

3

Unemployment returned to pre-crisis lows

Unemployment rate

Source: OECD Economic Outlook database.

0

1

2

3

4

5

6

7

8

9

0

1

2

3

4

5

6

7

8

9

2008 2009 2010 2011 2012 2013 2014 2015

%%

Czech Republic

OECD

4

Deflation risks are receding

Inflation

1. CPI inflation excluding food and energy.Source: OECD Economic Outlook database.

-1

0

1

2

3

4

5

6

7

8

-1

0

1

2

3

4

5

6

7

8

2008 2009 2010 2011 2012 2013 2014 2015 2016

y-o-y % y-o-y %

Headline inflation Core inflation¹

5

Well-being is good overall

OECD Better Life IndexIndex scale, 0 (worst) to 10 (best)

Note: For each dimension indicators are normalised and averaged. CEE peers are Estonia, Hungary, Poland, the Slovak Republic and Slovenia. Source: OECD (2016), OECD Better Life Index.

0

2

4

6

8

10Income and wealth

Jobs and earnings

Housing

Work and life balance

Health status

Education and skillsSocial connections

Civic engagement and governance

Environmental quality

Personal security

Subjective well-beingCzech Republic

OECD

CEE peers

6

Inequality is low

Gini coefficient

Note: The Gini coefficient is zero if everyone has the same income and is one if a single person has all the income. Source: OECD Income Distribution and Poverty database.

0.0

0.1

0.2

0.3

0.4

0.5

0.0

0.1

0.2

0.3

0.4

0.5

DNK

SVK

SVN

NOR

CZE

ISL

FIN

BEL

SWE

AUT

NLD

CHE

DEU

HUN

POL

LUX

IRL

FRA

KOR

AUS

ITA

NZL

ESP

PRT

EST

GRC LV

AG

BR ISR

USA

TUR

MEX

7

Reconciling work and family is difficult

The impact of young children on women’s employment rates

Note: Difference between employment rate of women aged 20-49 years with children up to 6 years old and those without children.Source: Eurostat.

-50

-40

-30

-20

-10

0

10

-50

-40

-30

-20

-10

0

10

HUN SVK CZE EST GBR DEU TUR FIN IRL EU AUT POL FRA ESP BEL LUX ITA NLD GRC DNK PRT SVN SWE

% pt% pt

8

FOSTERING PRODUCTIVITY

9

Productivity has stalled since the crisis

Labour productivity

Source: OECD Economic Outlook database.

60

70

80

90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150

1995 2000 2005 2010 2015

Index 2006 = 100

Output per worker

Pre-crisis trend

Index 2006 = 100

10

Business R&D spending is low

Business R&D as a percentage of value-added in industry

Source: OECD (2016), Main Science and Technology Indicators database. Complement grants with co-financing schemes. Increase fiscal incentives for business R&D spending. Streamline the system by unifying the design, assessment and

co-ordination of R&D and innovation policies in a single institution.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

MEX SV

K

GRC PO

L

EST

PRT

ESP

ITA

CAN

NOR

HUN

CZE

IRL

NLD

GBR FR

A

SVN

BEL

USA

DEU

AUT

DNK

SWE

FIN

JPN

KOR

11

Business-science collaboration is low

Share of higher education R&D financed by industry

Source: OECD (2016), Main Science and Technology Indicators database. Increase incentives to develop collaboration between research

institutions and businesses. Develop mobility schemes for public researchers to work for some

time in businesses’ research centres.

0

5

10

15

0

5

10

15

LUX

ITA

MEX PR

TIR

LCZ

ESV

KDN

KJP

NFR

APO

LCH

LSW

EFI

NNZ

LNO

RG

BR EST

ISL

AUS

USA

AUT

GRC ES

PIS

RCA

NNL

DHU

NCH

EKO

RBE

LSV

NDE

UTU

R

% %

12

Boosting finance for start-ups is key

Venture-capital backed companiesPer 1 000 firms with employees

Note: These companies are new or young enterprises that are (partially or totally) financed by venture capital.Source: OECD (2015), Entrepreneurship at a Glance.

Accelerate implementation of innovation funds and guarantee programmes.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

CZE ITA ESP SVN POL EST KOR GBR HUN LUX AUS PRT FRA ISR CAN DNK AUT DEU BEL NOR NLD FIN SWE

13

Exit barriers are high

Average cost of bankruptcy proceedings % of estate’s value

Source: World Bank, Doing Business database.

Reform bankruptcy proceedings to speed up the process. Allow for write-off of debts.

0

5

10

15

20

25

0

5

10

15

20

25

NOR

BEL

FIN

ISL

JPN

KOR

NLD

NZL

DNK

SVN

CHE

GBR CA

NAU

SDE

UUS

AES

TFR

AG

RC IRL

PRT

SWE

AUT

ESP

CHL

HUN

LUX

TUR

POL

CZE

MEX SV

KIT

AIS

R

%%

14

Skill mismatches are relatively high

Percentage of workers with skill mismatch

Note: Mismatched workers are those whose literacy proficiency score is in the top or bottom 5% of self-reported well-matched workers in their country and occupation. Source: OECD (2013), Skills Outlook 2013: First Results from the Survey of Adult Skills.

Reduce barriers to mobility of workers, including by improving the rental market.

0

2

4

6

8

10

12

14

16

18

20

0

2

4

6

8

10

12

14

16

18

20

NLD

POL

FIN

CAN

SWE

BEL

EST

AUS

DNK

KOR

USA

JPN

NOR

OEC

D

GBR DE

U

SVK

ITA

CZE

AUT

ESP

IRL

% %

15

Self-employment is high

Self-employed workers with no employees % of total employment

Source: Eurostat. Align social security coverage of the self-employed and

employees. Reconsider the tax advantages of self-employment.

0

5

10

15

20

25

0

5

10

15

20

25

DNK

NOR

LUX

HUN

DEU

SWE

EST

CHE

AUT

FRA

ISL

SVN

FIN

BEL

PRT

EU28 IR

L

GBR NL

D

ESP

SVK

CZE

POL

TUR

ITA

GRC

16

PROMOTING A MORE EFFECTIVE PUBLIC

SECTOR

17

Government debt is low

Government debt (Maastricht definition)

Source: OECD Economic Outlook database.

Implementing the fiscal framework and fiscal council will help maintain debt sustainability.

0

40

80

120

160

200

0

40

80

120

160

200

EST LUX NOR DNK CZE SWE POL SVK FIN NLD DEU HUN SVN AUT GBR IRL FRA ESP BEL PRT ITA GRC

% of GDP% of GDP

18

The public administration could be more effective

Public administration performance indicator

Note: Composite indicator based on measures of bureaucracy, quality of justice, level of corruption and government inefficiency. Source: Dutu and Sicari (2016).

Use and publish performance indicators for all levels of government.

0

1

2

3

4

5

0

1

2

3

4

5

SVK CZE HUN SVN POL EST OECD AUT BEL DNK SWE FIN

19

Turnover in the civil service has been high

Turnover of civil servants with a government changeNumber of levels of senior civil service that are affected

Note: In the countries with no turnover a change of government does not directly affect the employment of public servants. Source: OECD, Government at a Glance. Review the implementation of the new Civil Service Act, including

the overall remuneration system and staff engagement.

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

AUS

AUT

CAN

DNK

EST

GBR IR

L

JPN

NOR

NZL

SWE

BEL

CHE

FIN

ISL

KOR

NLD

POL

SVN

DEU

ESP

FRA

GRC IS

R

ITA

PRT

CZE

MEX SV

K

USA

CHL

HUN

TUR

20

Public procurement should be more competitive

Share of procurement processes with no call for tender

Source: European Commission, Single Market Scoreboard.

Increase joint procurement by public entities to increase contract size and improve competition.

Increase auditing throughout the process.

0

5

10

15

20

0

5

10

15

20

SWE NOR IRL PRT LUX GRC FIN GBR BEL NLD DNK AUT FRA POL ISL DEU ITA ESP EST HUN SVK SVN CZE

%%

21

Infrastructure investment is low

Source: OECD National Accounts database; International Transport Forum database.

Evaluate public investment needs in a standardised way across sectors.

Co-ordinate public investment across sectors.

Infrastructure investment% of GDP

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1995 1998 2001 2004 2007 2010 2013

Utilities

Information and communication

Roads, rail, airports and waterways

22

Local governments are very small

Average number of residents per municipality

Source: OECD (2016), Subnational Governments in OECD Countries: Key Data.

Increase joint provision of services and monitoring of performance.

Provide more technical assistance to municipalities, particularly for procurement contracts.

0

50

100

150

200

250

0

50

100

150

200

250

CZE

SVK

FRA

HUN

CHE

AUT

ISL

LUX

ESP EU EST

DEU

ITA

CAN

USA

OEC

DSV

NNO

RPO

LFI

NBE

LIS

RPR

TG

RCSW

EAU

SNL

DM

EX CHL

TUR

DNK

NZL

JPN

IRL

GBR

KOR

ThousandThousand

23

• Monetary and fiscal policies – The threat of deflation appears to be receding.– The fiscal outlook is sustainable subject to population-ageing related

reforms.• Fostering productivity

– Business R&D spending is low relative to other OECD countries.– Organisation and administration of R&D and innovation policies are

too complex.– The cost of bankruptcy is too high.– Access to finance for SMEs is difficult, particularly for start-ups.

• Promoting a more effective public sector – Choices of public investment projects lack co-ordination.– Insufficient information is available about policy outcomes.– The system of territorial administration fragments capacity and

hampers delivery of high quality public services.

Main findings

24

• Monetary and fiscal policies – Exit the exchange rate floor when deflation risk recedes.– Implement the new fiscal framework and the fiscal council.

• Fostering productivity – Develop government co-financing schemes to complement grants and

increase fiscal incentives for business R&D spending.– Unify the design, assessment and co-ordination of R&D and innovation

policies in a single institution.– Limit the possibilities to delay bankruptcy procedures and allow for eventual

debt write-off.– Accelerate implementation of innovation funds and guarantee instruments to

support SMEs and innovation.• Promoting a more effective public sector

– Use and publish standardised performance indicators at all levels of government.

– Further improve tools and rules to increase use of joint procurement by public entities.

– Designate responsibility for the co-ordination and prioritisation of public investments.

– Increase joint provision of municipal services.

Key recommendations

25

For more information

www.oecd.org/eco/surveys/economic-survey-czech-republic.htm

Disclaimers:

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This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.