Assessment of the 2012 national reform programme and convergence programme for the CZECH REPUBLIC Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Czech Republic's 2012 national reform programme and delivering a Council opinion on the Czech Republic's convergence programme 2012-2015

Abstract

Real GDP growth is expected to stagnate in the Czech Republic in 2012, while it should pick up to 1.5 % in 2013. The unemployment rate started to decline at the beginning of 2010 from a level close to 8 % to end on 6.7 % in the fourth quarter of 2011. It is expected to rise to 7.2% in 2012. The Czech Republic has introduced a set of measures to strengthen the sustainability of the pension system, reform the tax system, improve the performance of the public employment service and increase the transparency and efficiency of public procurement. However, in a context of increased competition from emerging economies and the steadily decreasing inflows of new equity capital, the key challenge for the Czech economy is to support economic recovery and long-term growth by improving the quality of fiscal adjustment, reducing inefficiencies and addressing the lack of stability in the public administration, making better use of the potential in the labour market, especially for women with children, and better mobilising factors facilitating the transition to growth based on innovation, higher value added and human capital. The growth of innovative enterprises is also constrained by inadequate links between the science base and the business sector and by inefficiencies in public funding of research. Inefficiencies and lack of stability of the public administration do not create a supportive environment for long-term growth. Furthermore, despite the relatively low debt-to-GDP ratio, and the recent reforms, public finances are not yet on a sustainable path.