COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Czechia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Czechia and delivering a Council opinion on the 2022 Convergence Programme of Czechia
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Czechia, digital transformation, economic policy, economic recovery, economic reform, energy policy, fiscal policy, green economy, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 605 final  COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Czechia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Czechia and delivering a Council opinion on the 2022 Convergence Programme of Czechia {COM(2022) 605 final} - {SWD(2022) 640 final}  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Challenges and opportunities on 
the way to recovery 

Czechia’s  economy  grew  strongly  before 
the  crisis,  catching  up  with  the  EU 
average. Pre-crisis growth was driven by solid 
domestic  demand  and  foreign  trade.  Average 
annual  GDP  growth  of  2.5%  between  2010 
and  2019  (compared  to  an  EU  average  of 
1.6%) ensured national convergence to the EU 
average. During these years, GDP per capita in 
purchasing  power  standards  increased  from 
84%  to  93%  compared  with  the  EU  average. 
Deeper integration in global supply chains and 
a  significant  inflow  of  EU  funds  supported 
growth  during  this  period.  Czechia  therefore 
entered  the  pandemic  on  a  solid  economic 
footing,  with  significant  room  for  policy 
support. 

in  GDP 

recovering  from 

The  Czech  economy  was  hit  hard  by  the 
pandemic  but  has  been 
recovering 
steadily.  The  COVID-19  pandemic  led  to  a 
sudden  contraction 
in  2020  as 
containment  measures  disrupted  economic 
activity,  confidence  fell  across  all  economic 
sectors  and  foreign  demand  dropped.  As  a 
result,  the  real  GDP  contracted  by  5.8%  in 
2020.  While 
the  2020 
recession, the negative impact of supply-chain 
disruptions  continued  to  cause  issues  for  the 
Czech  economy  in  2021.  Despite  that,  the 
Czech  economy  rebounded  by  3.3%  in  2021, 
benefitting  from  the  easing  of  the  pandemic-
related 
strong  private 
consumption  which  was  also  a  result  of 
accumulated  savings.  Economic  activity 
is 
expected  to  regain  momentum  in  2022  and 
2023,  surpassing  its  pre-pandemic  level,  and 
forecast is expected to grow by 1.9% in 2022 
and 2.7% in 2023. 

restrictions  and 

2021,  driven  by  fast-growing  prices  for 
commodities,  production  inputs  and  adverse 
supply side developments. A sharp increase in 
regulated  energy  prices  and  the  related 
indirect  effects,  faster  food  price  growth,  and 
increases in prices of services are expected to 
contribute  to  a  further  rise  in  inflation  this 
year.  As  a  result  of  extreme  price  pressures 
caused  by  the  Russian  invasion  of  Ukraine  - 
especially in the area of commodities, and to a 
lesser  extent,  the  related  exchange  rate 
depreciation  of the Koruna  (CZK)  - inflation  is 
very 
increase  noticeably,  albeit 
temporarily,  in  the  months  ahead.  This  will 
bring  the  average  annual  increase  in  the 
Harmonised  Index  of  Consumer  Prices  (HICP) 
to  11.7%  in  2022.  Well-anchored  inflation 
expectations  should  prevent  temporary  price 
pressures  from  becoming  entrenched  and 
allow inflation to slow to 4.5% in 2023. 

likely  to 

Czechia’s 
labour  market  performance 
remained  strong  throughout  the  crisis, 
but  employability  and  activation  of 
certain groups remain a challenge. Czechia 
has  shown  strong  labour  market  resilience, 
with  unemployment  and  employment  rates  at 
the end of 2021 close to their pre-crisis levels 
and the unemployment rate among the lowest 
in  the  EU.  The  ‘Antivirus  I  and  II’  short-time 
work  schemes,  both  supported  by 
the 
European  Social  Fund  and  the  European 
Instrument  for  Temporary  Support  to Mitigate 
Unemployment  Risks  in  an  Emergency  (SURE) 
(see  Annex  3),  have  proven  effective 
in 
protecting  employment.  At  the  end  of  2021, 
there  was  a  shortage  of  employees  in  most 
sectors  –  notably  in  manufacturing  and  in 
construction 
the 
unemployment  rate  fell.  At  the  same  time,  a 
lack of skilled labour and skills shortages pose 
a  significant  barrier  to  the  diffusion  of 
innovation (1). 

regions,  and 

-  and 

Inflation  pressures  have 
increased. 
Consumer  price inflation  increased  to  3.3%  in 

(1)  See  Annex  9  and  Innovation  Diffusion  in  the  Czech 

Republic (OECD, 2020). 

2 

 
  
                                                 
 
the  highest 

There  are  disparities  in  labour  market 
and  social  outcomes  between  population 
groups.  The  unemployment  rate  is  set  to 
decrease from 2.8% in 2021 to 2.6% in 2023 
(Graph  1.1).  However,  the  gender  pay  and 
employment  gaps  remain  high,  driven  in  part 
by the still limited provision of early childhood 
education  and  care.  The  employment  impact 
of parenthood for women with young children 
remains  among 
in  the  EU. 
Improving  the  relatively  low  labour  market 
outcomes for vulnerable groups, such as Roma 
people  and  people  with  low  levels  of  skills, 
would help support the implementation of the 
European Pillar of Social Rights and reach the 
2030  EU  headline target on  employment.  The 
proportion of people at risk of poverty or social 
exclusion  is  among  the  lowest  in  the  EU, 
though it remains high for specific groups (e.g. 
Roma, women aged over 65) and regions (e.g. 
North-West  Bohemia).  Dedicated  support 
through the European Social Fund (ESF) helped 
boost employment and address skills needs. 

Graph 1.1: Labour market indicators 

Source: Eurostat 

face 

regions 

Czech 
different 
challenges. While  richer  regions  suffer  from 
housing  unaffordability  and  pressures  on  the 
suburban  transport  networks,  the  poorest 
areas  face  issues  arising  from  demographic 
pressures, social exclusion, and an insufficient 
focus  on  key  areas  such  as  energy  transition 
innovation,  and  digitalisation  (see  Annex  15). 
The Prague region is the only region in Czechia 
classified as a strong innovator. 

Czech public  finances  responded  strongly 
during  the  pandemic  but  permanent 
measures  will  lead  to  a  deficit  in  the 
medium  term.  Before  the  start  of  the 
pandemic,  from  2016  to  2019,  the  Czech 

temporary 

support  measures 

budget  had  a  slight  surplus  and  the  debt-to-
GDP  ratio  had  decreased  to  30%  (Graph  1.2), 
one  of  the  lowest  among  EU  Member  States. 
At  the  start  of the  pandemic,  the  government 
took  measures  to  support  the  most  affected 
sectors,  maintain  employment  and  boost  the 
economic  recovery.  Gradual  withdrawal  of 
these 
is 
envisaged  in  2022  at  the  latest  leading  to  a 
decrease in the  general  government  deficit  to 
4.3%  in  2022  from  a  higher  5.9%  in  2021. 
Due  to  measures  with  permanent  effect  (for 
example the reduction of the personal income 
tax), the deficit is expected to remain at 3.9% 
levels.  The 
in  2023,  above  pre-pandemic 
general  government  debt-to-GDP  ratio 
is 
forecasted to increase from 41.9% in 2021 to 
44.0% in 2023.   

Graph 1.2: Key fiscal indicators 

Source: Eurostat 

low 

level 

relatively 

sustainability 

challenges  are 
Fiscal 
expected  to  intensify  in  the  medium  and 
long  term  due  to  population  ageing.  The 
debt-to-GDP ratio is expected to remain on an 
increasing path by 2032, though starting from 
a 
from  an  EU 
perspective (2).  Together  with  a  projected 
increase in age-related expenditure, these debt 
developments  are  expected  to  cause  fiscal 
sustainability  challenges  (see  Annex  19).  In 
particular, a projected doubling of the old-age 
dependency  ratio 
(according  to  European 
Commission-EPC 2021 Ageing Report) and the 
capping  of  the  Czech  retirement  age  will  lead 
to  the  anticipated  increase  in  total  ageing 
costs  of  6.1  pps  by  2070,  split  between 
spending  on  pensions,  healthcare  and  long-
term  care.  These  challenges  will  need  to  be 
addressed 
long-term 
safeguard 
sustainability of public finances. 

the 

to 

(2)  Fiscal Sustainability Report 2021. 

3 

012345674,7004,8004,9005,0005,1005,2005,3005,4005,500% of the labour forcethousands personsEmploymentLabour forceUnemployment rate (rhs)0102030405060708090100-8-7-6-5-4-3-2-101220102011201220132014201520162017201820192020202120222023% of GDP% of GDPGovernment budget balanceGovernment budget balance (Forecast)Forecast DataGross public debt (rhs)Gross public debt (forecast) (rhs) 
  
  
                                                 
to 

the 

in  2021 

related 
and 

recovery 
labour  cost  growth 

labour  costs, 
Challenges 
indebtedness, 
competitiveness 
remain  contained.  Unit  labour  cost  growth 
was  high  already  before  the  pandemic.  It 
accelerated  further  in  2020  on  the  back  of 
labour hoarding associated with the COVID-19 
in 
crisis.  However,  with 
productivity,  unit 
is 
expected  to  moderate  despite  strong  wage 
growth 
Further 
improvements  in  the  business  environment 
including 
reducing  administrative  barriers, 
tackling  late  payments  and  improving  access 
to  risk  financing  could  all  lead  to  further 
increases 
in  productivity (see  Annex  10). 
External  vulnerabilities  remained  contained. 
Private  debt  increased  in  2021  but  remains 
contained.  The  banking  sector 
is  well 
capitalised  and  its  profitability  is  well  above 
the  EU  average,  while  the  non-performing 
loans ratio is below the EU average.  

and  2022. 

and 

energy 

renewables 

Czechia  has  reduced  its  net  greenhouse 
gas emissions in 2020 by 40% compared 
to  1990.    Czechia’s  high  reliance  on  Russian 
fossil fuels necessitates an accelerated roll out 
of 
efficiency 
investments,  as  well  as  diversification  of  its 
supply sources. A broad range of technologies, 
including  solar,  wind,  geothermal,  renewable 
hydrogen  and  sustainable  bio-methane  could 
be  developed  further  to  substitute  for  natural 
gas  imports,  particularly  in  households  and 
industry. 
increasing 
challenges  resulting  from  climate  change 
natural hazards related to droughts and water 
stress,  requiring  more  efforts  in  forest  and 
water management.  

Czechia  will 

face 

House  prices  have  grown  continuously, 
leading to a potential overvaluation. Real 
house  price  growth  remained  high  in  2020. 
The  household  saving  rate  increased  in  2020 
and  remained  high  in  2021  and  incomes  are 
expected  to  continue  growing  in  2021  and 
2022.  As  a  result,  house  price  growth  is 
expected  to  continue  and  the  available  2021 
data indicate an acceleration. While monitoring 
is  needed,  the  price  pressures  could  be 
partially  mitigated  by  an  expected  increase in 
residential  construction in 2021 and 2022, as 
well  as  a  rise  in  interest  rates  for  housing 
loans amid ongoing monetary tightening. 

is 

improving 

is  progressing 

towards  the 
Czechia 
Sustainable  Development  Goals  (SDG), 
but still lags behind in some areas.  While 
Czechia 
its  performance  on 
several environmental sustainability indicators, 
the  current  status  remains  below  the  EU 
average (see Annex 1). In particular, Czechia is 
significantly below the EU average in terms of 
climate  action,  showing  a  lack  of  investment 
and reforms. These would also enable Czechia 
to realise the employment and social potential 
of the green transition (see Annex 6). Czechia 
made  progress  on  all  of  the  SDG  indicators 
related to fairness, where it ranks amongst the 
best  in  EU.  However,  progress  on  life-long 
learning  and  gender-equality  has  been  very 
limited  despite  Czechia  implementing  reforms 
and  strategies 
in  this  area  (e.g.  Gender 
Equality  Strategy  for  2021  –  2030).  In  the 
areas  of  decent  work  and  economic  growth  
Czechia performs better than the EU average.  

The invasion of Ukraine affects the 
economic outlook and social  
landscape 

The  Russian  invasion  of  Ukraine  poses 
risks  to  the  outlook  of  the  Czech 
economy.  Czech exports to and imports from 
Russia  represent  1.7%  and  2.5%  of  the  GDP 
respectively, while exports to and imports from 
Ukraine  represent  around  0.7%  of  GDP. 
Although  trade  links  are  minor,  they  are 
concentrated 
industries, 
notably  in  manufacturing,  which  hosts  many 
energy  intensive  businesses  characterised  by 
complex 
the 
chains 
automotive  sector).  Disruptions  of  imports 
therefore  pose  substantial  risks,  especially  as 
regards  energy.  In  2020  for  instance,  all  gas 
imports, 49% of crude oil imports and 70% of 
hard coal imports came from Russia (3). 

in  a  number  of 

(such  as 

supply 

(3)  Eurostat  (2020),  share  of  Russian  imports  over  total 
imports  of  natural  gas,  crude  oil  and  hard  coal.  For 
Czechia,  total  imports  include  intra-EU  trade.  Crude  oil 
does  not  include  refined  oil  products.  Czechia  has  an 
indirect  dependency  on  Russian  imports  through  intra-
EU trade. Accounting for the secondary dependence on 
Russian coal through intra-EU imports would lead to the 

4 

 
                                                 
to  staff  shortages.  In  the  medium  to  long 
term,  the  budgetary  impact  could  ease  if 
people  displaced  from  Ukraine  participate  in 
the  labour  market,  providing  more  dynamism 
in the context of labour and skills shortages of 
workers.  As  of  21  March,  those  who  fled 
Ukraine  and  registered  can  work  without  any 
additional  permits.  Stable  and  sufficient 
for  childcare  provision  will  be 
funding 
instrumental 
labour 
participation  of  women  with  children  who 
constitute the majority of the adult population 
fleeing  Ukraine.  The  spike  in  migration  has 
structural 
implications  for  the  overheated 
Czech  housing  market,  adding  to  the  housing 
affordability and energy poverty challenges.  

enabling 

the 

to 

The  worsening  macroeconomic  situation 
will  also  have  implications  for  plans  to 
consolidate  the  budget.  The  effects  of  the 
invasion  of  Ukraine,  the  economic  sanctions, 
the  supply  shortages  and  high  levels  of 
inflation are likely to dampen economic growth 
and  add  pressure  on  budgetary  revenues. 
Simultaneously,  increased  spending  is  needed 
to  manage  the 
inflow  of  people  fleeing 
Ukraine  and  to  support  households  which  are 
most  affected  by  high  energy  prices.  The 
consolidation  of 
the  government  budget 
therefore  faces  new  challenges  after  already 
registering  deficits  during 
the  COVID-19 
pandemic.  

can 

from 

benefit 

Czechia 
exceptional 
flexibilities provided in the framework of CARE 
Regulation  and  additional  pre-financing  under 
REACT-EU  to  urgently  address  reception  and 
integration needs for those fleeing Ukraine as 
a result of the Russian invasion. 

Supply-side  shortages  and  high  energy 
prices  have  detrimental 
impacts  on 
inflation  and  economic  growth.  The 
increase  in  energy  and  food  prices  (for  which 
Russia  and  Ukraine  represent  a  large  portion 
of  global  exports)  adds  to  pressure  on 
inflation,  as  these  items  represent  an  above 
EU average proportion of the Czech consumer 
basket.  The  government  has  taken  action  to 
mitigate  the  adverse  consequences  of  high 
inflation  by  increasing  household  allowances, 
after  temporarily  reducing  VAT  on  energy  in 
2021. 
November 
Nevertheless,  high  inflation  will  weigh  on  real 
wages  and  private  consumption.  Additionally, 
the  price  pressures  and 
the  heightened 
uncertainty, negatively affect investment.  

December 

and 

of 

and 

and 

introducing  measures 

The  inflow  of  displaced  persons  from 
Ukraine  presents  both  challenges  and 
opportunities.  Czechia  has  received  over 
300 000  people  fleeing  Ukraine.  The  Czech 
government  responded  swiftly  to  the  Russia’s 
invasion of Ukraine by providing humanitarian 
aid 
to 
accommodate  those  displaced  from  Ukraine, 
including  medical  coverage  and  support, 
retraining 
benefits 
unemployment 
expenses.  With  a  significant  share  being 
children,  ensuring  continuation  of  education 
through  access  to  mainstream  education 
emerged  as  priority.  Czechia  introduced  a 
range  of  measures  to  provide  access  to 
childcare  and 
their 
availability is put at risk. Based on the current 
number  of  registered  people  displaced  from 
Ukraine, 
in 
September  2022,  about  125 000  Ukrainian 
students  could  participate 
the  Czech 
education system. In the absence of additional 
measures,  the  provision  of  childcare  could 
reach its limits. Setting up systematic mapping 
of the availability of mainstream childcare and 
education  systems 
is  essential  to  ensure 
integration  and  to  efficiently  direct  resources 
to ease pressure on certain territories. Short to 
medium-term  integration  of  people  fleeing 
Ukraine  will  have  an 
the 
government  budget  and  lead  to  increased 
pressure on social and healthcare system due 

schooling,  however 

that  starting 

is  expected 

impact  on 

in 

it 

estimation  that  Czechia  has  a  70%  Russian  import 
dependency on hard coal. 

5 

 
                                                                        
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

Facility 

Czechia's  Recovery  and  Resilience  Plan 
(RRP),  adopted  by  the  Council  on  8 
September  2021,  represents  a  total  amount 
of  EUR  7  035  billion  support  in  grants  (about 
3.2%  of  2019  GDP)  (see  Annex  2).  The 
(RRF) 
Recovery  and  Resilience 
Regulation  provides  for  updates  to  grant 
allocations available to Member States in light 
of  the  aggregate  change  in  real  GDP  for  the 
2020-2021  period,  which  is  likely  to  increase 
Czechia’s  final  total  grant  allocation  from  the 
RRF.  Czechia  is  currently  updating  its  plan  in 
line  with  this  increased  allocation.  This  will 
allow Czechia to tackle more ambitiously some 
the  country’s  outstanding  social  and 
of 
economic  challenges, 
those 
identified below. 

in  particular 

and 

new 

The  reform  and  investment  agenda  set 
out in the RRP is expected to help address 
a  number  of  vulnerabilities  in  the  Czech 
economy.  The  plan  aims  to  facilitate  the 
digital transition through a comprehensive set 
of  measures.  Key  measures  for  digitalisation 
digitalisation 
reform 
the 
include 
of construction permits, 
curricula 
for digital  education,  advanced  ICT  equipment 
for  schools,  digital  gap  prevention, digital 
innovation hubs, digital skills and digitalisation 
digital 
of 
high 
infrastructure,  5G 
the 
digitalisation  of  public  administration.  Czechia 
will also take part in multi-country projects on 
digitalisation,  such  as  those  involving  digital 
innovation  hubs  and  microelectronics.  The 
measures will support the digitalisation of the 
economy 
business 
improve 
environment  by  facilitating  progress  towards 
the EU average, inter alia, on coverage by very 
high  capacity  networks  and  digital  public 
services (see Annex 8). 

technologies  and 

businesses, 

capacity 

and 

the 

supports 

Czechia’s  RRP 
the  green 
transition, through measures to reduce waste 
recycling 
and 
improve 
renovation  of 
infrastructure,  support 

country’s 
the 

the 

residential  and  public  buildings  and  the 
improve 
replacement  of  heating  sources, 
public  transport e-mobility  and  rail  mobility, 
forestry  and  watercourses 
and 
reform 
management. 
research  and 
In  case  of 
innovation,  it  remains  important  to  enhance 
investments  by 
the  effectiveness  of  the 
reform  processes. 
In  addition,  given  the 
country’s  above  average  energy  and  carbon 
intensity  (see  Annex  5),  Czechia  will  need  to 
its  ambition  towards  the  green 
increase 
transition 
less 
to  make 
vulnerable to high carbon prices.  

the  economy 

screening 

The  RRP  also  covers  further reforms  and 
investment  to  tackle  socio-economic  and 
regional  disparities,  thereby  supporting 
the 
implementation  of  the  European 
Pillar of Social Rights. These measures will 
invest  in  healthcare  infrastructure,  promote 
and 
preventive 
research,  and  facilitate  the  digitalisation  of 
schools  and  the  provision  of  digital  skills  and 
adult 
learning.  Further  measures  support 
labour  market  participation  of  women  by 
extending  the  capacity  of  childcare  facilities 
and  address  social  challenges  by  modernising 
the  social  care  infrastructure  and  reforming 
long-term care in Czechia. 

programmes 

to 

Work  to  deliver  the  measures  set  out  in 
the  RRP  is  underway.  Czechia  has  to  meet 
eight  dedicated  milestones  to  address  the 
shortcomings identified in its audit and control 
system  before  submitting  its  first  payment 
the  Commission.  Czechia’s 
request 
submission of the first payment request, upon 
the  satisfactory  fulfilment  of  the  agreed 
milestones  and  targets,  can  unlock  a  further 
EUR  928  million  in  grants.    At  the  time  of 
publication, Czechia has reported a total of 13 
milestones  and  1  target  as  being  completed 
according 
reporting 
to 
regulation.  These 
required  by 
measures 
to  digital 
led,  among  others, 
equipment being purchased and distributed to 

regular  bi-annual 
the  RRF 

6 

 
 
 
disadvantaged  pupils,  increased  road  and  rail 
safety,  the  launch  of  the  European  Digital 
Media  Observatory  hub  for  Central  and 
Eastern  Europe  and  the  implementation  of 
reforms  such  as  new  curricula  for  digital 
literacy  and  judicial  reform.  Reforms  to  the 
audit  and  control  system  are  also  being 
finalised. 

administration, 

investments 
public 

Other  measures  are  yet  to  be  set  in 
motion  and  need  to  be  speeded  up.  In 
particular 
to  upgrade  and 
and 
digitalise 
investments  in  forest  management  and  flood 
protection  should  be  closely  monitored  and 
accelerated. In the coming year, the Czech RRP 
is  expected  to  deliver  numerous  results  such 
as  digital  innovation  testing  facilities, tutoring 
for  pupils,  additional  reforested  areas,  water 
courses  and  water  reservoirs,  improved  e-
government  services,  new  and  modernised 
cycle  paths  and  railway  infrastructure  and 
reforms  to  long-term  care  and  to  audit  and 
control. 

Box 1: 

Key deliverables expected under the Recovery and Resilience Plan in 2022-2023 

  Implementation of reforms on audit and control 

  Implementation of reforms to long-term care 

  Investment in railway infrastructure and road safety 

  Launch of European Centre of Excellence in AI and regulatory sandboxes 

  Investment in reforestation and small watercourse reservoirs 

7 

 
 
 
 
FURTHER PRIORITIES AHEAD 
FURTHER PRIORITIES AHEAD 

the 

the 

and 

administrative 

implementation 
In 
projects. 

Beyond  the  challenges  addressed  by  the  RRP, 
faces  additional  challenges  not 
Czechia 
sufficiently  covered  in  the  plan.  Restoring  the 
fiscal  sustainability  of  public  finances  in  the 
long  term  would  help  address  the  challenges 
posed  by  an  ageing  population,  including 
sustainability. 
pensions 
healthcare 
Strengthening 
and 
analytical  capacity  of  public  administration 
and  increasing  the  quality  of  policymaking 
would improve the absorption of EU funds and 
of 
support 
public 
investment 
particular, 
implementing  measures  to  decarbonise  the 
Czech economy by closing the investment gap 
in renewables and streamlining the regulatory 
framework  would  substantially  contribute  to 
the country’s transition towards environmental 
sustainability.  Reducing  regional  disparities 
would  stimulate  long-term  sustainable  and 
the  economic 
inclusive  growth  boosting 
potential  of  the  less  developed  regions  in 
Czechia. Addressing these challenges will  also 
help  to  make  further  progress  on  the  SDG 
indicators in the relevant underlying areas and 
reach  the  2030  EU  headline  targets  on 
employment, skills and poverty reduction. 

Advancing the green transition and 
reducing dependence on Russian 
fossil fuels  

Czechia is highly dependent on fossil fuel 
imports  from  Russia.  While  the  use  of 
natural  gas  made  up  17.7%  of  the  country´s 
energy  mix  in  2020  (compared  to  an  EU 
average  of  24%),  it  still  plays  an  important 
role  in  the  industrial  and  heating  sectors.  To 
address  this  dependency,  Czechia  needs  to 
diversify  its  import  sources  and  leverage  its 
interconnected  gas  network  and  available 
storage 
for 
in  new  natural  gas-based 
investments 

capacity. 

support 

Public 

installations,  such  as  natural  gas  boilers, 
should  be  reconsidered.  Czechia is  also  highly 
dependent  on  the  Russia  in  terms  of  nuclear 
fuel supply.  

Czechia´s  overall  reliance  on  fossil  fuels 
needs  to  be 
through  new 
reduced 
decarbonisation measures. These should be 
informed by the ‘Fit for 55’ legislation, and the 
government´s  objective  to  stop  using  coal  by 
2033.  The  measures  to  mitigate  climate 
change 
take  account  of 
biodiversity and ecosystems considerations.  

should  also 

Czechia  needs  to  set  more  ambitious 
targets for the rollout of renewables. The 
latter could cover a large share of the natural 
gas  shortfall  by  deploying  a  broad  range  of 
technologies, including solar, wind, geothermal, 
renewable  hydrogen  and  sustainable  bio-
methane  solutions  in  line  with  the  relevant 
sustainability criteria. Czechia´ s 2030 goal for 
renewables  is  22%  (compared  to  current 
17.3%).  This  modest  level  of  ambition  is  in 
proposed 
contrast  with 
amendment  of  Renewable  Energy  Directive, 
which  envisages  Czechia´s  2030 
target 
increasing  to      31%.  While  the  RRP  includes 
investments for the construction of 270MW of 
photovoltaic  power 
this 
represents only a modest fraction of the total 
installed wind and solar power capacity, and is 
by  far  not  sufficient  to  meet  the  increased 
level  of  ambition.  Therefore,  significant 
additional  investment  volumes  in  renewables 
are essential.  

companies, 

recently 

the 

in 

and 

lengthy 

Complex, 
costly 
administrative  authorisation  proceedings 
for  renewables  pose  significant  barriers 
to  a  faster  rollout.  Reforms  are  needed  to 
address  the  restrictive  spatial  planning,  the 
restrictively  low  threshold  (20kW)  for  small-
scale  renewables,  the  complex  process  for 
obtaining  electricity  production  licenses  and 
the lack of transparency on the availability of 

8 

 
 
 
 
owners 

grid  capacity.  Czechia  should  streamline 
permitting  processes  for  renewables  (such  as 
adopting  a  one-stop-shop)  and 
increase 
thresholds  for  the  exemption  to  building 
permits  and  the  compulsory  registration  of 
as 
renewable 
installation 
entrepreneurs,  while  making  access 
to 
available  grid  capacity  simpler  and  more 
transparent. Measures to encourage renewable 
energy  self-consumption,  private  purchasing 
agreements  and  energy  communities  should 
also be  considered.  Accelerating  R&I  and 
the 
improving 
private and public sectors on deploying  clean 
technologies  is  also  vital (4).  In  addition,  it  is 
necessary to undertake more grid investments 
to  accommodate  the  increasing  volume  of 
renewables and increase its electricity network 
interconnection capacity (5). 

the  collaboration  between 

Czechia  also  needs  to  step  up  its  energy 
efficiency ambitions, prioritising the deep 
renovation  of  buildings  connected  to 
coal-based  district  heating (6)  (see  Annex 
5). Czechia is one of the countries that are the 
furthest  from  delivering  the  energy  saving 
measures  required  under  Article  7  of  the 
Energy  Efficiency  Directive,  with  only  68%  of 
the  required  cumulative  savings  achieved  as 
of  2018.  Only  25%  of  single-family  houses 
and  40%  of  multi-apartment  buildings  has 
been  renovated  by  2019 (7).  While  the  RRP 
allocates  EUR  1.4  billion  to  energy  efficiency, 
the 
required  by  2030  are 
estimated  at  a  total  of  around  EUR  17 
billion (8).  These  investments  will  also  enable 
Czechia  to  meet  the  increased  2030  effort 
sharing  target  proposed  as  part  of  the  Fit  for 
55 package.  

investments 

(4)  Performance on green patents has decreased over time 

but is almost at the EU average (see Annex 9). 

(5)  Czechia´s electricity interconnection capacity stands  at 
is  above  the  EU  15%  target,  but 

25%,  which 
significantly below its neighbours in the region. 

(6)  Czechia  has  double  the  EU  average  energy  intensity, 
namely  3.9  tCO2equivalent  (CO2e)  per  capita  above 
the EU average in 2019. 

(7)  https://energy.ec.europa.eu/system/files/2021-12/swd-
on-national-long-term-renovation-strategies.pdf 
117) 

(page 

(8)  https://energy.ec.europa.eu/system/files/2021-12/swd-
on-national-long-term-renovation-strategies.pdf 
19) 

(page 

regions 

More  efforts  are  needed  to  address  the 
socio-economic impacts of the coal phase 
out. Czechia should work with the Commission 
on  adopting  its  territorial  just  transition  plan, 
alongside measures to support workers at risk 
of redundancy in coal regions, as spelled out in 
its national energy and climate plan. Czechia´s 
coal 
of 
levels 
indebtedness  and 
unemployment,  poverty, 
early school leaving than the national average 
(targeted  policy  measures  are  to  be  taken 
according 
is 
particularly  the  case  in  the  Ústí  and  Karlovy 
Vary  regions (9),  where  the  disappearance  of 
coal-based 
these 
challenges  without  an  effective  transition 
strategy.  

to  Strategy  2030+).  This 

jobs  might  aggravate 

higher 

face 

the 

The  sustainability  of 
transport 
system  should  be  improved  given  the 
growing  emissions  from  this  sector.  A 
modal shift to rail and public transport should 
be  encouraged  along  with  investments  to 
increase the proportion of electrified rail. Given 
that  only  1.6%  of  new  car  registrations  are 
electric  vehicles  in  Czechia,  measures  should 
be  taken  to  facilitate  the  use  of  electric 
vehicles, particularly in relation to the charging 
infrastructure.   

have 

beetle 

Czechia  should  support  the  essential 
functions  of  the  forest  ecosystem  by 
promoting  biodiversity,  carbon  sinks  and 
water  retention  capacity.  Drought  induced 
bark 
recently 
outbreaks 
contributed  to  increased  net  emissions  from 
land  use,  land  change  and  forestry  (LULUCF) 
by  329%  of  kt  CO2  equivalent  in  2019 (10). 
While  the  RRP  allocates  EUR  335  million  to 
reforestation investments, large-scale reforms 
in  forest  management  practices  are  still 
needed  to  reach  the  LULUCF  net  removal 
levels  achieved  before  2015.  In  view  of 
Czechia´s  significant  exposure  to  the  adverse 
impacts of climate change, in particular floods 
and  droughts,  strategic  policy  support  for 
nature-based solutions is needed. Czechia has 
the  highest  average  size  of  agricultural 
holdings  in  the  EU  and  practising  large-scale 

(9)  Ústecký  region  and  Karlovarský  region  form  together 

the NUTS 2 region of Severozápad (Northwest).  

(10)  13 565 kt CO2 eq. in 2019. 

9 

 
                                                 
                                                 
agriculture is a major cause of natural habitat 
decline and low water retention (11). 

Czechia  has  the potential to  intensify  its 
work  on  the  circular  economy  (see  Annex 
7).  While  the  circular  (secondary)  use  of 
material shows a steady increase and is above 
the EU average of 12.8% (from 7.6% in 2016 
in  2020),  resource  productivity 
to  13.4% 
remained  well  below  the  EU  average  of  EUR 
2.09 per kg with EUR 1.19 generated per kg of 
material  consumed  in  2020.  The  landfill  rate 
of municipal waste has only slightly decreased 
in  the  last  decade,  accounting  for  49.2%  in 
2020, compared to an EU average of 22.7%. 

Strengthening capacities for 
implementing EU funds  

in 

Over the next decade, Czechia is expected 
to  absorb  around  EUR  30  billion  of  EU 
funds.  This  will  help  to  address  the  key 
development  challenges  outlined 
the 
country-specific  recommendations  addressed 
to  Czechia.  The  country  is  well  advanced  in 
preparing 
cohesion 
programmes.  In the  2014-2020  programming 
period, 
progressed  with 
has 
implementation, both in relation to contracting 
and  spending,  and  no 
is 
expected.   

the  2021-2027 

loss  of  funds 

Czechia 

for 

procedures 

With regard to the implementation of EU 
funds, specific challenges remain at both 
national and regional level. The two largest 
funding sources (see Annex 3), the RRF (EUR 7 
billion)  and  cohesion  policy  funds  (EUR  21.7 
billion),  will  require  increased  capacity  and 
and 
efficient 
sector 
successfully 
investment  projects.  The  absorption  of  funds 
was lower than expected in relation to the next 
generation  broadband  networks  and  energy 
efficiency in the 2014-2020 period. Given the 
importance  of  the  twin  green  and  digital 
transitions, those are the areas for Czechia to 
concentrate its work in the 2021-2027 period. 

prepare 
public 

implement 

to 

(11)  Agricultural land is capable of holding only 5 billion m3 
out of its total 8.4 billion m3 water retention capacity. 

10 

Otherwise, it could create macroeconomic risks 
and  could  represent  an  obstacle  for  the 
country’s  capacity  to  successfully  use  the 
opportunities  created  by  the  Green  Deal  and 
the Digital Europe Programme. 

and 

performance 

At  central  government 
level,  several 
layers  of  administrative  capacity  require 
further  attention.  Overall,  Czechia’s  public 
sector 
government 
effectiveness rank below the EU average (see 
Annex  11).  The  country  approved  the  ‘Client-
oriented  Public  Administration  2030’  strategy 
improve  the  quality  of  public 
aiming  to 
services, 
is 
and 
progressing. 
international 
indicators,  the  country  performs  less  well  on 
professionalism of civil  service and on quality 
of policymaking.  

its 
According 

implementation 

to 

improve 

cycle, 
planning, 

its 
Czechia  also  needs  to 
through 
better 
policymaking 
strategic 
inter-ministerial 
coordination across and between tiers of 
government.  Specific  skills  and  competences 
need  to  be  strengthened,  particularly  in  the 
field  of  green  and  digital  projects.  This  would 
also  help  to  remove  barriers  hampering  the 
development  of  a  fully  functioning  innovation 
ecosystem.  Strategic  planning  would  need  to 
build  on  the  synergies  between  local  needs 
and  central  objectives,  as  well  as  enhanced 
analytical  capacity  of  the  administration.  The 
public  procurement  framework 
is  another 
element that has an impact on the timely and 
correct  implementation  of  public  investment 
projects.  Over  time,  this  has  improved  but  it 
requires further fine-tuning. Czechia is scoring 
below  the  EU  average  in  some  important 
performance indicators such as the proportion 
of contracts awarded to a single bidder.  

low 

regions  with 

Targeted  efforts  at  regional  level  could 
increase  the  efficiency  of  EU  funds 
implementation.  Support  for  municipalities, 
cities  and 
investment 
absorption rates is critical as these entities risk 
a  further  deterioration  of  the  socio-economic 
situation  due  to  the  COVID  19  pandemic.  The 
example 
region 
(Severozápad),  the  only  region  not  converging 
to  the  EU  average  GDP  (this  remained  below 
65%  in  2020),  shows  that  low  absorption 

Northwest 

the 

of 

 
 
                                                 
capacity is a contributing factor to the growing 
disparities  between  the  Northwest  and  other 
regions.  The  Czech  government  should  set  up 
a  support  scheme  to  build  administrative 
capacity  and  aid  the  delivery  of  public  sector 
and  private  sector 
investment  projects, 
especially  those  that  will  facilitate  the  twin 
transition,  and  those  in  the  regions  with  the 
lowest  absorption  rates.  To  this  end,  targeted 
technical  assistance  could  be  provided  to 
regional entities and territorial partners.  

Increasing housing affordability  
and accessibility of social housing 

reserves  weighs  on 

Housing affordability in Czechia has been 
among the lowest in the EU for the past 5 
years (12).  Acquiring  property  has  become 
increasingly difficult for middle-income groups 
and  young  families,  feeding  the  demand  for 
rental property. According to the OECD housing 
survey,  the  limited  mobilisation  of  available 
land 
the  housing 
development  opportunities  at  local  level  in 
Czechia.  Municipal  rental  stock  is  very  limited 
and  there  are  no  incentives  for  rental  or 
cooperative housing, which would increase the 
supply of affordable housing. Low affordability 
of housing is reflected in high and accelerating 
house  price  growth  in  most  Czech  regions, 
potential  house  price  overvaluation,  high 
mortgage  credit  growth  and  a  loosening  of 
lending  standards  (see  Annex  16).  Limited 
access  to  housing  and  underused  housing 
allowances impose substantial economic costs 
and  efficiency 
the  housing 
losses  on 
market. Moreover,  the  integration  of  people 
fleeing  Ukraine  and  staying  in  Czechia  may 
further increase the demand for housing. 

Affordability  of  housing  is  limited,  in 
particular  for  low-income  groups,  due  to 
the  absence  of  a 
legal  framework 
providing  systemic  support  for  social 
housing. Lack of definition of roles at national 
and  regional  level  impedes  a  comprehensive 

(12)  Twelve  annual  salaries  are  needed 

to  buy  a 
standardised dwelling in Czechia, which is the highest in 
the EU.  Property Index 2021, Deloitte. 

approach  to  social  housing,  with  a  high 
variability  of  the  social  housing  stock  and 
different  eligibility 
criteria  at  municipal 
level (13). The  proportion  of  social  housing  out 
of the total stock of rental dwellings is 0.4% in 
Czechia,  well  below  the  EU  average  of  7-
8% (14).  In  recent  years,  investment  in  new 
social  housing  has  relied  mostly  on  EU 
funding.  As  a  consequence,  the  number  of 
households  in  need  of  housing  is  currently 
estimated  at  about  35 000  to  62 000 (15). 
Low-income  families  are  expected  to  be 
disproportionally affected by the rise in energy 
prices,  increasing  housing  expenses  to  up  to 
63% of their average budget (16).  Overall, this 
leads  to  increasing  costs  for  government 
budgets and the healthcare system as well as 
wider  societal  costs  through  negative  impact 
on education and employment of the families 
affected (17).    

level,  and 

A  broad  reform  ensuring  adequate  and 
affordable  housing  in  Czechia  is  needed. 
As part of the reform efforts, incentivising the 
land  suitable  for  housing 
availability  of 
construction  at  municipal 
the 
reconstruction  and  refurbishment  of  existing 
housing  units  can  have  positive  effects  on 
housing supply and prices. For instance, recent 
estimates show that reforms incentivising the 
renting  and  private  development  of  housing 
the  vacant 
could 
dwellings,  currently  22%  in  rural  and  10%  in 
urban  areas.  Effective  coordination  between 
different  public  bodies  would  be  key  for  the 
construction  and  provision  of 
effective 
affordable  and  quality  housing, 
including 
rental housing. 

impulse  utilisation  of 

(13)  Peer  Review  on 
legislation?”, 2020. 

“Housing  exclusion:  the 

role  of 

(14)  Affordable Housing Database (OECD). 

(15)  Report on Housing Exclusion 2021 and Social Housing in 
the Czech Republic (Platform for Social Housing), 2021.   

(16)  Impacts  of  the  rising  energy  prices  and  proposal  for 

reforms of the housing allowance, PAQ research 

(17)  The  direct  fiscal  cost,  including  healthcare  spending,  is 
estimated  at  CZK  2.5  billion  per  year.  Wider  societal 
costs through the impact on education and employment 
are  estimated  at  CZK  11  billion  per  year.  Cost  of  the 
Housing Need (European Priorities), 2021.     

11 

 
 
                                                 
                                                 
Ensuring the long-term 
sustainability of the public 
finances 

Pre-crisis  fiscal  discipline  provided  the 
necessary buffer to support the economy 
during  the  crisis  but  since  then  public 
debt levels have increased and structural 
risks have intensified. The initial public debt 
low  compared  with  other  EU 
level  was 
countries (37.7% of GDP in 2020 for Czechia, 
compared  to  91.8%  EU  average).  Despite 
renewed  economic  pressures  from  Russia’s 
invasion of Ukraine, a gradual consolidation of 
the  public  finances  is  expected  to  start  this 
year,  as  COVID-19  support  measures  are 
withdrawn.  While  targeted  fiscal  measures 
might  still  be  needed  in  the  short  term  to 
the 
support 
implemented 
the  economy, 
permanent  expansionary 
fiscal  measures 
including  tax  cuts  are  expected  to  lead  to  an 
increased  structural  deficit  compared  to  the 
pre-pandemic  situation. 
In  addition,  debt 
sustainability 
challenges  will  be  more 
substantial  in  the  long  run,  due  to  an  ageing 
population  and  the  associated  increase  in 
spending  on  pensions,  healthcare  and  long-
term  care.  The  old-age  dependency  ratio  (the 
ratio  of  people  over  65  to  people  of  working 
age  20-64)  is  expected to  double,  rising  from 
33% in 2019 to a peak of 59.2% by 2060 (18).  

Pension  expenditure  is  projected  to  rise 
considerably  beyond  2030.  The  increase  in 
the  retirement  age  to  65  (by  2030)  helps 
address  the  medium-term  pressure  on  public 
finances  stemming  from  ageing  population, 
but challenges remain beyond 2030. While the 
previous legislation envisaged increases in the 
retirement age also beyond 2030, a legislative 
change  in  2017  set  the  maximum  retirement 
age  at  65.  A  mechanism  to  regularly  assess 
the  retirement  age  was  also  introduced.  In 
2019, the latest assessment of the Ministry of 
Labour  and  Social  Affairs  discussed  the  pros 
and cons of increasing the retirement age and 
recommended  no  retirement  age  change 
during  this  round  of  assessment  procedure. 
the 
The 

Government 

followed 

future 

thus  no 

legislative 
recommendation  and 
change  was  adopted.  As  a  result,  in  the 
fiscal 
absence  of  any 
sustainability  challenges  are  expected 
to 
intensify beyond 2030. According to the 2021 
Ageing  Report,  public  pension  spending  is 
expected  to  increase  from  8.8%  of  GDP  in 
2030 to 11.8% in 2060. 

change, 

Multiple options are available to improve 
the  fiscal  sustainability  of  the  pension 
system.  Several  elements  of  a  potential 
pension  reform  have  been  discussed  in  the 
recent  years  and  some  priorities  have  been 
highlighted (19). Measures to address the fiscal 
sustainability  of  pension  system  will  be 
needed to address the increasing pressures on 
public finances. These measures could include: 
adjusting  the  retirement  age  in  line  with  the 
increase  in  life  expectancy;  incentivising  the 
increase  in  participation  rates  of  people  over 
60  (where  these  are  below  EU  average); 
adjusting pension indexation rates to take into 
consideration  the  fiscal  sustainability  of  the 
pension system or taking measures to increase 
labour  supply.  These  measure  could  include, 
for example, supporting flexible/part-time work 
arrangements  for  young  people  and  elderly 
workers,  strengthening  the 
labour  market 
integration of women with young children and 
of  vulnerable  groups  such  as  Roma  people  or 
facilitating 
people  with  disabilities,  and 
migration and refugees’ integration.  

Further  improvements  to  the  tax  system 
could  also  improve  the  sustainability  of 
public finances. Even if the newly appointed 
government  does  not  envisage  reversing  the 
tax  cuts  legislated  for  in  2020  (including  the 
reduction of the personal income tax), a better 
adjustment  of  the  tax  mix  and  measures  to 
improve  compliance  could  help  improve  the 
sustainability  of  public  finances.  At  36%  of 
GDP  in  2020,  Czech  tax  revenues  are  still 
significantly  below  the  EU  average.  Labour 
taxation  rates  have  been 
lowered  by  a 
reduction  in  personal  income  tax  but  remain 
high  for  low-income  earners  which,  together 
level  of 
with  personal  debt  and  high 
low-income 
foreclosures,  discourage  some 

(18)  According to EC-EPC 2021 Ageing Report 

(November 2020) 

(19)  see OECD Review of Pension System in Czech Republic 

12 

 
 
                                                 
                                                 
from  seeking  employment,  and 
earners 
encourage undeclared work. Increases in taxes 
that  are  less  detrimental  to  economic  growth 
could help improve the sustainability of public 
finances.  These  include  property  taxes,  which 
stand  at  0.2%  of  GDP  in  Czechia  compared 
with an EU average of 1.2%, or environmental 
taxes,  which  stand  at  1.9% 
in  Czechia 
compared  with  an  EU  average  of  2.2%. 
Additionally,  improving  tax  compliance  could 
help  increase  tax  revenues.  Although  it  has 
decreased in recent years, the value-added tax 
gap of 14.3% is still among the largest in the 
EU (see Annex 17).  

Stepping  up  the  implementation  of  the 
‘Health  2030’  strategy  should  further 
strengthen  the  resilience  of  the  health 
system 
in  Czechia.  Despite  significant 
improvement, Czechia still performs below the 
EU  average  in  many  areas  related  to  health 
status  and  healthcare  outcomes  (see  Annex 
14).  Treatable  mortality is  higher  than  the  EU 
average  and  there  are  substantial  regional 
differences  in  health  status,  for  example  life 
expectancy at birth for both men and women. 
Socio-economic  conditions, 
including  those 
linked  to  unhealthy  lifestyles, are  the  main 
contributing  factor.  As  a  share  of  total 
healthcare  spending,  spending  on  prevention 
has declined over the 2016-2019 period. 

to 

on 

care, 

some 

reforms 

long-term 

The  projected  increase  in  age-related 
public  expenditure  on  healthcare  puts 
pressure 
fiscal 
In  addition,  care  needs 
sustainability. 
associated  with  multiple  chronic  diseases  are 
increase  with  an  ageing 
expected 
population.  While 
and 
investments  taking  place  outside  the  RRP  in 
long-term 
screening  and 
cancer 
treatment and health workforce education will 
improve  the  resilience  of  the  healthcare 
system,  several  challenges  remain.  An  update 
of  the  long-term  care  system  is  necessary, 
with  Czechia  ranking  as  one  of  the  OECD 
countries  with  the  highest  proportion  of  end-
of-life  care  taking  place  in  hospitals  (63%  in 
2019  vs  an  OECD  average  of  50%).  Public 
expenditure  on  healthcare  is  projected  to 
increase by 0.9 pps of GDP by 2070, adding to 
costs associated with an ageing population. 

risk 

This 

chronic 

initiatives 

in  preventing 

conditions,  and 

the  EU  average. 

role.  Patients  may 

Inefficient  use  of  outpatient  care  is  still 
prevalent  in  the  system.  While  funding  for 
outpatient  care  is  high,  avoidable  hospital 
admissions  in  certain  conditions  are  higher 
indicates 
than 
factors, 
weaknesses 
managing 
the 
insufficient  integration  of  healthcare  services. 
in  this  direction, 
Despite  some 
care  doctors  do  not  play  a 
primary 
gatekeeping 
consult 
specialists  directly  without  any  user  fees, 
which  partly  explains  the  comparatively  high 
number  of  outpatient  consultations.  The  cost-
effective  use  of  medicines,  medical  devices 
and  equipment  in  hospitals  and  outpatient 
care  is  less  than  optimal.  The  expanded 
functionality  of  the  e-prescription  system 
holds the potential  to deliver efficiencies over 
time  by  enabling  optimised  prescribing 
and 
practices. 
implementing  health  technology  assessments 
together  with 
procurement 
procedures  for  pharmaceuticals  and  other 
medical and non-medical goods may generate 
savings  for  payers,  while  ensuring  access  to 
high-quality products in the health system.  

centralised 

developing 

Further 

the 

hinder 

Fragmented  governance  and  financing 
structures 
appropriate, 
efficient  provision  of 
long-term  care 
services.  Financial  incentives  still  exist  for 
prolonging  the  hospital  treatment  of  patients 
in  need  of 
long-term  care.  The  planned 
transformation  of  acute  care  into  long-term 
care  hospital  beds  is  expected  to  increase 
transparency  and  save  costs.  If  the  provision 
of  home  care  services  is  sufficient,  a  40% 
increase  in  the  reimbursement  rate  for  home 
length  of 
care  services  may  reduce  the 
hospital  stays.  The  de-institutionalisation 
strategy  currently  being  developed  will  be  an 
important  tool  to  comprehensively  link  social 
and health services, including concrete actions 
to  develop  community-  and  family-based 
social services.   

13 

 
KEY FINDINGS 
KEY FINDINGS 

Czechia’s  Recovery  and  Resilience  Plan 
includes measures to address a series of 
its structural challenges through: 

  Facilitating  the  digital  transition  via  a 
comprehensive  set  of  measures,  including 
digitalisation  of  public  administration  and 
businesses,  supporting  the  deployment  of 
digital  technologies  (very  high  capacity 
networks or 5G), or developing digital skills.  

  Incentivising  the  use  of  sustainable means 
of  transport,  promoting  the  transition  to 
cleaner  energy  sources,  and  investing  in 
recycling  infrastructure,  in  biodiversity  and 
reforming 
forestry  and  watercourses 
management. 

  Supporting  the  renovation of  residential 
and public buildings and the replacement of 
heating sources. 

  Addressing social challenges by investing in 
healthcare 
care 
infrastructure and enhancing the excellence 
of research in medical sciences. 

long-term 

and 

  Addressing  labour  market  challenges  by 
promoting development of digital skills and 
adult  learning,  and  extending  the  childcare 
facilities’  capacity  to  increase  employment 
of women with children.  

  Strengthening  Czechia’s  anti-corruption 
framework,  including  through  measures  in 
the area of management and avoidance of 
conflict of interest. 

  Boosting 

the 

capacity  of 
innovation 
domestic businesses and strengthening the 
connection  with  the  public  research  sector, 
as  well  as  improving  access  to  finance  for 
small and medium-sized enterprises. 

Beyond  the  reforms  and  investments  in 
the RRP, Czechia would benefit from: 

  Restoring the long-term fiscal sustainability 
of public finances, by addressing challenges 
to  the  sustainability  of  the  pension  and 
healthcare systems. 

  Strengthening 

the  capacity  of  public 
administration,  at  central  and  regional 
level,  and  improving  public  procurement 
efficiency,  especially  in  the  context  of  the 
RRP and cohesion policy implementation. 

  Diversifying  its  fossil  fuel  imports  and 
reducing  the  use  of  imported  natural  gas 
from  Russia.  Czechia  needs  to  accelerate 
decarbonisation  efforts  through  increased 
investments 
in  renewables  and  energy 
efficiency  and  by  improvements  in  the 
regulatory,  permitting  and  grid  access 
framework for the rollout of new renewable 
installations.  

  Ensuring  the  effective  provision  of  social 
and  affordable  housing 
to  address 
affordability  challenges  and  tackle  poverty 
and  social  exclusion,  as  well  as  the 
integration of people fleeing Ukraine. 

14 

 
 
 
 
 
 
ANNEXES 

 
 
 
LIST OF ANNEXES 

Cross-cutting progress indicators 

Annex 1: Sustainable Development Goals 

Annex 2: Recovery and Resilience Plan - Implementation 

Annex 3: Other EU instruments for recovery and growth 

Annex 4: Progress in the implementation of country-specific recommendations 

Environmental sustainability 

Annex 5: Green Deal 

Annex 6: Employment and social impact of the green transition 

Productivity 

Annex 7: Resource efficiency and productivity 

Annex 8: Digital transition 

Annex 9: Innovation 

Annex 10: Industry and single market 

Annex 11: Public administration 

Fairness 

Annex 12: Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

Annex 13: Education and skills 

Annex 14: Health and health systems 

Annex 15: Economic and social performance at regional level 

Macroeconomic stability 

Annex 16: Key financial sector developments 

Annex 17: Taxation 

Annex 18: Key economic and financial indicators 

Annex 19: Debt sustainability analysis 

LIST OF TABLES 

Table A2.1: 
Table A4.1: 
Table A5.1: 
Table A7.1: 
Table A8.1: 
Table A9.1: 
Table A10.1: 

Key elements of the Czechian RRP 
Summary table on 2019,2020 and 2021 CSRs 
Indicators underpinning the progress on the EU Green Deal from a macroeconomic perspective 
Selected resource efficiency indicators 
Key Digital Economy and Society Index Indicators 
Key research, development and innovation indicators 
Key Single Market and Industry Indicators 

17 

19 

19 

21 

22 

24 

26 

26 

30 

33 

33 

35 

37 

39 

42 

44 

44 

46 

48 

50 

52 

52 

54 

56 

57 

21 
25 
29 
34 
36 
38 
40 

 
 
 
Table A11.1: 
Table A12.1: 
Table A13.1: 
Table A14.1: 
Table A15.1: 
Table A16.1: 
Table A17.1: 
Table A18.1: 
Table A19.1: 
Table A19.2: 

Public administration indicators 
Social scoreboard for Czechia 
EU-level targets and other contextual indicators under the European Education Area strategic framework 
Key health indicators 
Selected indicators at regional level - Czechia 
Financial soundness indicators 
Taxation indicators 
Key economic and financial indicators 
Debt sustainability analysis for Czechia 
Heat map of fiscal sustainability risks for Czechia 

LIST OF GRAPHS 

Graph A1.1: 

Progress towards SDGs in Czechia in the last five years 

Graph A2.1: 

Share  of RRF funds contributing to each policy pillar 

Graph A3.1: 

2014-2020 European Strategic and Investment Funds - Total budget by fund 

Graph A3.2: 

Cohesion policy contribution to the SDGs (EUR billion) 

Graph A4.1: 

Czechia’s progress on the 2019-2020 CSRs (2022 European Semester cycle) 

Graph A5.1: 

Fiscal aspects of the green transition Taxation and government expenditure on environmental protection 

Graph A5.2: 

Thematic – Energy Share in energy mix (solids, oil, gas, nuclear, renewables) 

Graph A5.3: 

Thematic – Biodiversity  Terrestrial protected areas and organic farming 

Graph A5.4: 

Thematic – Mobility  Share of zero emission vehicles (% of new registrations) 

Graph A6.1: 

Energy poverty by income decile 

Graph A6.2: 

Fair green transition challenges 

Graph A11.1: 

Performance on the single market public procurement indicator 

Graph A11.2: 

Performance on evidence-based policy making indicators 

Graph A13.0: 

Participation in formal childcare 

Graph A14.1: 

Life expectancy at birth, years 

Graph A14.2: 

Projected increase in public expenditure on health care over 2019-2070 (AWG reference scenario) 

Graph A15.1: 

CO2 emissions from fossil fuels per head, 2018 

Graph A15.2: 

Territories most affected by the climate transition in Czechia 

Graph A15.3: 

Innovation performance in Czechia 

Graph A17.1: 

Tax wedge 2021 (%) 

43 
44 
47 
49 
50 
53 
54 
56 
57 
58 

20 

21 

22 

23 

24 

26 

27 

28 

28 

32 

32 

42 

42 

46 

48 

48 

50 

51 

51 

55 

18 

 
 
 
 
CROSS-CUTTING PROGRESS INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

This  Annex  assesses  Czechia’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities,  and  tackle  climate  change,  while 
ensuring that no one is left behind. The EU and its 
Member  States  are  committed  to  this  historic 
global  framework  agreement  and  to  playing  an 
active  role  in  maximising  progress  on  the  SDGs. 
The graph below is based on the EU SDG indicator 
set  developed  to  monitor  progress  on  SDGs  in  an 
EU context. 

While  Czechia  has  improved  its  performance 
on  several  environmental  sustainability 
indicators  (SDGs  7,  9,  12,  13)  or  is  even 
performing  very  well  on  some  (SDGs  2,  11), 
there  is  room  for  improvement  on  others 
(SDGs  6,  15).  In  particular,  Czechia  performs 
significantly  below  the  EU  average  on  climate 
action, showing a lack of investment and reform to 
facilitate  the  green  transition  (SDG  13  stands  at 
78.4%  below  EU  average).  Czechia  has  also 
significant  untapped  potential  with  regard  to 
reaping  the  economic  benefits  from  innovation 
and  clean  energy  (SDGs  7,  9).  For  example, 
Czechia’s  level  for  indicator  for  affordable  and 
clean  energy  status  is  14.3%  below  the  EU 
average. Czechia is improving in indicators for life 
on  land  and  clean  water  and  sanitation  (SDGs  6, 
15),  but  they  also  remain  below  the  EU  average. 
Sustainable  cities  and  communities  (SDG  11)  is 
the  only  environmental  sustainability  indicator 
where Czechia is progressing with its status being 
better than EU average. 

Czechia  performs  very  well  on  several  SDG 
indicators  related  to  fairness  (SDG  1,  2,  8, 
10) and is improving on others (SDG 3, 4, 5), 
although at an uneven pace. Czechia is the best 
performer  in  the  EU  with  respect  to  some  of  the 
poverty  and  inequality  indicators  (SDGs  1,  10), 
which  can  be  attributed  both  to 
low  wage 
dispersion  and  Czechia’s  social  benefits  system. 
Czechia  improved  only  marginally  on  the  quality 
education  indicators  (SDG  4).  Access  to  life-long 
learning  –  already  below  the  EU  average  –  has 
constantly  declined  since  2017  and  early  school 
leaving, although still low in comparison with other 
EU countries, has increased (4.9% in 2011, 7.5% in 

2020). The weakest performance (29.6% below EU 
average) in the fairness category relates to gender 
equality 
(SDG  5)  where  –  despite  some 
improvement in recent years - Czechia lags behind 
its  EU  peers  in  terms  of  the  gender  pay  gap 
(16.4%  in  2020  compared  to  EU  average  13%), 
the  employment  gap,  share  of  managerial 
positions  held  by  women  and  the  impact  of 
parenthood  on  employment.  The  RRP  includes 
measures  to  improve  digital  skills  and  ensure 
inclusiveness at all levels of education, notably by 
expanding  pre-school  education,  and  supporting 
disadvantaged  pupils  and  schools.  (Components 
3.1, 3.2 and 3.3). 

Czechia  performs  very  well  on  some  SDG 
indicators related to productivity (SDG 8) and 
is improving on others (SDGs 4, 9). Public R&D 
recent  years,  having 
in 
spending  stagnated 
reached  only  0.77%  of  GDP  in  2020,  which  is 
significantly  below  the  EU  average  (2.32%).  The 
number  of  new  graduates 
in  sciences  and 
engineering  per  thousand  of  population  shows  a 
steady  decline  over  the  past  decade,  having 
reached 10.9 in 2019, compared to an EU average 
of  16.3.  Tertiary  educational  attainment,  a  crucial 
element of improving the quality of human capital 
and  transitioning  to  a  knowledge-based  society, 
improved  from  31%  to  33%  between  2015  and 
2020,  and  thus  remains  markedly  below  the  EU 
average  of  40.5%.  The  proportion  of  households 
with  a  high  capacity  network  connection  was  at 
33% in 2019, which is one of the lowest coverage 
rates  in  the  EU  and  significantly  below  the  EU 
average  of  59.3%.  However,  at  least  60%  of 
adults  had  at  least  basic  digital  skills  in  2021, 
the  EU  average  of  54%. 
which 
and 
digital 
Investments 
educational  reforms  outlined  in  the  RRP  are 
expected  to  boost  these  sources  of  long-term 
productivity. 

is  above 
in 

infrastructure 

Czechia  performs  very  well  on  the  indicator 
for  decent  work  and  economic  growth  (SDG 
8)  and  is  improving  on  peace,  justice  and 
strong  institutions  (SDG  16).  Real  GDP  per 
capita  in  Czechia  has  increased,  reaching  17  340 
EUR in 2020 in real terms (up from 16 290 EUR in 
2015),  but  it  is  still  substantially  below  the  EU 
average of EUR 26 380 in 2020, with convergence 
slowing  even  at  comparable  purchasing  power 
standards.  Between  2010  and  2019,  GDP  per 
capita in purchasing power standards compared to 

19 

 
 
 
 
the EU average increased from 84% to 93%. Even 
during the pandemic, unemployment has remained 
low,  reaching  2.60%  in  2020  compared  to  an 
average of 4.6% between 2013 and 2018. 

Graph A1.1: Progress towards SDGs in Czechia in the last five years 

For detailed datasets on the various SDGs see the annual ESTAT report ‘Sustainable development in the European Union’, 
https://ec.europa.eu/eurostat/product?code=KS-09-22-019; Extensive country specific data on the short-term progress of Member 
States can be found here: Key findings - Sustainable development indicators - Eurostat (europa.eu) 
Source: Eurostat, latest update of 28 April 2022. Data mainly refer to 2015-2020 and 2016-2021 

20 

 
  
 
 
 
 
 
 
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION 
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION 

The  share  of  funds  contributing  to  each  of  the 
RRF’s  six  policy  pillars  is  outlined  in  the  graph 
below.  

by 

progress  made 

The 
in 
implementing  its  plan  is  published  in  the 
Recovery  and  Resilience  Scoreboard.  The 
Scoreboard  also  gives  a  transparent  overview  of 
progress on implementing the RRF as a whole. 

Czechia 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the  centrepiece  of  the  EU’s  efforts  to 
support  its  recovery  from  the  COVID-19 
pandemic,  fast  forward  the  twin  transition 
and  strengthen  resilience  against  future 
shocks.  

Czechia submitted its recovery and resilience plan 
(RRP)  on  2  June  2021.  The  Commission’s  positive 
assessment  on  19  July  and  Council’s  approval  on 
8  September  paved  the  way  for  disbursing  EUR 
7.035  billion  in  grants  under  the  RRF  over  2021-
2026. The financing agreement was signed on 22 
September  2021.  Table  A2.1  sets  out  the  plan’s 
key elements. 

Table A2.1: Key elements of the Czechian RRP 

(1) See Pfeiffer P., Varga J. and in ’t Veld J. (2021), 
“Quantifying Spillovers of NGEU investment”, European 
Economy Discussion Papers, No. 144 and Afman et al. (2021), 
“An overview of the economics of the Recovery and Resilience 
Facility”, Quarterly Report on the Euro Area (QREA), Vol. 20, 
No. 3 pp. 7-16.   
Source: European Commission 2022 

Graph A2.1: Share  of RRF funds contributing to each policy pillar 

(1) Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed on 
this chart amounts to 200% of the Czechian RRP. The bottom part represents the amount of the primary pillar, the top part the 
amount of the secondary pillar.  
Source: RRF Scoreboard https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/country_overview.html 

21 

Total allocation EUR 7 billion in grants (3.1% of 2019 GDP)Investments and Reforms 85 investments and 37 reforms Total number of Milestones and Targets244Estimated macroeconomic impact (1) Raise GDP by 1.2 % by 2026 (0.3% in spillover effects)Pre-financing disbursed EUR 915 million (September 2021)First instalment Czechia did not yet submit a first payment request0%10%20%30%40%50%60%70%Green transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
 
 
   
 
 
 
 
 
  
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The EU’s budget of more than EUR 1.2 trillion 
for  2021-2027  is  the  investment  lever  to 
help  implement  EU  priorities.  Underpinned  by 
an  additional  amount  of  about  EUR  800  billion 
largest 
through  NextGenerationEU  and 
instrument, the Recovery and Resilience Facility, it 
represents  significant  firepower  to  support  the 
recovery and sustainable growth. 

its 

Graph A3.1: 2014-2020 European Strategic and 
Investment Funds - Total budget by fund 

funds 

support 

partnership 

agreements 

In  2021-2027,  EU  cohesion  policy  funds (20) 
will 
development 
long-term 
objectives in Czechia by investing EUR 23.41 
billion (21) including EUR 1 641.5 million from the 
Just  Transition  Fund  to  alleviate  the  socio-
economic  impacts  of  the  green  transition  in  the 
most vulnerable regions. The 2021-2027 cohesion 
and 
policy 
programmes are designed taking into account the 
2019-2020  CSRs  and 
investment  guidance 
provided  within  the  context  of  the  European 
and 
Semester, 
complementarities  with  other  EU  funding. 
In 
addition,  Czechia  will  benefit  from  EUR  5.6  billion 
support for the 2023-27 period from the Common 
Agricultural 
social, 
environmental,  and  economic  sustainability  and 
innovation 
rural  areas, 
contributing  to  the  European  Green  Deal,  and 
ensuring long-term food security. 

in  agriculture  and 

Policy,  which 

synergies 

supports 

ensuring 

(20)  European  Regional  Development  Fund  (ERDF),  European 
Social Fund+ (ESF+), Cohesion Fund (CF), Just Transition Fund 
(JTF), Interreg. 

(21) Current prices, source: Cohesion Open Data  

22 

bn EUR in current prices, % of total 
The data for the EAFRD and REACT-EU refer to the period 
2014-2022 
Source: European Commission, Cohesion Open Data 

total 

investment 

In  2014-2020,  European  Structural  and 
Investment  Funds  (ESIF)  for  Czechia  are  set 
to  invest  EUR  25.46  billion (22)  from  the  EU 
budget.  The 
including 
national  financing  amounts  to  EUR  33.97 
billion (graph 3.1), representing around 2.53% of 
GDP  for  2014-2020  and  48.79%  of  public 
investment (23).  By  31  December  2021,  109%  of 
the  total  was  allocated  to  specific  projects  and 
68%  was  reported  as  spent,  leaving  EUR  10.83 
billion to be spent by the end of 2023 (24). Among 
the  11  objectives  the  most  relevant  ones  for 
cohesion  policy  funding  in  Czechia  are  research 
and innovation, low-carbon economy, environment 
protection  and 
resource  efficiency,  network 
infrastructure in transport and energy, (in total 19 
billion).  By  the  end  of  2020,  cohesion  policy 
investments had supported 10 989 of enterprises, 
10 676 direct jobs, 735 km of reconstructed roads.  
Educational  and 
social 
vocational 
inclusion and sustainable and quality employment 

training, 

(22)  ESIF includes cohesion policy funds (ERDF, ESF+, CF, Interreg), 
the  European  Agricultural  Fund  for  Rural  Development 
(EAFRD)  and  the  European  Maritime  and  Fisheries  Fund 
(EMFF). According to the ‘N+3 rule’, the funds committed for 
the  years  2014-2020  must  be  spent  by  2023  at  latest  (by 
2025  for  EAFRD).  Data  source:  Cohesion  Open  data,  cut-off 
date  31.12.2021  for  ERDF,  ESF+,  CF,  Interreg;  cut-off  date 
31.12.2020 for EAFRD and EMFF  

(23)  Public  investment  is  gross  fixed  capital  formation  plus 

capital transfers, general government. 

(24)  Including 

REACT-EU. 
https://cohesiondata.ec.europa.eu/countries/CZ 

ESIF 

data 

on 

7.2321%4.6114%0.040%17.5652%4.5013%0.030%CFEAFRDEMFFERDFESFYEI 
 
                                                 
  
                                                 
 
feature  prominently  among  the  11  objectives  for 
cohesion  policy  funding  in  Czechia  (totalling  EUR 
7.17  billion).  The  2014-2020  ESF  focused  on 
employment,  female  labour  market  participation, 
social inclusion and education.  

Graph A3.2: Cohesion policy contribution to the 
SDGs (EUR billion) 

extraordinary  flexibility  enabling  Czechia  to  re-
allocate  resources  to  support  enterprises  (275 
million). This included shifting resources to working 
capital  for  SMEs  and  support  for  digitising  the 
public  administration 
(digitisation  of  spatial 
planning  and  construction  procedures).  Czechia 
also  benefited  from  the  temporary  100%  EU 
financing of incurred measures in Cohesion policy, 
with  approximately  EUR  64  million 
in  2021 
through 100% co-financing. 

for 

risks 

temporary 

unemployment 

support 
in 

Czechia received support under the European 
to 
instrument 
mitigate 
an 
emergency  (SURE)  to  finance  short-time 
work  schemes  and  similar  measures. The 
Council granted financial assistance under SURE to 
Czechia  in  September  2020  for  a  maximum  of 
EUR 2.0 billion, which was disbursed by 30 March 
2021.  SURE  is  estimated  to  have  supported 
approximately  30%  of  workers  and  20%  of  firms 
for  at  least  one  month  in  2020,  primarily  in 
manufacturing,  wholesale  and  retail  trade,  and 
accommodation  and  food  services.  Czechia  is 
estimated to have saved a total of EUR 0.04 billion 
on  interest  payments  as  a  result  of  SURE’s  lower 
interest rates. 

via 

the 

provides 

Technical 

Commission 

tailor-made 
The 
expertise 
Support 
Instrument  to  support  Czechia  in  designing 
and implementing growth-enhancing reforms, 
including  implementing  its  RRP.  Since  2016, 
Czechia  has  received  assistance  through  58 
technical  support  projects.  Projects  delivered  in 
2021 aimed for example to improve the country’s 
digital infrastructure and set up and operationalise 
a  national  coordinator  for  intelligent  mobility.  The 
Commission also assisted Czechia in implementing 
specific  reforms  and  investments  in  its  RRP,  for 
instance  improving  the  overall  RRP  monitoring, 
coordination  and  implementation  frameworks  and 
assisting  with  the  application  of  the  “do  no 
significant  harm”  principle.  In  2022,  new  projects 
will  start  to  support  the  overall  RRP  audit  and 
control  systems,  the  RRP  communication  strategy 
and implement digital transformation.  

include 

from  other  EU 
Czechia  benefits  also 
programmes.  These 
the  Connecting 
Europe Facility, which allocated EU funding of EUR 
1.1  billion  to  specific  projects  on  strategic 
transport  networks,  and  Horizon  2020,  which 
allocated EU funding of EUR 501.6 million. 

Source: European Commission, DG REGIO 

Cohesion  policy  funds  already  substantially 
contribute  to  meeting  the  objectives  set  in 
the  SDGs.  In  Czechia,  cohesion  policy  funds 
support 11 of the 17 SDGs with up to 95% of the 
expenditure contributing to meeting the goals.  

REACT-EU 

instrument 

The 
(Recovery 
Assistance  for  Cohesion  and  the  Territories 
of Europe) under NextGenerationEU provided 
EUR  836.3  million  of  additional  funding  to 
2014-2020  cohesion  policy  allocations  for 
Czechia  to  ensure  a  balanced  recovery, 
foster convergence and provide vital support 
for  regions  following  the  impact  of  the 
coronavirus  outbreak.  REACT-EU  provided 
in  Czechia  to  reinforce  the  primary 
support 
rescue  systems, 
integrated 
healthcare,  equip 
promote 
social 
in 
efficiency 
energy 
infrastructure and reduce material deprivation with 
direct food delivery. 

the 

The  Coronavirus  Response 
Investment 
Initiative (25) 
EU 
the 
initial 
emergency  support  to  Czechia  in  relation  to 
introduced 
the  COVID-19  pandemic. 

provided 

It 

(25)  Re-allocating  ESIF  resources  according  to  Regulation  (EU) 
2020/460 of the European Parliament and of the Council of 
30  March  2020,  and  Regulation  (EU)  2020/558  of  the 
European Parliament and of the Council of 23 April 2020. 

23 

0.150.490.610.680.720.941.122.833.344.9011.05010SDG 13 Climate actionSDG 12 Responsible…SDG 15 Life on landSDG 6 Clean water and…SDG 3 Good health and well…SDG 11 Sustainable cities and…SDG 1 No povertySDG 4 Quality educationSDG 7 Affordable and clean…SDG 8 Decent work and…SDG 9 Industry, innovation,… 
   
                                                 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 
RECOMMENDATIONS 

The  Commission  assessed  the  2019-2021 
country-specific  recommendations  (CSRs) (26) 
addressed  to  Czechia  in  the  context  of  the 
European  Semester.  The  assessment  takes  into 
account  the  policy  action  taken  by  Czechia  to 
date (27),  as  well  as  the  commitments  in  the 
Recovery  and  Resilience  Plan  (RRP) (28).  At  this 
early  stage  of  the  RRP  implementation,  overall 
62%  of  the  CSRs  focusing  on  structural  issues  in 
2019  and  2020  have  recorded  “some  progress”, 
while 33% recorded “limited progress” and 5% “no 
Considerable 
progress” 
additional  progress  in  addressing  structural  CSRs 
is  expected  in  the  years  to  come  with  the  further 
implementation of the RRP.  

(see  Graph  A4.1). 

Graph A4.1: Czechia’s progress on the 2019-2020 
CSRs (2022 European Semester cycle) 

Source: European Commission 

(26)  2021 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32021H0729%2822%29&qi
d=1627675454457  
2020 CSRs: https://eur-
lex.europa.eu/search.html?textScope0=ti&lang=en&scope=E
URLEX&qid=1526385017799&type=quick&AU_CODED=CO
NSIL&DD_YEAR=2020&andText0=recommendation&DD_M
ONTH=07  
2019 CSRs:  https://eur-
lex.europa.eu/search.html?textScope0=ti&lang=en&scope=E
URLEX&qid=1526385017799&type=quick&AU_CODED=CO
NSIL&DD_YEAR=2019&andText0=recommendation&DD_M
ONTH=07   

(27)  Incl.  policy  action 

in 

reported 

the  National  Reform 
Programme,  as  well  as  in  the  RRF  reporting  (bi-annual 
reporting on the progress with implementation of milestones 
and  targets  and  resulting  from  the  payment  request 
assessment). 

relevant 

subset  of 

(28)  Member  States  were  asked  to  effectively  address  all  or  a 
significant 
country-specific 
the 
recommendations issued by the Council in 2019 and 2020 in 
their  RRPs.  The  CSR  assessment  presented  here  takes  into 
account  the  degree  of  implementation  of  the  measures 
included in the RRP and of those done outside of the RRP at 
the time of assessment.  Measures foreseen in the annex of 
the adopted Council Implementing Decision on the approval 
of the assessment of the RRP which are not yet adopted nor 
implemented  but  considered  as  credibly  announced,  in  line 
with  the  CSR  assessment  methodology,  warrant  “limited 
progress”.  Once  implemented,  these  measures  can  lead  to 
“some/substantial  progress”  or 
implementation”, 
depending on their relevance. 

“full 

24 

No Progress5%Limited Progress33%Some Progress62% 
 
                                                 
   
 
 
Table A4.1: Summary table on 2019,2020 and 2021 CSRs 

* See footnote 28. 
Source: European Commission 

25 

CzechiaAssessment in May 2022*RRP coverage of CSRs until 20262019 CSR1Limited ProgressImprove long-term fiscal sustainability of the pension and health-care systems. No ProgressRelevant RRP measures planned as of 2021, 2023, 2024, and 2025. Adopt pending anti-corruption measures.Limited ProgressRelevant RRP measures planned as of 2021, 2023, 2024 and 2026. 2019 CSR 2Some ProgressFoster the employment of women with young children, including by improving access to affordable childcare, and of disadvantaged groups. Some ProgressRelevant RRP measures planned as of 2022, 2023, 2024 and 2025. Increase the quality and inclusiveness of the education and training systems, including by fostering technical and digital skills and promoting the teaching profession.Some ProgressRelevant RRP measures planned as of 2020, 2022 and 2025.2019 CSR 3Some ProgressFocus investment-related economic policy on transport, notably on its sustainabilitySome ProgressRelevant RRP measures planned as of 2022 and 2025., digital infrastructureSome ProgressRelevant RRP measures planned as of 2021, 2022, 2025. , and low carbon and energy transition, including energy efficiency , taking into account regional disparities. Some ProgressRelevant measures planned as of 2021, 2022, 2024 and 2026. Reduce the administrative burden on investment Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023 and 2026.and support more quality-based competition in public procurement. Some ProgressRemove the barriers hampering the development of a fully functioning innovation ecosystem.Some ProgressRelevant RRP measures planned as of 2022 and 2025.2020 CSR1Some ProgressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreNot applicableEnsuretheresilienceofthehealthsystem,strengthentheavailabilityofhealthworkers,primarycareandtheintegrationofcare,anddeployment of e-health services.Some ProgressRelevant RRP measures planned as of 2021, 2022 and 2024.2020 CSR2Some ProgressSupport employment through active labour market policies, Some ProgressRelevant RRP measures planned as for 2022 and 2025.theprovisionofskills,includingdigitalskills,andaccesstodigitallearning.Limited ProgressRelevant RRP measures planned as of 2020, 2021, 2024 and 2025.2020 CSR 3Limited ProgressSupportsmallandmedium-sizedenterprisesbymakinggreateruseof financial instruments to ensure liquidity support, Some ProgressRelevant RRP measures  planned as of 2022.reducing the administrative burden and improving e-government. Limited ProgressRelevant RRP measures planned as of 2021, 2022 and 2023. Front-load mature public investment projects andSome Progress promote private investment to foster the economic recovery.Some ProgressRelevant RRP measures planned as of 2023.Focusinvestmentonthegreenanddigitaltransition,inparticularonhigh-capacity digital infrastructure and technologies, Limited ProgressRelevant RRP measures planned as of 2021, 2022, 2025. clean and efficient production and use of energy,Some ProgressRelevant measures planned as of 2021, 2022, 2024 and 2026. and sustainable transport infrastructure, including in the coal regions.Limited ProgressRelevant RRP measures planned as pf 2022 and 2025. Ensure access to finance for innovative firms and improve public-private cooperation in research and development.Limited ProgressRelevant RRP measures planned as of 2022 and 2025.2021 CSR1Some ProgressIn 2022, maintain a supportive fiscal stance, including the impulse provided by the Recovery and Resilience Facility, and preserve nationally financed investment.Some ProgressNot applicableWheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Some ProgressNot applicableAt the same time, enhance investment to boost growth potential. Pay particular attention to the composition of public finances, on both the revenue and expenditure sides of the budget, and to the quality of budgetary measures in order to ensure a sustainable and inclusive recovery. Prioritise sustainable and growth-enhancing investment, in particular investment supporting the green and digital transition.Substantial ProgressNot applicableGiveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.No ProgressNot applicable 
 
  
 
With  respect  to  fiscal  indicators,  Czechia 
performs below the EU average. Environmental 
tax  revenues as percentage of total taxes as well 
as in terms of GDP has been decreasing for some 
years now and especially in the areas of pollution, 
resources and transport is very low (31). The share 
of expenditure on environmental protection in total 
government  expenditure  is  also  decreasing,  but 
remains  above  the  EU  average.  The  Czech 
government  has  a  low  to  medium  exposure  to 
uninsured  climate  induced  damages,  although 
insurance cover for wildfires is particularly low.   

Graph A5.1: Fiscal aspects of the green transition 
Taxation and government expenditure on 
environmental protection 

Source: Eurostat 

ENVIRONMENTAL SUSTAINABILITY 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 5: GREEN DEAL 
ANNEX 5: GREEN DEAL 

intends 

The  European  Green  Deal 
to 
transform the  EU  into a  fair and prosperous 
society,  with  a  modern,  resource-efficient 
and competitive economy where there are no 
net  emissions  of  greenhouse  gases  in  2050 
and  where  economic  growth  is  decoupled 
from resource use. This Annex offers a snapshot 
of  the  most  significant  and  economically  relevant 
developments 
in  relation  to  the 
European Green Deal’s building blocks. It should be 
viewed together with Annex 6 on the employment 
and  social  impact  of  the  green  transition  and 
Annex 7 for circular economy aspects of the Green 
Deal.  

in  Czechia 

in 

still 

gas 

than 

laying 

progress 

greenhouse 

recent  decades,  Czechia  has  made 
In 
considerable 
the 
foundation  of  a  low-carbon  economy.  The 
country's  energy  and  carbon  intensity,  however, 
the  EU  average.  This 
remains  higher 
underlines 
significant 
there  are 
that 
opportunities  to  make  Czechia’s  economy  more 
resilient and sustainable. Between 1990 and 2020, 
economy-wide 
emissions 
(excluding those from land use) decreased by 40% 
and these are projected to significantly decrease in 
the  years  ahead.  The  production  of  goods  and 
services  in  Czechia  remains  nevertheless  very 
carbon  and  energy  intensive.  Czechia’s  Land  Use, 
Land  Use  Change  and  Forestry  sink  has 
significantly  decreased  since  2018,  and  it  is  not 
projected  that  forests  will  absorb  more  then  they 
emit  until  2026.  The  country’s  emissions  not 
covered by the EU Emissions Trading System (29) in 
2020 respected the target of limiting increases to 
9% compared to 2005. Emissions have decreased 
in  most  sectors,  but  increased  in  road  transport 
and remained stable in agriculture. In its National 
Energy  and  Climate  Plan,  Czechia  intends  to 
achieve  reductions  in  line  with  its  current  ESR 
target  for  2030  of  -14%.  The  proposed  new  ESR 
target  for  Czechia  is  -26%.    In  its  Recovery  and 
Resilience Plan (RRP), Czechia allocates 42% of the 
plan  to  climate  objectives  and  outlines  reforms 
and 
the 
investments  to  make  progress  on 
transition  to  a  more  sustainable,  low-carbon  and 
climate-resilient economy (30). 

(29)  Buildings, transport, agriculture, waste and small industry. 

(30)  The  share  of  financial  allocation  contributing  to  climate 
objectives  has  been  calculated  using  Annex  VI  of  the  RRF 
Regulation. 

(31)  For more information on taxation see Annex 17. 

26 

0.001.002.003.004.005.006.00Environmental taxes(% of GDP)Environmental taxes(% of total taxation)Governmentexpenditure onenvironmentalprotection (% of totalexpenditure)CZ (2020)EU27 (2020) 
 
 
                                                 
     
 
                                                 
 
 
Graph A5.2: Thematic – Energy 
Share in energy mix (solids, oil, gas, nuclear, 
renewables) 

requires  investments  to  bioenergy  to  be  made  in 
line with the ‘do no significant harm’ principle. 

In  terms  of  biodiversity  and  ecosystem 
health,  there  is  room  for  improvement.  With 
regard  to  the  conservation  status  for  species  and 
habitat  in  the  Natura  2000  network  protected 
under  the  Habitats  and  Birds  Directives,  the 
proportion  of  habitats  and  species  in  a  good 
conservation status increased slightly between the 
two  reporting  periods  (2007-2012  and  2013-
2018).  However, 
the  proportion  of  habitats 
considered  to  be  in  a  bad  conservation  status 
increased  and  the  proportion  of  species  whose 
status  remained  unchanged  decreased.  Czechia 
has  more  land  being  farmed  organically  than  the 
EU  average.  Although  the  agricultural  sector’s 
share in total greenhouse gas emissions remained 
stable  (and  well  below  the  EU  average),  net 
agricultural  emissions  production  have  increased 
since the early 2010s. This is driven by increasing 
(enteric 
from 
non-CO2  emissions 
soils, 
fermentation)  and 
from  agricultural 
combined  with  a  dramatic  decrease 
in  CO2 
removals  by  forests  in  the  land  use,  land  use 
change  and  forestry  (LULUCF)  sector.  Reducing 
ammonia  emissions  from agriculture  continues  to 
be an important goal for the Czech farming sector. 
Net  land  take  can  be  seen  as  a  measure  of  land 
use  change,  a  significant  pressure  on  nature  and 
biodiversity,  and  an  environmental  pressure  on 
people living in urbanised areas. Although net land 
take  almost  halved  between  2006-2012  and 
2012-2018, 
it  remains  higher  than  the  EU 
average. Czechia has not yet committed to setting 
Land  Degradation  Neutrality  targets  under  the 
Combat 
United 
to 
Desertification.  Therefore,  Czechia  needs 
implement 
create 
a 
multigenerational  forests  included  in  the  national 
Recovery  and  Resilience  Plan  to  build  forests 
resilient to climate change. 

Convention 

livestock 

urgently 

Nations 

reform 

to 

to 

Further  investments  will  also  be  needed  to 
improve  the  water  status  for  the  remaining 
water  bodies  in  all  river  basins  in  Czechia. 
Despite  progress  on  reaching  EU  water  policy 
in  the  Water  Framework 
objectives  set  out 
Directive, it is not certain, whether this progress is 
sufficient  to  meet  the  obligations  until  2021,  i.e. 
for  all  water  bodies to  have  a good  water  status. 
In terms of the   water exploitation index, Czechia 
has one of the lowest scores in the EU at 19.53%, 
which 
the  20% 
that is generally considered  as  an  indication  of 

slightly less than 

is  only 

27 

(1) The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste. 
Source: Eurostat. 

At  29.6%,  Czechia  has  the  second  highest 
share of coal in its energy mix in the EU. Coal 
is  therefore  the  most  important  source  of  energy 
in  Czechia  and  the  dominant  source  in  electricity 
production,  district  heating  and  in  the  industry. 
Energy intensity in Czechia is one of the highest in 
the EU, which is more due to the low value added 
per  energy  consumed,  rather  than  a  high  level  of 
industrialisation. In fact only 1.7 percentage points 
more  energy  is  consumed  in  the  Czech  industry 
(27.3%)  than  in  the  EU  industry  (25.6%).  Further 
upwards  revision  in  terms  of  renewables  and 
energy  efficiency  targets  will  be  needed  for 
Czechia to be in line with the ‘Fit for 55’ objectives. 
For  example,  there  has  been  only  marginal 
progress on renewable electricity production since 
2013.  Significant  barriers  to  the  deployment  of 
renewable 
from 
administrative  authorisation  processes,  especially 
in  relation  to  the  building  and  zonal  permitting 
process,  which  is  regarded  as  too  complex  and 
lengthy.  According  to  2020  data,  Czechia  had 
18.2% of nuclear energy in its energy mix and the 
government  aims  to  increase  this  share.  Natural 
gas accounted for 17.7% of Czechia´s energy mix, 
100% of which was imported from Russia. Czechia 
will face a particular challenge in substituting coal 
by  renewable  alternatives  in  the  district  heating 
sector, in order to enable the expected coal exit by 
2033. Further use of biomass is also expected (in 
the  energy,  transport  and  heating  sectors),  which 

sources 

energy 

arise 

020406080100200520102015201820192020RenewablesNuclearGasOilSolid fossil fuels, peat and oil shale 
     
water  scarcity.  Securing  good  quality  surface  and 
groundwater is vital to becoming more resilient to 
increasing  floods  and  droughts.  It  is  therefore 
important  that  there  is  sufficient  uptake  and 
upscaling  of  measures  to  manage  drought  in  the 
national  Recovery  and  Resilience  Plan  which  are 
linked  to  a  reform  to  bring  about  a  systemic 
improvement of water retention in the landscape. 

Graph A5.3: Thematic – Biodiversity  
Terrestrial protected areas and organic farming 

average. However, the number of years of life lost 
to  nitrogen  dioxide  concentrations  has 
due 
significantly  decreased  since  2015  and  is  well 
below  the  EU  average,  despite  the  continued 
growth in GDP. According to the latest projections 
submitted  under  Article  10(20)  of  the  National 
Emission reduction Commitments Directive (NECD), 
Czechia  expects  to  reach  its  emissions  reduction 
commitments for all air pollutants covered by the 
Directive for the 2020-2029 period and for 2030 
onwards. For the year 2020, values exceeding the 
limits set by the Ambient Air Quality Directive were 
registered for particulate matter (PM10) in two air 
quality  zones.  In  addition,  the  target  values  for 
ozone concentration have not been met in several 
air quality zones. 

for 

In terms of sustainable mobility, Czechia has 
room 
The  market 
improvement. 
development  for  zero  emission  road  mobility  has 
been  very  modest  in  Czechia  to  date,  but  has 
seemed  to  pick  up  pace  in  the  last  years.  Only  a 
third of the Czech railway network is electrified. 

(1) For terrestrial protected areas data for 2018, and data for 
the EU average (2016, 2017) is lacking. 
Source: EEA (terrestrial protected areas) and Eurostat 
(organic farming). 

Graph A5.4: Thematic – Mobility  
Share of zero emission vehicles (% of new 
registrations) 

(1) Zero emission vehicles (passenger cars) include battery 
and fuel cell electric vehicles (BEV, FCEV) 
Source: European Alternative Fuels Observatory.  

Air quality in Czechia continues to be a cause 
for concern. The number of years of life lost due 
to  fine  particulate  matter  (PM2.5)  has  remained 
stable  since  2015  and  is  higher  than  the  EU 

28 

0510152025302016201720192020Terrestrial protected areas (% total area)Area under organic farming (% total utilised agricultural area)EU27 (terrestrial)EU27 (organic)012345678910201620172018201920202021% of new registrationsCZEU27 
  
 
  
Table A5.1: Indicators underpinning the progress on the EU Green Deal from a macroeconomic perspective 

(1) The 2030 non-ETS GHG target is based on the Effort Sharing Regulation. The FF55 targets are based on the COM proposal to 
increase EU's climate ambition by 2030. Renewables and Energy Efficiency targets and national contributions under the 
Governance Regulation (Regulation (EU) 2018/1999). (2) Distance to target is the gap between Member States’ 2030 target under 
the Effort Sharing Regulation and projected emissions, with existing measures (WEM) and with additional measures (WAM) 
respectively, as a percentage of 2005 base year emissions. (3) Percentage of total revenues from taxes and social contributions 
(excluding imputed social contributions). Revenues from the ETS are included in environmental tax revenues (in 2017 they 
amounted to 1.5% of total environmental tax revenues at the EU level). (4) Covers expenditure on gross fixed capital formation to 
be used for the production of environmental protection services (i.e. abatement and prevention of pollution) covering all sectors, 
i.e. government, industry and specialised providers. (5) The climate protection gap indicator is part of the European adaptation 
strategy (February 2021), and is defined as the share of non-insured economic losses caused by climate-related disasters. 
(6) Sulphur oxides (SO2 equivalent), Ammonia, Particulates < 10µm, Nitrogen oxides in total economy (divided by GDP). 
(7) Transportation and storage (NACE Section H). (8) Zero emission vehicles include battery electric vehicles (BEV) and fuel cell 
electric vehicles (FCEV). (9) European Commission Report (2019) 'Benchmarking smart metering deployment in the EU-28'. 
(10) European Commission (2021). Each year the DESI is re-calculated for all countries for previous years to reflect any possible 
change in the choice of indicators and corrections to the underlying data. Country scores and rankings may thus differ compared 
with previous publications. 
Source: Eurostat, JRC, European Commission, EEA, EAFO. 

29 

TargetTarget2005201920202030WEMWAM2030WEMWAMNon-ETS GHG emission reduction target (1)MTCO2 eq; %; pp (2)65.0-2%4%-14%622-26%-610200520162017201820192020Share of energy from renewable sources in gross final consumption of energy (1)%7%15%15%15%16%17%22%Energy efficiency: primary energy consumption (1)Mtoe42.539.740.440.539.837.541.4Energy efficiency: final energy consumption (1)Mtoe26.124.825.525.325.324.523.7201520162017201820192020201820192020Environmental taxes (% of GDP)% of GDP2.12.12.02.02.01.92.42.42.2Environmental taxes (% of total taxation)% of taxation (3)6.06.05.75.45.75.46.05.95.6Government expenditure on environmental protection% of total exp.2.651.882.062.102.031.911.661.701.61Investment in environmental protection% of GDP (4) 1.130.640.710.76--0.420.380.41Fossil fuel subsidiesEUR2020bn1.031.131.401.101.41-56.8755.70-Climate protection gap (5)score 1-4Net GHG emissions1990 = 100656566656260797669GHG emissions intensity of the economykg/EUR'100.680.680.640.620.570.590.320.310.30Energy intensity of the economykgoe/EUR'100.240.240.230.230.220.220.120.110.11Final energy consumption (FEC)2015=100100.0102.6105.4104.7104.4101.2103.5102.994.6FEC in residential building sector2015=100100.0104.7106.4104.0102.9105.6101.9101.3101.3FEC in services building sector2015=100100.0103.8106.8105.1107.2100.3102.4100.194.4Smog-precursor emission intensity (to GDP) (4)tonne/EUR'10 (6)1.691.471.361.251.14-0.990.93-Years of life lost caused due to air pollution by PM2.5per 100.000 inh.100195710741186892-863762-Years of life lost due to air pollution by NO2per 100.000 inh.4924283219-12099-Nitrate in ground watermg NO3/litre18.218.718.318.017.7-21.720.7-Terrestrial protected areas% of total-21.121.9-21.921.9-25.725.7Marine protected areas% of total-------10.7-Organic farming% of total utilised agricultural area13.714.014.114.815.215.38.08.59.100-0606-1212-18Net land takeper 10,000 km213.011.05.0201520162017201820192020201820192020GHG emissions intensity of transport (to GVA) (7)kg/EUR'100.981.040.970.890.891.010.890.870.83Share of zero emission vehicles (8)% in new registrations0.10.10.10.30.31.61.01.95.4119101012128812Share of electrified railways%34.034.034.234.234.2-55.656.0-Congestion (average number of hours spent in road congestion per year by a representative commuting driver)23.423.023.422.823.3-28.928.8-YearCZEUShare of smart meters in total metering points (9) - electricity% of total20180.035.8Share of smart meters in total metering points (9) - gas% of total20180.013.1ICT used for environmental sustainability (10)%202155.865.9'Fit for 55'DistanceDistanceProgress to policy targetsNational contribution to 2030 EU targetFiscal and financialindicators1.9 out of 4 (slight increase from historical level of 1.8). This is a low/medium risk category (4 being a high risk).ClimateCZECHIAEUEnergyPollution2.61.7MobilityNumber of plug-in electric vehicles per charging pointDigitalBiodiversity2000-20062006-20122012-20184.0 
 
  
 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 

The  green  transition  not  only  encompasses 
environmental 
to 
improvements 
sustainability, but also includes a significant 
social  dimension.  While  measures  here  include 
the  opportunity  for  sustainable  growth  and  job 
creation,  it  must  also  be  ensured  that  no  one  is 
left  behind  and  all groups  in  society  benefit  from 
the  transition.  Czechia’s  green  transition  can 
labour  market  and 
benefit  from  a  strong 
supportive  policy  framework,  however,  energy-
intensive  sectors  are  sizeable  and  lower-income 
groups are likely to be most affected. 

Czechia’s Recovery and Resilience Plan (RRP) 
outlines  some  measures  to  support  a  fair 
green  transition.  Investments  in  multimodal 
transport,  cycle  paths  and  pedestrian  barrier-free 
routes  will  mitigate  the  impact  of  traffic  on  the 
environment,  support  public  health  and  promote 
active  mobility,  especially  in  cities.  Additional 
investments in refurbished social care facilities will 
help  achieve 
the  highest  energy  efficiency 
standards.  Actions  to  increase  the  number  of 
electric  vehicles  for  greener  delivery  of  social 
services  are  also  envisaged.  In  synergy  with  the 
Recovery  and  Resilience  Facility,  the  European 
Social  Fund  Plus  (ESF+)  will  help  unlock  the 
potential  for  ‘green  jobs’  in  Czechia;  and  the  Just 
Transition  Fund  (EUR  1.64  billion;  current  prices) 
will  help  to  mitigate  the  social  impact  of  the 
transition  in  three  Czech  regions  (see  Annex  3). 
Czechia’s  integrated  national  energy  and  climate 
plan 
(NECP)  of  22  January  2020  partially 
addresses  the  impact  on  the  population  affected 
by the restructuring of coal regions. The document 
analyses the impacts on energy poverty, skills and, 
to  some  extent,  income  distribution,  and  outlines 
an  approach  to  tackle  energy  poverty. However, 
specific measures tackling energy poverty and the 
impact  assessment  of  the  planned  transition 
measures on households’ income are still lacking.  

intensity  of 

The  economy  has  slightly  reduced  its carbon 
footprint,  while  energy-intensive  sectors 
remain  sizeable.  The  greenhouse  gas  (GHG) 
emissions 
the  Czech  economy 
decreased  slightly  between  2015  and  2020  (in 
terms  of  gross  value  added),  but  is  more  than 
twice  the  EU  average.  The  carbon  footprint  per 
worker is, at 18.18 tonnes of GHG emissions, one 
of the highest in the EU (the EU average is 13.61) 
(see Figure 1). Declining activities such as coal and 
lignite  extraction  still  take  place (32).  Czechia’s 

industry, 

energy-intensive 
including  activities 
involving metals, chemicals, non-metallic minerals, 
and  automotive  manufacturing (33),  provides  jobs 
for  6.76%  of  the  total  workforce,  one  of  the 
highest percentages among EU Member States. In 
particular,  Czechia’s  automotive  manufacturing 
sector  is  the  largest  in  the  EU  in  terms  of 
employment  share.  It  is  estimated  that  22 000 
jobs in energy and coal  sectors may be  at risk of 
disappearing (34).  In  this  context,  upskilling  and 
reskilling  are  particularly  important  (see  Annex 
15) (35).  The  environmental  goods  and  services 
sector  provides  jobs  to  2.3%  of  the  workforce, 
compared  to  an  EU  average  of  2.2%.  The  steady 
increase in the job vacancy rate (5.1% in Q3-2021 
versus  2.4%  in  the  EU)  highlights  the  need  to 
closely  monitor  labour  shortages,  in  particular  in 
sectors 
linked  to  the  transition  to  climate-
neutrality such as construction (which has a 11.6% 
vacancy rate) (Eurofound, 2021). 

As  for  the  social  dimension  of  the  green 
transition,  ensuring  access  to  essential 
transport  and  energy  services  appears 
in 
overall  to  be  a  moderate  challenge 
Czechia.  A  relatively low  and  stable  share  of the 
population  in  rural  areas  lives  at  risk  of  poverty 
(9.2% compared to the EU average of 18.7%) (36). 
The  share  of  the  population  who  are  unable  to 
keep  their  homes  sufficiently  warm  is  2.2%  in 
2020, one of the lowest values in the EU and well 
below  the  EU  average  (8.2%).  The  lowest-income 
households  are  most  affected  (see  Figure  2).  The 
average  carbon  footprint  of  the  top  10%  of 
emitters is about 5.1 times higher than that of the 
bottom  50%,  which  is  broadly  in  line  with  the  EU 
average of 5.3 times. 

Tax  systems  are  key  to  ensuring  a  fair 
transition  towards  climate  neutrality (37). 
Czechia’s revenues from total environmental taxes 

(33)  2020 European Semester: Overview of Investment Guidance 
on  the  Just  Transition  Fund  2021-2027  per  Member  State 
(Annex D). 

(34)https://publications.jrc.ec.europa.eu/repository/handle/JRC112

593 

(35)  There  is  currently  no  common  EU-wide  definition  of  green 
jobs.  The  environmental  goods  and  services  sector  (EGSS) 
accounts  only  report  on  an  economic  sector  that  generates 
environmental products, i.e. goods and services produced for 
environmental protection or resource management. 

(36)  As a proxy for potential transport challenges in the context of 

the green transition (see COM(2021) 568 final). 

(32)  SWD(2021) 275 final. 

(37)  COM(2021) 801 final. 

30 

 
 
                                                 
                                                 
 
remained  stable  between  2015  (2.05%  of  GDP) 
and  2019  (2.04%)  and  slightly  declined  to  1.93% 
in  2020  (compared  to  an  EU  average  of  2.24%). 
The  labour  tax  wedge  for  low-income  earners (38) 
increased from 37.0% to 39.4% in 2019. It stood 
at 35.1% in 2021, compared to an EU average of 
31.9%  (see  Annex  17).  Redistributive  measures 
accompanying environmental taxation can support 
disposable  income  of  households  in  the  lowest 
segments  of  the  income  distribution  and  prevent 
inequality from growing (39). 

(38)  Tax  wedge  for  a  single  earner  at  50%  of  the  national 
(Tax  and  benefits  database,  European 

average  wage 
Commission/OECD). 

(39)  SWD(2021)  641  final  PART  3/3,  on  distributional  effects  of 
energy taxation revision, based on the European Commission 
Joint Research Centre GEM-E3 and Euromod models. 

31 

 
                                                 
Graph A6.1: Fair green transition challenges 

Numbers are the normalised indicator performance, signifying factors relative to the EU27 average. Carbon inequality average 
emissions per capita 10% vs bottom 50% (2019)  
Source: Eurostat, World inequality database 

Graph A6.2: Energy poverty by income decile 

HH050: Ability to keep home adequately warm 
HY020: Total disposable household income 
Source: Eurostat EU-SILC survey (2020) 

32 

0%5%10%15%20%25%12345678910Unable to keep home adequately warm  (per income decile) Income decileCzechiaEuropean Union0.000.501.001.502.002.503.00GHG tonnes per Euro ofgross added value(MS/EU)GHG tonnes per worker(MS/EU)Employment share inenergy-intensiveindustries (MS/EU)Share of population inrural areas at risk ofpoverty (MS/EU)Energy poverty (MS/EU)Carbon inequality(MS/EU)CzechiaEU 2020Czechia 2015 
 
 
   
   
PRODUCTIVITY 
PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 

productivity rates. Czechia performs slightly better 
than the EU average and has been improving since 
2015.  

Czechia’s  economic  growth 
is  not  yet 
decoupled  from  the  generation  of  waste. 
Czechia’s  municipal  waste  recycling  rate  was 
33.8%  in  2020,  well  below  the  EU  average  of 
48%,  and  far  below  the  2020  and  2025  EU 
targets  of  50%  and  55%  respectively.  This  low 
level  illustrates  the  below  average  level  of  waste 
management 
clear 
challenges  in  reaching  the  2035  EU  target  for 
reducing  landfilling  to  a  maximum  of  10%  of 
municipal  waste.  The  90%  collection  target  for 
plastic  bottles  by  2029  may  also  be  a  challenge. 
Czechia  has  not 
introduced  a  deposit-refund 
system for single-use beverage packaging. 

in  Czechia.  There  are 

Further  measures  can  help  Czechia  improve 
its  position  on  environmental  technology, 
notably  in  relation  to  sustainable  product  design, 
resource  efficient  production  processes,  digital 
solutions,  industrial  symbiosis,  remanufacturing in 
key value chains, alternatives to the unsustainable 
extraction  of  raw  materials,  and  new  circular 
business  models.  There  is  also  scope  to  shift 
reusable and recyclable waste  away from landfill, 
including  through  economic  instruments,  adding 
separate  collection  facilities  to  ensure  that  the 
post-2020  recycling  targets  -  in  particular  on 
plastics  -  are  met.  A  successful  transition  to  a 
circular economy requires social and technological 
innovation as its full potential can only be reached 
if  implemented  across  all  value  chains.  Eco-
innovation is an important enabling factor for the 
circular  economy.  The  country  ranked  13th  in  the 
list of EU countries with a total score of 111 in the 
2021  Eco-Innovation  Scoreboard.  With  regard  to 
the components of the 2021 Eco-innovation index, 
Czechia  performs  below  the  EU  average  for  ‘eco-
innovation  inputs’,  ‘eco-innovation  outputs’  and 
‘resource-efficiency  outcomes’.  Nevertheless,  for 
‘socio-economic  outcomes’,  Czechia  performs 
slightly  above  the  EU  average,  and  outperforms 
for  ‘eco-innovation  activities’,  as  the  country  with 
the most ISO 14001 registered organisations. 

while 

minimising 

The  efficient  use  of  resources  is  key  to 
ensuring  competitiveness  and open strategic 
autonomy, 
the 
environmental  impact.  The  green  transition 
presents  a  major  opportunity  for  European 
industry 
clean 
creating  markets 
technologies  and  products.  It  will  have  an  impact 
across  the  entire  value  chains  in  sectors  such  as 
energy and transport, construction and renovation, 
food  and  electronics,  helping  create  sustainable, 
local and well-paid jobs across Europe. 

for 

by 

(prevention  of  waste, 

While  circular  secondary  material  usage  has 
shown  a  steady  increase  over  the  past 
still  needs  ambitious 
decade,  Czechia 
measures  covering  the  whole  product  life 
cycle  to  double  the  EU  circular  material  use 
rate by 2030 at EU level.  The circular material 
use  rate  was  13.4%  in  2020,  which  is  above  the 
EU  average  of  12.8%.  The  Czech  RRP  includes 
measures  to  support  the  transition  to  a  circular 
increase  of 
economy 
recycling infrastructure and reduction of secondary 
raw  materials  waste,  as  well  as  increasing  the 
proportion  of  recycled  materials  in  products  and 
ensuring raw material safety in Czechia). There are 
also  investments  planned  to  support  resource 
management  solutions  in  enterprises.  Component 
2.7  ‘circular  economy,  recycling  and  industrial 
water’ in the RRP includes investments to support 
resource  management  solutions  in  enterprises,  in 
particular  investments  in  innovative  technologies 
to  enable  new  or increased  use  of  secondary  raw 
materials  as  a  substitute  for  primary  resources, 
and to reduce the material intensity of production 
and  substitute  primary  feedstock  by  secondary 
ones, and the optimisation of material eco-design 
of products to facilitate recycling and re-use. 

expresses 

productivity 
how 
Resource 
the  economy  uses  material 
efficiently 
Improving 
to  produce  wealth. 
resources 
resource  productivity  can  help 
to  minimise 
negative  impacts  on  the  environment  and  reduce 
dependency  on  volatile  raw  material  markets.  At 
1.16 purchasing power standards (PPS) generated 
per  kg  of  material  consumed  in  2020,  resource 
productivity  in  Czechia  is  still  below  the  EU 
average  of  2.23  PPS  per  kg  although  there  has 
been  a  steady  increase  since  2014.  The  ‘material 
intensity’  variable  shows  how  many  additional  kg 
of material consumption would be associated with 
an  increase  in  GDP,  at  the  current  resource 

33 

 
 
 
 
 
Table A7.1: Selected resource efficiency indicators 

Source: Eurostat 

34 

SUB-POLICY AREA201520162017201820192020EU27 CircularityResource Productivity (Purchasing power standard (PPS) per kilogram)1.51.61.71.81.81.92.22020Material Intensity (kg/EUR)0.70.60.60.60.50.50.42020Circular Material Use Rate (%)6.97.59.110.511.313.412.82020Material footprint (Tones/capita)1817181818-152019Waste Waste generation (kg/capita, total waste)-2402-3560--52342018Landfilling (% of total waste treated)-16.6----38.52018Recycling rate (% of municipal waste)29.733.632.032.233.333.847.82020Hazardous waste (% of municipal waste)-4.3-4.5--4.32018CompetitivenessGross value added in environmental goods and services sector (% of GDP)2.52.42.32.22.3-2.32019Private investment in circular economy (% of GDP)------0.12018201520162017201820192020Persons employed in the circular economy, CZ (% of total employment)------Value added at factor cost, CZ (% of GDP )------Persons employed in the circular economy, EU27 (% of total employment)1.72%1.73%1.75%1.71%--Value added at factor cost, EU27 (% of GDP )0.94%0.94%0.96%0.97%--Key indicators - Czech RepublicLatest year EU 27Source: EurostatGraph - Economic importance and expansion of the circular economy 
 
 
   
 
ANNEX 8: DIGITAL TRANSITION 
ANNEX 8: DIGITAL TRANSITION 

The Digital Economy and Society Index (DESI) 
monitors EU Member States’ digital progress. 
The  areas  of  human  capital,  digital  connectivity, 
the 
technologies  by 
businesses  and  digital  public  services  reflect  the 
Digital  Decade’s  four  cardinal  points (40).  This 
Annex describes Czechia’s DESI performance.  

integration  of  digital 

enterprises are above the EU average in  their use 
of  cloud  solutions.  However,  Czechia  is  below  the 
EU average in using AI and big data. According to 
the Confederation of Industry (44), large enterprises 
are adopting digital technologies faster than SMEs, 
competitive 
therefore  gaining  a 
and  are 
advantage.  

Czechia  is  rolling-out  new  digital  public 
services  and  the  monitored  indicators  are 
approaching the EU average. The recent launch 
of  bank  identity  and  the  adoption  of  the  law 
introducing  the  ‘right  for  digital  service’  will 
stimulate  interest  in  e-government  services.  The 
country  is  following  an  ambitious  strategy  and  is 
planning to allow citizens carry ID cards or driving 
licences in a mobile app instead of physical cards.  

The  share  of  Czech  RRP  dedicated  to  digital 
priorities  is  22% (41).  The  main  areas  for 
investment are the digitalisation of public services 
(e-government,  e-health),  boosting  digital  skills 
and  supporting  the  digital  transformation  of 
businesses. 

Czechia scores well in basic digital skills but 
the  economy  lacks  ICT  specialists,  which 
limits  digital  transformation.  According  to 
Eurostat,  76%  of  Czech  enterprises  reported 
difficulties  in  finding  ICT  specialists  which  is  the 
(EU  average: 
highest  percentage 
55%) (42). Despite the relatively high proportion of 
ICT graduates (Czechia: 5%; EU average: 3.9%) the 
economy has the capacity to absorb an additional 
ICT  specialists (43).  The  proportion  of 
14000 
female  ICT  specialists is the  second lowest  in the 
EU after Hungary. 

in  the  EU 

Czechia  has  one  of  the  lowest  coverages  of 
very  high  capacity  networks  in  the  EU,  and 
the 
is 
take-up  of  gigabit  broadband 
practically  non-existent.  The  overall  fixed 
broadband  take-up  is  above  the  EU  average 
(Czechia:  84%  of  households;  EU  average:  78%) 
and mobile broadband take-up is slightly below EU 
average (Czechia: 85% of individuals; EU average: 
87%). Czech telecom providers are starting to roll 
out  5G  internet  but  the  networks  are  so  far  only 
available in a few dozen cities.  

Czech  SMEs  are  almost  in  line  with  the  EU 
average 
digital 
transformation and the country remains one 
of  the  EU  leaders  in  e-commerce.  Czech 

undergoing 

on 

(40)  2030  Digital  Compass:  the  European  Way  for  the  Digital 

Decade Communication, COM (2021) 118 final. 

(41)  The  share  of  financial  allocations  contributing  to  digital 
objectives  has  been  calculated  using  Annex  VII  of  the  RRF 
Regulation. 

(42) Source: Eurostat – European Union Survey on ICT Usage and 

eCommerce in Enterprises. 

(43)  https://www.e15.cz/byznys/technologie-a-media/cesku-chybi-
tisice-it-odborniku-seniorni-vyvojar-si-pritom-muze-vydelat-
az-200-tisic-mesicne-1383866 

(44)  Confederation 

of 

Industry: 

https://www.spcr.cz/pro-

media/tiskove-zpravy/14125-firmy-ktere-zavedly-
technologie-prumysl-4-0-jsou-produktivnejsi 

35 

 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
Table A8.1: Key Digital Economy and Society Index Indicators 

(*) The 5G coverage indicator does not measure users’ experience, which may be affected by a variety of factors such as the type 
of device used, environmental conditions, number of concurrent users and network capacity. 5G coverage refers to the percentage 
of populated areas as reported by operators and national regulatory authorities. 
Source: Digital Economy and Society Index 

36 

EUEU top-performanceHuman capitalDESI 2020DESI 2021DESI 2022DESI 2022DESI 2022At least basic digital skillsNANA60%54%79%% individuals202120212021ICT specialists4.0%4.2%4.6%4.5%8.0%% individuals in employment aged 15-7420192020202120212021Female ICT specialists10%10%10%19%28%% ICT specialists20192020202120212021ConnectivityFixed Very High Capacity Network (VHCN) coverage29%33%52%70%100%% households201920202021202120215G coverage (*)NA0%49%66%99.7%% populated areas2020202120212021Integration of digital technologySMEs with at least a basic level of digital intensityNANA53%55%86%% SMEs202120212021Big data8%9%9%14%31%% enterprises20182020202020202020CloudNANA40%34%69%% enterprises202120212021Artificial IntelligenceNANA4%8%24%% enterprises202120212021Digital public servicesDigital public services for citizensNANA7575100Score (0 to 100)202120212021Digital public services for businessesNANA8182100Score (0 to 100)202120212021Czechia 
 
  
 
ANNEX 9: INNOVATION 
ANNEX 9: INNOVATION 

The  present  Annex  provides  a  general 
overview  of  the  performance  of  Czechia’s 
research  and  innovation  system.  Czechia  is  a 
moderate innovator according to the 2021 edition 
of  the  European  Innovation  Scoreboard (45).  Total 
R&D 
in  2020  and 
although  it  is  increasing  (compared  to  1.33%  in 
2010), it remains below the EU average of 2.32%. 

intensity  reached  1.99% 

to  be 
strategies (47). 

followed  along 

the  national  R&I 

lags 

the  proportion  of 

Public and private R&D investments are close 
to  the  EU  average,  but  scientific  and 
technological performance remains weak and 
stagnant  over  time.  Scientific  excellence,    as 
measured  by 
scientific 
publications  among  the  top  10%  most  cited 
publications, remains low at around half of the EU 
average  (in  2018,  5%  against  an  EU  average  of 
9.9%). 
in 
In  addition,  Czechia  also 
technological  production  with  a  low  number  of 
patent  applications,  well  below  the  EU  average.  A 
decreasing  number  of  graduates  in  science  and 
engineering 
in 
(14.5  per  thousand 
comparison to 10.9 in 2019 with an EU average at 
16.3)  and  skills  shortages  could  endanger  future 
R&I  performance.  The  Recovery  and  Resilience 
Plan  includes  investments  to  address  some  of 
these  challenges,  such  as  large-scale  projects  to 
improve  cooperation  in  excellent  research  and 
sponsoring  participation  in  international  scientific 
projects.  Nevertheless,  many  of  the  reforms 
required 
the  efficiency  of  R&I 
investments are not sufficiently covered. 

in  2010 

increase 

to 

Weak  science-business 
links  continue  to 
hamper  knowledge  and  technology  transfer. 
Poor incentives for stronger collaboration between 
research  organisations  and  individual  researchers 
on creating and working in academic spin-offs and 
regulatory  barriers  to  creating  such  spin-offs 
academic-business 
to 
continue 
cooperation (46). 
co-
Public-private 
publications remain below the EU average (6.7% in 
2020  compared  to  an  EU  average  of  9.05%)  and 
Czechia  continues  to  score  below  the  EU  average 
for  public  R&D  financed  by  businesses.  The  RRP 
does  not  propose  simplifying  of  the  overall 
regulatory 
private 
cooperation  and  the  reform  processes  thus  need 

framework 

scientific 

hinder 

public 

for 

(45)  2021  European 

Innovation  Scoreboard,  Country  profile: 

Czechia; https://ec.europa.eu/docsroom/documents/45910 

(46)  OECD  Report  on  innovation  Diffusion  in  the  Czech  Republic, 
2020 Innovation diffusion in the Czech Republic (oecd.org) 

(47)  Innovation Strategy of the  Czech Republic 2019-2030    and 
the National Policy of Research, Development and Innovation 
of the Czech Republic 2021+ 

37 

 
 
                                                 
                                                 
 
Table A9.1: Key research, development and innovation indicators 

Source: DG Research and Innovation - Common R&I Strategy and Foresight Service - Chief Economist Unit. Eurostat, OECD, DG 
JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

38 

CompoundEUannual growthaverage2010-20R&D Intensity (GERD as % of GDP)1.331.921.91.931.994.12.32Public expenditure on R&D as % of GDP0.550.870.720.730.773.40.78Business enterprise expenditure on R&D (BERD) as % of GDP0.771.041.181.191.214.71.53Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 4.74.55::0.89.9PCT patent applications per billion GDP (in PPS)0.711::-0,1 3.5Public-private scientific co-publications as % of total publications5.55.96.86.66.72.19.05Public expenditure on R&D financed by business enterprise (national) as of % GDP0.0160.030.0310.0270.0254.20.054New graduates in science & engineering per thousand pop. aged 25-3414.513.111.510.9:-2.516.3Total public sector support for BERD as % of GDP0.1730,180:0.160.16:-0.90.196R&D tax incentives: foregone revenues as % of GDP0.0330.0550.0480.048:4.20.1Share of environment-related patents in total patent applications filed under PCT (%) 15,16,3 12,4  : : -2,512,8 Venture Capital (market statistics) as % of GDP0.020.0030.0040.0070.008-8.30.054Employment in fast-growing enterprises in 50% most innovative sectors6.76.56.16.1:-15.52020Czechia2010201520182019Finance for innovation and Economic renewalKey indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation  
 
 
  
 
ANNEX 10: INDUSTRY AND SINGLE MARKET 
ANNEX 10: INDUSTRY AND SINGLE MARKET 

level  of  interest  rates  in  2021.  Equity  financing 
remained  underdeveloped,  and  venture  capital 
investment  represented  only  around  0.01%  of 
GDP (50),  one  of  the  lowest  rates  in  the  EU. 
However,  Czechia  has included  some measures  in 
its  Recovery  and  Resilience  Plan  to  improve  this 
situation,  such  as  extending 
the  National 
Development  Bank  of  the  Czech  Republic  (NDB)’s 
include  a  new  quasi-equity 
product 
instrument 
NDB’s 
implementation  capacity.  The  plan  also  includes 
measures  to  ease  the  administrative  burden  on 
businesses  such  as  expanding  digital  public 
services,  lowering  high  regulatory  barriers  for 
entrepreneurs  and  improving  access  to  quality  e-
government services. 

strengthening 

line  to 

and 

Although the economy is well-integrated into 
the  single  market,  barriers  remain.  Despite 
recent reforms, several professions (architect, civil 
engineer,  lawyer  and  real  estate  agent)  face 
higher regulatory restrictions than the EU average. 
Czechia announced the regulation of tourist guides 
and  real  estate  agents  professions.  The  RRP  does 
not address these barriers. 

There  are  still  public  procurement  issues  to 
resolve  from  recent  years.  Although  SME 
participation  in  public  procurement  procedures  is 
above  the  EU  average  (in  numbers  of  both 
contractors and bids), Czechia scores below the EU 
average on some important indicators such as the 
proportion of contracts awarded to a single bidder. 

industry  had 

the  automotive 

As  in  other  countries,  global  supply  chain 
disruptions  are  denting  growth.  Sectors  such 
as 
reduce 
production  due  to  disruptions  in  supplies  such  as 
semiconductors.  In  2021,  21%  of  firms  reported 
disruptions to their operations due to shortages in 
materials  or  equipment  (compared  with  an  EU 
average of 26%).  

to 

prosperity,  well-being 

Productivity  growth  is  a  critical  driver  of 
and 
economic 
convergence over the long run. A major source 
of  productivity  for  the  EU  economy  is  a  well-
functioning single market, where fair and effective 
competition  and  a  business  friendly  environment 
are  ensured, 
in  which  small  and  medium 
enterprises  (SMEs)  can  operate  and  innovate 
without  difficulty.  Businesses  and  industry  rely 
heavily  on  robust  supply  chains  and  are  facing 
bottlenecks that bear a negative impact on firms’ 
productivity 
levels,  employment,  turnover  and 
entry/exit  rates.  This  may  impact  the  Member 
States’  capacity  to  deliver  on  Europe’s  green  and 
digital transformation.  

low 

and 

levels 

unemployment 

competitiveness 

labour 
Overall 
productivity  have  been  subdued  in  Czechia. 
Relatively 
and 
bottlenecks  in  the  labour  market  have  pushed 
wages upwards in the recent years. In 2021, 26% 
of  firms  reported  problems  finding  adequate 
workforce  to  employ  compared  to  an  EU  average 
of  14%.  Although 
labour 
issues 
decreased 
remain, including those related to labour and skills 
shortages.  

the  demand  for 
in  the  pandemic,  structural 

to 

to 

support 

Lengthy 

investment 

is  needed 

improvement 

in  the 
Further 
business environment, especially with regard 
to  late  payments,  access  to  finance  and 
and 
burden. 
administrative 
burdensome  administrative  procedures  remain 
barriers 
local 
entrepreneurship  and  SMEs.  Late  payments 
constitute  a  key  barrier  to  SMEs’  resilience  and 
growth  (62.3%  of  SMEs  experienced  payment 
delays in the last 6 months compared with an EU 
average of 45%) and these were the second most 
important  barrier  after  administrative  burden  for 
SMEs  and  start-ups  according  to  the  2020 
Eurobarometer (48).  The  survey  on  the  access  to 
finance of enterprises 2021 (49) found that Czechia 
has  a  high  success  rate  for  application  for  bank 
loans  (80%),  but  the  percentage  of  SMEs  whose 
bank loan applications were refused or rejected in 
2021  was  16.3%,  compared  to  an  EU  average  of 
12.4%. There has also been a net deterioration in 
changes  to  the  availability  of  credit  lines,  bank 
overdrafts  or  credit  cards  overdrafts  and  in  the 

(48)  Flash Eurobarometer 486 

(49)  https://ec.europa.eu/growth/system/files/2021-

11/Analytical%20report%202021.pdf  

(50)  EIF Access to Finance Index – Equity, 2020 

39 

 
 
                                                 
                                                 
 
Table A10.1: Key Single Market and Industry Indicators 

(Continued on the next page) 

40 

SUB-POLICY AREAINDICATOR NAMEDESCRIPTION20212020201920182017Growth ratesEU27 average*Value added by source (domestic)VA that depends on domestic intermediate inputs, % [source: OECD (TiVA), 2018]61.5862.6%Value added by source (EU)VA imported from the rest of the EU, % [source: OECD (TiVA), 2018]22.2819.7%Value added by source (extra-EU)% VA imported from the rest of the world, % [source: OECD (TiVA), 2018]16.117.6%Cost competitivenessProducer energy price (industry)Index (2015=100) [source: Eurostat, sts_inppd_a]114.5104.4106.2100.995.120.4%127.3Material Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]2110131110110%26%Labour Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]2621343533-21%14%Sectoral producer pricesAverage (across sectors), 2021 compared to 2020 and 2019, index [source:Eurostat]6.1%5.4%Concentration in selected raw materialsImport concentration a basket of critical raw materials, index [source: COMEXT]0.190.170.190.190.21-10%17%Installed renewables electricity capacity Share of renewable electricity to total capacity, % [source:Eurostat, nrg_inf_epc]23.222.42221.96%47.8%Net Private investmentsChange in private capital stock, net of depreciation, % GDP [source: Ameco]3.96.66.25.5-29%2.6%Net Public investmentsChange in public capital stock, net of depreciation, % GDP [source: Ameco]0.80.60.3-0.6-233%0.4%Single Market integrationIntra-EU tradeRatio of Intra-EU trade to Extra-EU trade, index [source: Ameco]3.533.263.323.373.384%1.59Professional services restrictivenessRegulatory restrictiveness indicatorRestrictiveness of access to and exercise of regulated professions (professions with above median restrictiveness, out of the 7 professions analysed in SWD (2021)185 [source: SWD (2021)185; SWD(2016)436 final])4   40%3.37Professional qualifications recognitionRecognition decisions w/o compensationProfessionals qualified in another EU MS applying to host MS, % over total decisions taken by host MS [source: Regulated professions database]45%Transposition - overall5 sub-indicators, sum of scores [source: Single Market Scoreboard]On averageBelow averageOn averageBelow averageInfringements - overall4 sub-indicators, sum of scores [source: Single Market Scoreboard]Below averageOn averageBelow averageBelow averageInvestment dynamicsSINGLE MARKETCompliance - cooperation EC and MS61.1HEADLINE INDICATORSEconomic structureRESILIENCEShortages/supply chain disruptionsStrategic dependencies 
 
 
  
 
Table (continued) 

Source: See above in the table the respective source for each indicator in the column "description". 

41 

Investment protectionConfidence in investment protectionCompanies confident that their investment is protected by the law and courts of MS if something goes wrong, % of all firms surveyed [source: Flash Eurobarometer 504]6256%BankruptciesIndex (2015=100) [source: Eurostat, sts_rb_a]n.a.n.a.n.a.n.a.n.a.n.a.70.1Business registrationsIndex (2015=100) [source: Eurostat, sts_rb_a]n.a.n.a.n.a.n.a.n.a.n.a.105.6Late paymentsShare of SMEs experiencing late payments in past 6 months, % [source: SAFE]62.355.874.2n.a.n.a.-16%45%EIF Access to finance index - LoanComposite: SME external financing over last 6 months, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.430.540.710.69-37.4%0.56EIF Access to finance index - EquityComposite: VC/GDP, IPO/GDP, SMEs using equity, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.050.060.120.050%0.18% of rejected or refused loansSMEs whose bank loans’ applications were refused or rejected, % [source: SAFE]16.324.806.42.1662%12.4%SME contractorsContractors which are SMEs, % of total [source: Single Market Scoreboard]686569663%63%SME bidsBids from SMEs, % of total [source: Single Market Scoreboard]969696951.1%70.8%(*) latest availableBusiness demographyAccess to financeBUSINESS ENVIRONMENT - SMEsPublic procurement  
 
  
 
ANNEX 11: PUBLIC ADMINISTRATION 
ANNEX 11: PUBLIC ADMINISTRATION 

capacity 

administrative 

Good 
enables 
economic  prosperity,  social  progress  and 
fairness. Public administrations at all government 
levels deliver crisis response, ensure the provision 
of  public  services  and  contribute  to  building 
resilience  for  the  sustainable  development  of  the 
EU economy.  

Graph A11.1: Performance on the single market 
public procurement indicator 

(1) The competition and transparency indicators are triple-
weighted, whereas the efficiency and quality indicators have 
unitary weights. All others receive a 1/3 weighting in the SMS 
composite indicator.  
Source: Single market scoreboard 2020 data. 

of 

the 

effectiveness 

public 
 Overall, 
administration in Czechia is ranked below the 
EU27  average (51).  Administrative  capacity  and 
the  professionalism  of  civil  servants  remains  a 
challenge.  Czechia  has  a  relatively  low  share  of 
adult  learning  of  public  sector  workers  (10.2%  in 
2021  compared  to  the  EU27  average  of  18.6%, 
likely  aggravated  by  the  COVID-19  pandemic 
restrictions).  Czechia  also  remains  below  the  EU 
average  in  its  share  of  public  administration 
employees  with 
(45.3% 
compared  to  the  EU  average  of  55.3%).  Czechia 
also  faces  challenges  in  attracting  young  civil 
servants. It ranks in the bottom half of the EU on 
share  of  government  employees  aged  under  39, 
leading to potential concerns about the stability of 
the civil service (52). 

tertiary  education 

framework  and  strength  of  fiscal  rules  indices, 
which  have  remained  stable  over  the  past  four 
years.  Public  procurement  issues  also  remain  due 
to  the  relatively  high  proportion  of  contracts 
awarded where there was only a single bidder and 
various  measures  of  quality  of  information  in 
procurement (Graph A11.1).  

Performance  on  e-government  services  is 
mixed.  The  proportion  of  e-government  users  is 
relatively high (76% compared with an EU average 
of  70.8%),  whereas  the  e-government  score  of 
62.6  is  below  the  EU  average  (70.9).  Czechia’s 
Recovery  and  Resilience  Plan  contains  significant 
measures  to  improve  digital  services  for  citizens 
and  business,  and  to  develop  the  digital  public 
administration systems. 

Evidence-based  policy  making  in  Czechia 
ranks  around  the  EU  average  (Graph  A11.2), 
with public consultation and ex-post evaluation of 
legislation  showing  the 
largest  potential  for 
improvement.  Czechia’s  Recovery  and  Resilience 
Plan  also  contains  investments  to  improve  the 
efficiency  of  the  administration  and  promote  the 
use of evidence-based decision-making. 

Graph A11.2: Performance on evidence-based 
policy making indicators 

RIA : Regulatory Impact Assessment 
Source: OECD (iREG indicators) 

Czechia  performs  below  the  EU  average  on 
indicators.  These 
some  fiscal  framework 
include the Commission’s medium-term budgetary 

(51)  Worldwide Governance Indicators, 2020.  

Czechia  remains  below  the  EU  average  on 
open data provision. It scores 74.3 (EU average 
of  81.1).  Low  provision  of  open  data  reduces  the 
potential  of 
institutions 
accountable to citizens. 

information 

to  hold 

(52)  European  Commission,  Directorate-General  for  Structural 
Reform  Support,  Public  administration  and  governance: 
“European Public Administration Country Knowledge, Country 
brief 2021, Czechia”, Publications Office, 2022 

The  justice  system  performs  efficiently.  The 
main  challenge  is  the  length  of  administrative 
cases  (317  days  in  the  courts  of  first  instance  in 

42 

00.20.40.60.811.21.41.61.8CZEU27averageCZEU27averageMethodologyRIAOversightStakeholder consulationSystematic adoptionEx-post evaluationTransparency 
 
 
                                                 
  
 
2020),  though  this  has  improved  in  recent  years. 
Digitalisation remains a challenge, as digital tools 
in  courts.  No  systemic 
are  scarcely  used 
deficiencies  have  been 
judicial 
independence (53).  The  Recovery  and  Resilience 
Plan  contains  reforms to ensure  the protection  of 
whistle-blowers,  strengthen  transparency  in  the 
judiciary, set rules for lobbying and collect data on 
corruption.  

reported 

in 

Table A11.1: Public administration indicators 

(1) High values stand for good performance barring indicators # 7 and 8. 
(2) Break in the series in 2018 and 2021. 
(3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. 
(4) Break in the series in 2021. 
(5) Defined as the absolute value of the difference between the share of men and women in senior civil service positions 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Fiscal Governance 
Database (# 4, 9, 10); Labour Force Survey, Eurostat (# 5, 6, 8), European Institute for Gender Equality (# 7), Single Market 
Scoreboard public procurement composite indicator (# 11); OECD Indicators of Regulatory Policy and Governance (# 12).   

(53)  For more detailed analysis of the performance of the justice 
system  in  Czechia,  see  the  2022  EU  Justice  Scoreboard 
(forthcoming)  and  the  country  chapter  for  Czechia  of  the 
Commission’s 2022 Rule of Law Report (forthcoming). 

43 

CZ20172018201920202021EU27153.061.061.064.076.070.82nananana62.670.93nananana74.381.14NA51.351.351.3na56.8542.843.745.143.345.355.3617.915.714.19.510.218.6738.236.840.636.643.421.8820.720.920.720.321.021.390.430.570.570.57na0.72101.11.11.11.1na1.511-5.7-2.7-4.70.3na-0.7121.63nana1.67na1.7E-government Public Financial Management Evidence-based policy makingIndicator (1)Medium term budgetary framework indexStrength of fiscal rules indexPublic procurement composite indicatorShare of individuals who used internet within the last year to interact with public authorities (2)2021 e-government benchmark´s overall score (3) 2021 open data maturity indexScope Index of Fiscal InstitutionsShare of public administration employees with tertiary education, levels 5-8  (4)Index of regulatory policy and governance practices in the areas of stakeholder engagement, Regulatory Impact Assessment (RIA) and ex post evaluation of legislation Educational attainment level, adult learning, gender parity and ageingOpen government and independent fiscal institutionsParticipation rate of public administration employees in adult learning (4)Gender parity in senior civil service positions (5)Share of public sector workers between 55 and 74 years (4) 
                                                 
 
   
 
FAIRNESS 
FAIRNESS 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The European Pillar of Social Rights provides 
for  upward  convergence 
the  compass 
towards better working and living conditions 
in  the  European  Union.  The  implementation  of 
its 20 principles on equal opportunities and access 
to  the  labour  market,  fair  working  conditions, 
social  protection  and  inclusion,  supported  by  the 
2030  EU  headline  targets  on  employment,  skills 
and  poverty  reduction,  will  strengthen  the  EU’s 
drive  towards  a  digital,  green  and  fair  transition. 
This  Annex  provides  an  overview  of  Czechia’s 
progress 
the 
European Pillar of Social Rights. 

the  goals  under 

in  achieving 

labour  market 

Czechia’s 
performance 
remained  strong  throughout  the  COVID-19 
crisis,  though  employment  of  young  people, 
women  with  children  and  vulnerable  groups 
remains a challenge. The overall unemployment 
and youth unemployment rates (2.8% and 8.2% in 
2021  respectively)  are  among  the  lowest  in  the 
EU.  The  proportion  of  young  people  neither  in 
employment,  nor  in  education  and  training  stood 
at 10.9% in 2021. The percentage of women NEET 
aged 15-29 who are not in employment, education 
or training is above the EU average (17.3% in Q4-
2021  versus  14.6%  in  the  EU)  and  significantly 
higher than for men (4.8%). Young Roma also face 
significantly  higher  risks  of  being  NEET  (47%  in 
2021). Both the gender employment and pay gaps 
(at  15.4 pps  in  2021  and  16.4 pps  in  2020)  are 
well  above  the  EU  average  (10.8 pps  and  13 pps, 
respectively).  Such  gaps  remain  in  part  driven  by 
the  still 
limited  provision  of  early  childhood 
education and care. The gender employment gap is 
partly  driven  by  the  relatively  high  employment 
rate  of  men.  The  European  Social  Fund  (ESF)  has 
provided  EUR  313  million  to  1 108  facilities, 
creating  14 652  additional  places  for  children. 
Even so, only 4.8% of children under the age of 3 
were in formal childcare in 2020, compared to the 
much  higher  EU  average  of  32.3%.  The 
employment 
therefore 
remains  one  of  the  highest  in  the  EU,  which 
contributes to high inactivity among women.  

impact  of  parenthood 

44 

Table A12.1: Social scoreboard for Czechia 

Update of 29 April 2022. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2022. Due to changes in the 
definition of the individuals' level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: European Commission 

in 

learning, 

participation 

High  rates  of  early  school  leaving  for  some 
groups,  coupled  with  relatively  low  levels  of 
adult 
pose 
challenges,  including  to  achieving  a  fair 
green  and  digital  transition.  The  early  school 
leaving  rate  (6.4%  in  2021)  is  below  the  EU 
average  (9.7%).  It  is  nonetheless  around  seven 
times higher for Roma pupils (57% in 2016). There 
are also strong regional disparities in early school 
leaving  rates,  and  educational  outcomes  remain 
linked  to  the  students’  socioeconomic  background 
(see Annex 13). Adult participation in learning (25-
64)  has  slightly  decreased  in  recent  years  (from 
8.5%  in  2018  to  5.5%  in  2020),  and  it  remains 
well  below  the  EU  average  (9.2%  in  2020). 
Individuals’  high  overall  digital  skills  could  still 

6.460.010.915.43.380.02.80.8124.111.512.940.625.66.54.80.4Critical situationTo watchWeak but improvingGood but to monitorOn averageLong term unemployment(% population aged 15-74) (2021)GDHI per capita growth (2008=100) (2020)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP) (2020)Children aged less than 3 years in formal childcare (% of under 3-years-olds) (2020)Self-reported unmet need for medical care (% of population 16+) (2020)Housing cost overburden (% of population) (2020)Social Scoreboard for CZECH REPUBLICEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24) (2021)Youth NEET(% of total population aged 15-29) (2021)Gender employment gap (percentage points) (2021)Income quintile ratio (S80/S20) (2020)Individuals' level of digital skills (% of population 16-74) (2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionAt risk of poverty or social exclusion for children (in %) (2020)Disability employment gap (ratio) (2020)Better than averageAt risk of poverty or social exclusion (in %) (2020)Employment rate(% population aged 20-64) (2021)Unemployment rate(% population aged 15-74) (2021) 
 
 
 
  
 
 
 
benefit  from  further  continuous  learning  support. 
European  Social  Fund  Plus  (ESF+)  support  will 
tackle labour market barriers for vulnerable groups 
and 
reskilling  and  upskilling 
opportunities  for  long-term  unemployed,  thereby 
contributing  to  reaching  the  2030  EU  headline 
targets on skills and employment. 

create  more 

The proportion of people at risk of poverty or 
social  exclusion  is  among  the  lowest  in  the 
EU,  although  it  remains  high  for  specific 
groups.  While  severe  material  and  social 
deprivation  of  children  remains  low  (3.1%  versus 
and  EU  average  of  7%  in  2020),  children  in  low-
income  households 
in  socially  disadvantaged 
locations  and  Roma  children  remain  strongly 
affected  by  the  risk  of  poverty  and  social 
exclusion (54).    The  number  of  people  at  risk  of 
foreclosure  is  relatively  high  (712,000  in  2021), 
while  the  size  of  the  social  housing  stock  is  low 
(less than 2% of the total dwelling stock). Limited 
expenditure  to  increase  the  accessibility  of  social 
housing  (0.18%  of  GDP  in  2019  versus  an  OECD 
average of 0.25%) constrains Czechia’s capacity to 
meet  the  demand  by  low-income  and  vulnerable 
households  (OECD,  2021).  The  ESF+  will  provide 
support  for  social  inclusion,  including  via  social 
housing.  Some  workers  in  non-standard  forms  of 
employment lack formal access to elements of the 
social  protection,  such  as  sickness  and  old-age 
benefits.  Czechia  has  one  of 
the  highest 
proportions  of  end-of-life  care  taking  place  in 
hospitals (63% in 2019 versus 50% in the OECD), 
which indicated a need to modernise the long-term 
care system. 

(54)  On average, 77% of Roma adults and 85% of Roma children 

in Czechia are at the risk of poverty (FRA, RS2021). 

45 

 
 
 
                                                 
ANNEX 13: EDUCATION AND SKILLS 
ANNEX 13: EDUCATION AND SKILLS 

This  Annex  outlines  the  main  challenges  for 
Czechia’s  education  and  training  system  in 
light of the EU-level targets of the European 
Education  Area  strategic  framework  and 
other  contextual  indicators,  based  on  the 
analysis  from  the  2021  Education  and 
Training  Monitor.  Czechia’s  education  and 
training  system  struggles  with  equity  challenges 
that  could  worsen  due  to  the  pandemic.  Czechia 
lags  significantly  behind  the  EU  average  and  the 
EU-level  targets  in  terms  of  participation  in  early 
childhood  education  and 
tertiary  education 
attainment.  

Participation  in  early  childhood  education 
and  care  is  low.  While  participation  in  early 
childhood  education  of  children  aged  3  and  older 
has  increased  slightly,  the  EU-level  target  is  not 
yet  within  reach.  Children  at  risk  of  poverty  and 
social exclusion are less likely to attend childcare, 
likely  to 
and  Roma  children  are  even 
participate (55).  Enrolment  in  early  childhood  care 
for  children  under  the  age  of  3  was  the  lowest 
among  EU  countries  in  2020  (see  Annex  12).  The 
recent  amendment 
the  Child  Group  Act 
combined with contributions from Structural Funds 
and  the  EU’s  Recovery  and  Resilience  Facility  will 
provide funding to expand childcare capacity. 

less 

to 

Graph A13.0: Participation in formal childcare 

Source: EU-SILC Survey, ilc_caindformal  

Czechia’s  education  system  struggles  with 
equity challenges. While the rate of early leavers 
from  education  and  training  is  relatively  low  on 
average and within the EU-level target, pandemic-

(55)  Only 51% of Roma children aged between 3 and the start of 
compulsory  primary  education  age  attend  early  childhood 
education  and  care  (FRA,  RS2021),  compared  to  79.4%  in 
general population (Eurostat, 2019). 

46 

induced  school  closures  may  have  a  negative 
impact  in  the  future.  Furthermore,  there  are 
significant regional disparities, with disadvantaged 
regions  recording  more  than  double  the  national 
rate  of  early  school  leavers.  The  early  school 
leaving  rate  of  Roma  students  was  estimated  at 
57% in 2016, posing challenges for labour market 
and  social  inclusion.  Differences  in  the  quality  of 
education between disadvantaged and advantaged 
schools,  as  measured  by  the  PISA,  remain 
significant,  and  educational  outcomes  remain 
closely 
socioeconomic 
background. Czechia introduced reforms to funding 
of  primary  and  secondary  education  and  the 
Education Policy Strategy 2030+ in 2020.  

students’ 

linked 

to 

the 

and 

shortages 

limited 
Teacher 
attractiveness  of  the  teaching  profession 
remain a challenge. Despite significant increases 
in  Czech  teachers’  salaries,  teacher  shortages 
persist,  particularly  in  disadvantaged  regions.  The 
proportion  of  teachers  who  are  aged  50  or  over 
increased  between  2015  and  2021  and  remains 
above  the  EU  average.  Czech  teachers  report 
comparatively  lower  rates  of  classroom  practice 
acquired  during  their  studies.  Reform  to  initial 
teacher  education  has  been  launched.  Attracting 
highly  qualified  teachers and  pedagogical  support 
remains  a 
staff 
challenge. 

to  disadvantaged  schools 

for  Czech  women 

The  EU-level  target  for  tertiary  education 
attainment remains distant. The rate of tertiary 
education  attainment 
is 
significantly higher than that for Czech men. High 
in  higher  education  are  a 
drop-out 
challenge (56),  as  are  decreasing  numbers  of 
graduates  in  science  and  engineering  (see  Annex 
8).  The  Recovery  and  Resilience  Facility  will 
support  the  introduction  of  35  new  accredited 
programmes,  including  20  with  a  professional 

rates 

(56)  From  the  Czech  strategic  plan  of  the  Ministry  for  Higher 
Education  for  the  period  from  2021  on  doctoral  degree 
programmes:  “Only  about  7%  of  students  complete  their 
studies within the regular time limit and the overall success 
rate  is  around  40%  –  this  means  that  there  are  more 
unsuccessful students than successful ones.” “In addition, the 
issue  of  professional  orientation  is  also  related  to  the 
problem  of  academic  failure  –  the  failure  rate  is  currently 
untenable, especially in bachelor’s degree programmes. Most 
students  expect  professional  relevance  from  their  studies, 
and  if  they  feel  that  their  expectations  are  not  being  met, 
their  studies.” 
they  often 
strategic_plan_2021_.pdf 
Studijní 
also 
neúspěšnost  na  vysokých  školách:  Teoretická  východiska, 
empirické  poznatky  a  doporučení  -  Aleš  Vlk  |  Databáze  knih 
(databazeknih.cz) 

lose  motivation  and  quit 

(msmt.cz), 

0510152025303540EUCZEUCZEUCZEUCZEUCZEUCZ201520162017201820192020From 1 to 29 hours30 hours or over 
 
  
                                                 
                                                 
 
profile,  in  order  to  increase  the  labour  market 
relevance  of  studies  and  to  counteract  shortages 
of  highly  skilled  specialists  in  high  value-added 
sectors.  

Table A13.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

The 2018 EU average on PISA reading performance does not include ES; u = low reliability; Data is not yet available for the 
remaining EU-level targets under the European Education Area strategic framework, covering underachievement in digital skills, 
exposure of vocational educational training graduates to work based learning and participation of adults in learning. 
Source: Eurostat (UOE, LFS); OECD (PISA). 

47 

96%84.6%91.9%86.3%201992.8%2019Reading< 15%22.0% 20.4%20.7%201822.5%2018Mathematics< 15%21.7% 22.2%20.4%201822.9%2018Science< 15%20.7% 21.1%18.8%201822.3%2018< 9 %6.2%11.0%6.4%9.7%Men6.4%12.5%7.0%11.4%Women6.0%9.4%5.8%7.9%Cities5.2%9.6%4.8% 8.7%Rural areas5.5%12.2%6.6%10.0%Native6.1%10.0%6.2%8.5%EU-born14.1%u20.7%17.2%u21.4%Non EU-born7.7%u23.4%9.0%u21.6%45%31.0%36.5%34.9%41.2%Men24.3%31.2%27.1%35.7%Women38.1%41.8%43.3%46.8%Cities43.2%46.2%49.9%51.4%Rural areas22.8%26.9%26.5%29.6%Native31.1%37.7%34.0%42.1%EU-born32.6%32.7%54.1%40.7%Non EU-born21.2%27.0%42.7% 34.7%42.1% 38.3%44.3%201938.9%201920152021IndicatorTargetCzechiaEU27CzechiaEU27Participation in early childhood education (age 3+)Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)TotalBy genderBy degree of urbanisationBy country of birthTertiary educational attainment (age 25-34)TotalBy genderBy degree of urbanisationBy country of birthShare of school teachers (ISCED 1-3) who are 50 years or over 
 
   
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

Especially  relevant  in  light  of  the  ongoing 
COVID-19 pandemic, resilient healthcare is a 
prerequisite  for  a  sustainable  economy  and 
society.  This  Annex  provides  a  snapshot  of  the 
healthcare sector in Czechia.  

Life  expectancy  in  Czechia  has  improved 
slowly  in  recent  years,  but  was  still  2  years 
below  the  EU  average  in  2019.  The  COVID-19 
pandemic  temporarily  set  the  country  back  to 
2013 levels – a larger impact than in many other 
EU  countries.  As  of  17  April  2022,  Czechia 
reported  3.74  cumulative  COVID-19  deaths  per  1 
000  inhabitants  and  363  confirmed  cumulative 
COVID-19  cases  per  1  000  inhabitants.  Treatable 
mortality poses a higher burden than in the EU as 
a  whole,  as  reflected  in  high  levels  of  cancer 
mortality.  

Graph A14.1: Life expectancy at birth, years 

Graph A14.2: Projected increase in public 
expenditure on health care over 2019-2070 (AWG 
reference scenario) 

Source: European Commission/EPC (2021) 

Czechia  has  levels  of  physicians  and  nurses 
above the EU average, but they are unevenly 
distributed across regions. The high age profile 
of  practising  doctors 
concern. 
Strengthening  primary  and  integrated  care  and 
prevention are important strategic goals.  

is  also  a 

Source: Eurostat database 

Health  spending  relative  to  GDP  in  Czechia 
was  below  the  EU  average  in  2019.  The 
proportion  of  public  funding  is  above  the  EU 
average,  resulting  in  a  low  level  of  out-of-pocket 
payments.  In  the  long  run,  public  expenditure  on 
health  is  projected  to  increase  by  0.9  percentage 
points  of  GDP  by  2070  (the  same  as  the  EU 
average),  raising  long-term  fiscal  sustainability 
concerns. 

investing 

system,  mainly 

Through  its  Recovery  and  Resilience  Plan, 
Czechia  plans  to  invest  EUR  1.1  billion 
(16.1%  of  the  total  RRP)  to  strengthen  its 
in 
health 
oncological  care,  e-health  and  research  & 
development. Czechia registered the third biggest 
increase over the last 10 years (2011-2021) in the 
proportion of the population aged 65 or older (57). 
This, coupled with the fact that the supply of long 
term  care 
inadequate, 
is  often  considered 
indicates  an  urgent  need  for  a  rapid  increase  of 
community  and  family-based  social  and  health 
services (58). 

(57)  Eurostat 

(58)  ESPN thematic report on challenges in long-term care Czech 

Republic 2018  

48 

80.980.98181.380.479.179.179.179.378.320162017201820192020EUCzechia6.65.60.90.902468EUCzechia% of GDP20192070increase 
 
   
  
                                                 
 
Table A14.1: Key health indicators 

Doctors' density data refer to practising doctors in all countries except FI, EL, PT (licensed to practice) and SK (professionally 
active). Nurses' density data refer to practising nurses in all countries (imputation from year 2014 for FI) except IE, FR, PT, SK 
(professionally active) and EL (nurses working in hospitals only). Break in time series for numbers of nurses in Czechia in 2017. 
More information: https://ec.europa.eu/health/state-health-eu/country-health-profiles_en  
Source: Eurostat Database; except: * Eurostat Database and OECD, ** ECDC. 

49 

20162017201820192020EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)128.2127.2124.2120.392.1 (2017)Cancer mortality per 100 000 population277.0272.9272.1272.4252.5 (2017)Current expenditure on health, % GDP 7.17.17.57.89.9 (2019)Public share of health expenditure, % of current health expenditure82.082.183.081.879.5 (2018)Spending on prevention, % of current health expenditure 3.02.92.72.52.8 (2018)Acute care beds per 100 000 population414.3410.9408.0404.1387.4 (2019)Doctors per 1 000 population *4.04.13.8 (2018)Nurses per 1 000 population *7.98.58.58.68.2 (2018)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day **16.913.414.5 (2020) 
 
 
  
 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

is  an 

The  regional  dimension 
important 
factor  when  assessing  economic  and  social 
developments  in  Member  States.  Taking  into 
account  this  dimension  enables  a  well-calibrated 
and targeted policy response that fosters cohesion 
and  ensures  sustainable  and  resilient  economic 
development  across  all  regions.  Although  they 
have  been  falling  since  2008,  regional  disparities 
in  Czechia  are  now  increasing  again.  The  country 
has a highly developed capital city (Prague) where 
GDP per head was at 205% of the EU-28 average 
in 2019. In the rest of the country, there is a group 
of  six  regions  that  are  moderately  developed, 
where the GDP per head ranges between 74% and 
83% of the EU-27 average), and a less developed 
(Northwest,  Severozápad)  where  GDP  per  head 
corresponds to 64% of the EU average.  

All Czech regions are converging towards the 
EU average. As a result, Czechia has continued its 
convergence  with the  EU average,  from  84.4%  of 
the  EU  per  head  average  in  2010  to  93.1%  in 
2019. Despite this positive trend, significant intra-
regional  socioeconomic  disparities  remain.  The 
annual  real  GDP  per  head  growth  between  2010 
and  2019  was 
relatively  stable,  with  no 
particularly large variations  between  the  different 
regions,  with  the  exception  of  the  Northwest 
region, where the gap persists. Real GDP per head 
grew  by  only  0.6%  in  this  region  between  2010 
and  2019.  Different  socio-economic  indicators, 
including  depopulation,  indicate  that  the  situation 
in the Northwest is not improving. The main reason 
for  this  is  the  structure  of  the  local  economy, 
where  old industries, in  particular the  coal  mining 
and coal-fired energy sectors, prevail. 

Graph A15.1: CO2 emissions from fossil fuels per 
head, 2018 

Source: European Commission 

The  2021-2027  Just  Transition  Fund  investments 
in Czechia will take place in the Moravian-Silesian 
and  the  Northwest  regions.  Czech  coal  regions 
face  problems  in  different  areas:  the  highest 
unemployment  rates  in  the  country  and  the 
educational  structure  of  the  population  make 
these  regions  less  attractive  to  investors  from 
higher  added  value  sectors.  Brownfields  in  towns 
and  villages  contribute  to  the  negative  image  of 
these  regions.  These  interlinked  areas  influence 
each  other.  A  successful  economic  and  energy 
transformation  must 
economic 
diversification  and  reconversion.  Investments  will 
focus on providing support to small and medium-
and 
sized 
decontamination of sites and repurposing projects. 
The coal regions need to stimulate the deployment 
of  new  technologies  and  infrastructures  for  clean 
energy.  The  Just  Transition  Fund  will  support 
actions  focused  on  upskilling,  reskilling  and 
creating  new  job  opportunities.  In  addition,  it  will 

regeneration 

enterprises, 

lead 

to 

Table A15.1: Selected indicators at regional level - Czechia 

Source: Eurostat, *EDGAR Database. 

50 

NUTS 2 RegionGDP per head (PPS)Productivity (GVA (PPS) per person employed)GDP growthGDP per head growthNet migrationUnemplAt-risk-of-poverty or social exclusionEarly school leaversCO2 emissions from fossil fuels  per headInnovation performanceEU27=100, 2019EU27=100, 2018Avg % change on preceding year, 2010-2019Avg % change on preceding year, 2010-2019Total % change, 2011-2019% of a% of active population, 2019% of population aged 18-24, 2017-tCO2 equivalent, 2018RIS regional performance groupEuropean Union1001001.571.392.210.47.2Česká republika93852.472.301.912.506.5Praha2051313.072.625.57.902.13.0Strong innovator -Střední Čechy83843.312.398.29.605.211.5Moderate innovatorJihozápad78752.111.952.59.606.66.7Moderate innovator -Severozápad64640.490.66-0.421.5016.137.8Emerging innovatorSeverovýchod76742.652.570.612.906.18.8Moderate innovator -Jihovýchod83772.352.130.912.504.86.0Moderate innovatorStřední Morava75702.572.63-0.612.905.26.2Moderate innovator -Moravskoslezsko74741.701.99-1.714.907.611.4Moderate innovator - 
 
 
 
 
 
  
 
help  to  reform  the  education  system  by  creating 
new study programmes. 

Graph A15.2: Territories most affected by the 
climate transition in Czechia 

2019. Attention must therefore be paid not only to 
challenges  at  regional  level,  but  also  at  intra-
regional  level,  notably in the peripheral  areas and 
in  socially  disadvantaged  municipalities,  which 
require targeted investment.  

Source: European Commission 

Graph A15.3: Innovation performance in Czechia 

Source: European Commission 

In  2018,  R&D  intensity  was  the  highest  in  the 
capital  region  where  it  corresponded  to  2.7%  of 
GDP and where 10.4% of workers were employed 
in high technology sectors. At the other end of the 
spectrum, R&D intensity was only 0.3% of GDP in 
the  less  developed  region  of  Severozápad  and 
in  high-tech  sectors  represented 
employment 
2.1% of total employment. 

The  country  shows  large  regional  disparities 
in terms of jobs, education, health and social 
developments.  Even  more  developed  regions 
include  municipalities  that  suffer  from  high  rates 
of  early  school  leaving,  absenteeism,  school  year 
repetition and poverty. Excess mortality from week 
9  of  2020  increased  by  between  14.8%  (Prague) 
and  26.8%  (the  Northwest  region),  compared  to 
the average mortality in the same weeks in 2015-

51 

 
 
 
 
 
 
 
 
 
MACROECONOMIC STABILITY 
MACROECONOMIC STABILITY 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 

prudent mortgage lending. Given the relatively low 
internal  ratings-based  risk  weights  for  mortgage 
exposures  and 
to 
developments  in  the  household  sector,  the  CNB 
decided  to  increase  the  countercyclical  buffer  in 
several steps, up to 2.5%, with effect from 1 April 
2023. 

increased 

related 

risks 

The  Annex  provides  an  overview  of  key 
developments  in  the  financial  sector  of 
Czechia.  The  banking  sector  remains  resilient, 
despite the pandemic. Total banking sector assets 
stood  at  almost  146%  of  GDP  in  2021,  of  which 
the share of the five largest banks was 65.3% at 
the end of 2020, marginally  higher than in 2019. 
The  majority  of  banks’  assets  are  foreign-
controlled.  The  loan-to-deposit  ratio  has  declined 
slightly since 2019 (59), due to a larger increase in 
deposits compared to loans. Household loans saw 
a  steady  increase  in  contrast  to  the  evolution  of 
credit for non-financial corporations. After a slight 
increase  in  2020,  the  non-performing  loans  ratio 
dropped to the pre-pandemic level of 1.7%. Banks 
capitalisation is high, partially due to the measures 
taken  by  the  Czech  National  Bank  (CNB)  in 
response  to  the  pandemic.  The  return  on  equity 
in  2020,  but  partially 
declined  significantly 
recovered  in  2021.  The  efficiency  of  the  banking 
sector  has  recently  deteriorated,  as  shown  by the 
increase  of  cost-to-income  ratio,  but  it  remains 
above the EU average. 

(2022) (60)identified 

The  residential  real  estate  market  exhibits 
medium vulnerabilities that are mitigated by 
macro-prudential  policy  measures.  In  its most 
recent  assessment,  the  European  Systemic  Risk 
Board 
the  following  key 
vulnerabilities: house price overvaluation, high and 
accelerating  house  price  growth,  high  mortgage 
credit growth, and loosening of lending standards. 
During the last 2 years, residential property prices 
have  increased  by  6.7%  annually  on  average, 
accelerating to 22% in Q3 2021, although the rate 
varies among Czech regions. The overvaluation of 
apartment prices reached almost 25% in Q2 2021. 
The volume of new mortgages increased, in terms 
of  volume  as  well  as  the  average  loan  size,  and 
lending  standards  eased.  These  developments  led 
the CNB to apply macro-prudential measures, such 
as  lowering  the  basic  loan-to-value  limit  and 
setting upper limits on the deb-to-income and debt 
service-to-income  ratios  with  effect  from  1  April 
2022. 
forward 
quantitative  and  qualitative  recommendations  for 

the  CNB  put 

In  addition, 

(59)  ECB, 

https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=359.CB
D2.Q.CZ.W0.67._Z._Z.A.A.I3006._Z._Z._Z._Z._Z._Z.PC   

(60)  ESRB, Vulnerabilities in the residential real estate sectors of 
2022, 

the 
https://www.esrb.europa.eu/news/pr/date/2022/html/esrb.pr2
20211~9393d5e991.en.html. 

countries, 

February 

EEA 

52 

 
 
 
                                                 
 
 
Table A16.1: Financial soundness indicators 

Last data: Q3 2021. 
Source: ECB, Eurostat, Refinitiv 

53 

20172018201920202021Total assets of the banking sector (% of GDP)143.0135.6133.2142.1145.8Share (total assets) of the five largest bank (%)63.764.564.865.3-Share (total assets) of domestic credit institutions (%)18.38.68.98.28.4Financial soundness indicators: 1- non-performing loans (% of total loans)2.82.11.71.91.7- capital adequacy ratio (%)18.118.319.722.121.5- return on equity (%)13.013.313.96.710.0NFC credit growth (year-on-year % change)6.16.33.9-0.68.3HH credit growth (year-on-year % change)8.47.96.66.810.2Cost-to-income ratio (%) 147.147.047.049.649.6Loan-to-deposit ratio (%)194.9101.9103.9102.194.4Central bank liquidity as % of liabilities0.00.00.00.0-Private sector debt (% of GDP)80.383.078.681.9-Long-term interest rate spread versus Bund (basis points)66.3158.5180.1163.8227.8Market funding ratio (%)48.247.046.046.1-Green bond issuance (bn EUR)----0.9 
 
 
 
 
  
 
ANNEX 17: TAXATION 
ANNEX 17: TAXATION 

This  Annex  provides  an 
indicator-based 
overview  of  Czechia’s  tax  system.  It  includes 
information  on  the  tax  structure,  i.e.  the  types  of 
tax  that  Czechia  derives  most  revenue  from,  the 
tax  burden  for  workers,  and  the  progressivity  and 
redistributive  effect  of  the  tax  system.  It  also 
tax  collection  and 
provides 
compliance  and  on  the  risks  of  aggressive  tax 
planning activity. 

information  on 

Czechia’s  tax  revenues  are  relatively  low 
compared  to  the  EU  average,  except  for 
consumption  taxes.  Total  tax  revenues  have 
increased  by  about  3%  of  GDP  since  2010  but 
they  remain  below  the  EU  average  (at  36%  in 
2020  compared  to  an  EU average  of  40.2%).  Tax 
revenues  in  all  categories  remain  below  the  EU 
average  except  for  consumption  taxes  (11.3%  of 
GDP  in  2020,  compared  to  an  EU  average  of 
10.8%). Since 2010, there has been an increase in 
revenues from labour taxes (by 3.3 pps of GDP to 
20.3%)  and,  to  a  lesser  extent,  in  consumption 
taxes  (by  0.6  pps),  while  revenues  from  capital 
taxes  fell  (by  0.7  pps  of  GDP  to  4.4%).  Tax 
revenues  from  environmental  taxes  are  slightly 
below  the  EU  average  and  have  decreased  in  the 
recent years (at 1.9% of GDP, compared to the EU 

Table A17.1: Taxation indicators 

average of 2.2%). Revenue from property taxation 
(including recurrent property taxation) is very low.   

The tax burden on labour is relatively high in 
Czechia  for  low  earners  and  second  earners. 
In  particular,  the  tax  wedge  for  single  workers 
earning 50% of the average wage was above the 
EU  average  in  2021  (at  35.1%  against  an  EU 
average of 31.9%), and so was the tax wedge for 
a second earner earning 67% of the average wage 
(see Graph 18.1). At higher earnings (e.g. at 167% 
of  the  average  wage),  the  total  tax  burden  was 
close  to  the  EU  average  in  2021.  The  total  tax 
burden  has  diminished  as  a  result  of  a  2021  tax 
reform  which  makes  the  tax  schedule  more 
progressive  and  reduces  the  tax  base.  The  ability 
of the tax and benefit system to reduce inequality 
(measured  by  its  ability  to  reduce  the  GINI 
coefficient)  has  somewhat  diminished  since  2010 
and is below the EU average.  

but  work 

Czechia  is  doing  relatively  well  in  the  area  of  tax 
administration 
on 
digitalisation, 
compliance  and  enforcement  could  be  further 
improved.  Outstanding  tax  arrears  have  remained 
stable at 16.8% of total net revenue. This is below 
the EU27 average of 31.8%, though that average 
is inflated by very large values in a small number 
of  Member  States.  The  VAT  gap  (an  indicator  of 

For more data on tax revenues as well as the methodology applied see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office, 2021, https://data.europa.eu/doi/10.2778/843047 and the ‘Data on Taxation’ webpage (data 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en). For more details on VAT GAP see 
European Commission, Directorate-General for Taxation and Customs Union, “VAT gap in the EU : report 2021”, Publications 
Office, 2021, https://data.europa.eu/doi/10.2778/30877   
Source: European Commission and OECD 

54 

2010201820192020202120102018201920202021Total taxes (including compulsory actual social contributions) (% of GDP)32.936.035.936.037.940.139.940.1Labour taxes (as % of GDP)17.019.019.220.320.020.720.721.5Consumption taxes (as % of GDP)10.711.611.511.310.811.111.110.8Capital taxes (as % of GDP)5.15.45.24.47.18.28.17.9Total property taxes (as % of GDP)0.50.60.50.31.92.22.22.3Recurrent taxes on immovable property (as % of GDP)0.20.20.20.21.11.21.21.2Environmental taxes as % of GDP2.32.02.01.92.42.42.42.2Tax wedge at 50% of Average Wage (Single person) (*)35.738.939.439.635.133.932.432.031.531.9Tax wedge at 100% of Average Wage (Single person) (*)42.143.744.044.039.941.040.240.139.939.7Corporate Income Tax - Effective Average Tax rates (1) (*)17.917.918.319.819.519.3Difference in GINI coefficient before and after taxes and cash social transfers (pensions excluded from social transfers)8.06.76.76.78.47.97.48.3Outstanding tax arrears: Total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)16.816.831.931.8VAT Gap (% of VTTL)13.814.311.210.5Dividends, Interests and Royalties (paid and received) as a share of GDP (%)6.97.84.910.710.5FDI flows through SPEs (Special Purpose Entities), % of total FDI flows (in and out)0.00.00.047.846.236.7(*) EU-27 simple average, as no aggregated EU-27 valueCzechiaEU-27Tax structureProgressivity & fairnessTax administration & complianceFinancial Activity Risk(1) Forward-looking Effective Tax Rate (OECD) 
 
 
 
 
  
 
Graph A17.1: Tax wedge 2021 (%) 

The tax wedge measures the difference between the total labour cost of employing a worker and the worker’s net earnings: sum 
of personal income taxes and employee and employer social security contributions, net of family allowances, expressed as a 
percentage of total labour costs (the sum of the gross wage and social security contributions paid by the employer). 

(1) The second earner average tax wedge measures how much extra personal income tax (PIT) plus employee and employer social 
security contributions (SSCs) the family will have to pay as a result of the second earner entering employment, as a proportion of 
the second earner’s gross earnings plus the employer SSCs due on the second earner’s income. For a more detailed discussion see 
OECD (2016), Taxing Wages 2016, OECD Publishing, Paris. http://dx.doi.org/10.1787/tax_wages-2016-en 
(*) EU-27 simple average, as no aggregated EU-27 value 
Source: European Commission 

the  effectiveness  of  VAT  enforcement  and 
compliance)  has  increased  slightly  in  Czechia  by 
0.5 pps to 14.3%, which is above the EU  average 
gap  of  10.5%.  The  average  forward-looking 
effective  corporate 
rates  were 
moderately below the EU average in 2020.  

income 

tax 

55 

35.137.639.341.844.7At 50% of Average Wage (Singleperson)At 67% of Average Wage (Singleperson)At 100% of Average Wage (Singleperson)At 167% of Average Wage (Singleperson)For second earner at 67% of AverageWage (Two earner couple, 1st earner100% of AW) (1)CZEU-27 (*) 
   
 
ANNEX 18: KEY ECONOMIC AND FINANCIAL INDICATORS 
ANNEX 18: KEY ECONOMIC AND FINANCIAL INDICATORS 

Table A18.1: Key economic and financial indicators 

(1) NIIP excluding direct investment and portfolio equity shares       
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches.         
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

56 

2004-072008-122013-1820192020202120222023Real GDP (y-o-y)5.90.23.13.0-5.83.31.92.7Potential growth (y-o-y)4.51.72.42.51.31.31.61.7Private consumption (y-o-y)3.60.62.92.7-6.84.42.02.0Public consumption (y-o-y)0.2-0.12.22.53.41.60.61.3Gross fixed capital formation (y-o-y)7.1-1.93.75.9-7.50.93.15.6Exports of goods and services (y-o-y)18.14.25.01.5-6.95.11.23.5Imports of goods and services (y-o-y) 15.52.95.31.5-6.911.51.23.6Contribution to GDP growth:Domestic demand (y-o-y)3.8-0.32.73.3-4.52.61.82.7Inventories (y-o-y)0.6-0.40.2-0.3-0.84.50.00.0Net exports (y-o-y)1.51.00.10.0-0.5-3.80.10.0Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.5-0.10.60.3-0.2-0.10.30.0Capital accumulation (y-o-y)1.10.80.60.90.60.50.60.7Total factor productivity (y-o-y)2.91.01.21.31.00.80.80.9Output gap3.5-0.1-0.22.9-4.3-2.4-2.2-1.2Unemployment rate7.26.44.62.02.62.82.62.6GDP deflator (y-o-y)2.10.91.73.94.44.17.44.7Harmonised index of consumer prices (HICP, y-o-y)2.32.71.22.63.33.311.74.5Nominal compensation per employee (y-o-y)6.02.54.17.23.25.72.45.3Labour productivity (real, hours worked, y-o-y)4.90.31.82.70.40.3-0.12.3Unit labour costs (ULC, whole economy, y-o-y)1.32.12.24.37.72.42.82.8Real unit labour costs (y-o-y)-0.71.20.50.43.2-1.6-4.3-1.8Real effective exchange rate (ULC, y-o-y)3.71.90.91.1....Real effective exchange rate (HICP, y-o-y)3.12.10.30.30.83.8..Net savings rate of households (net saving as percentage of net disposable income)7.27.46.98.516.8...Private credit flow, consolidated (% of GDP)7.94.34.21.42.3...Private sector debt, consolidated (% of GDP)57.677.581.678.681.9...of which household debt, consolidated (% of GDP)18.128.631.031.634.0...of which non-financial corporate debt, consolidated (% of GDP)39.548.950.647.147.9...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)...1.51.6...Corporations, net lending (+) or net borrowing (-) (% of GDP)-2.7-0.9-1.1-2.81.6-4.4-3.5-2.8Corporations, gross operating surplus (% of GDP)28.628.228.927.527.127.328.929.8Households, net lending (+) or net borrowing (-) (% of GDP)1.01.91.92.17.79.05.84.7Deflated house price index (y-o-y)4.6-0.94.46.25.5...Residential investment (% of GDP)4.44.44.04.44.85.1..Current account balance (% of GDP), balance of payments-3.2-2.30.60.32.0-0.8-2.4-2.6Trade balance (% of GDP), balance of payments1.83.56.56.06.73.0..Terms of trade of goods and services (y-o-y)-0.5-0.70.50.51.70.1-1.80.1Capital account balance (% of GDP)0.30.91.20.41.21.6..Net international investment position (% of GDP)-27.8-43.5-31.1-19.8-16.3-15.6..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)17.88.622.730.237.436.4..IIP liabilities excluding non-defaultable instruments (% of GDP) (1)30.541.958.161.361.471.6..Export performance vs. advanced countries (% change over 5 years)77.229.61.33.210.6...Export market share, goods and services (y-o-y)10.0-0.91.5-0.94.2-4.4-3.3-0.7Net FDI flows (% of GDP)-4.8-1.7-1.1-2.4-2.6-0.1..General government balance (% of GDP)-2.0-3.6-0.10.3-5.8-5.9-4.3-3.9Structural budget balance (% of GDP)..0.0-0.9-4.1-4.9-3.1-3.5General government gross debt (% of GDP)27.736.538.130.137.741.942.844.0forecast 
 
 
 
 
  
 
ANNEX 19: DEBT SUSTAINABILITY ANALYSIS 
ANNEX 19: DEBT SUSTAINABILITY ANALYSIS 

level.  In  the  ‘lower  SPB’  scenario,  the  SPB  is 
permanently  weaker  than  in  the  baseline.  The 
‘adverse interest-growth rate’ scenario assumes a 
less  favourable  snowball  effect  than 
in  the 
baseline.  In  the  ‘financial  stress’  scenario,  the 
country  temporarily  faces  higher  market  interest 
rates in 2022.  

Graph 2 shows the outcome of the stochastic 
projections.  These  projections  show  the  impact 
on  debt  of  2 000  different  shocks  affecting  the 
government’s 
economic 
growth,  interest  rates  and  exchange  rates.  The 
cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

budgetary 

position, 

Table  2  shows  the  S1  and  S2  fiscal 
sustainability 
indicators  and  their  main 
drivers.  S1  measures  the  consolidation  effort 
needed to bring debt to 60% of GDP in 15 years. 
S2  measures  the  consolidation  effort  required  to 
stabilise  

This  Annex  assesses  fiscal  sustainability 
risks for Czechia over the short, medium and 
long term. It follows the same multi-dimensional 
approach as the 2021 Fiscal Sustainability Report, 
updated  on  the  basis  of  the  Commission  2022 
spring forecast. 

Table  1  presents 
the  baseline  debt 
projections.  It  shows  the  projected  government 
debt  and  its  breakdown  into  the  primary  balance, 
the  snowball  effect  (the  combined  impact  of 
interest payments and nominal GDP growth on the 
debt  dynamics)  and  the  stock-flow  adjustment. 
These  projections  conventionally  assume  that  no 
new  fiscal  policy  measures  are  taken  after  2023, 
and  include  the  expected  positive  impact  of 
investments under Next Generation EU. 

Graph  1  shows  four  alternative  scenarios 
around  the  baseline, to  illustrate the  impact 
of changes in assumptions. The ‘historical SPB’ 
scenario  assumes  that  the  structural  primary 
balance (SPB) gradually returns to its past average 

Table A19.1: Debt sustainability analysis for Czechia 

Source: European Commission 

57 

Table 1. Baseline debt projections20192020202120222023202420252026202720282029203020312032Gross debt ratio (% of GDP)30.137.741.942.844.045.346.147.249.151.053.255.758.561.4Change in debt-2.07.74.20.91.21.30.81.01.91.92.22.52.82.9of whichPrimary deficit-1.05.05.13.43.02.82.52.42.72.72.83.03.13.2Snowball effect-1.41.3-1.9-2.7-2.0-1.6-1.7-1.4-0.8-0.8-0.7-0.5-0.3-0.3Stock-flow adjustment0.41.41.00.20.20.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)5.310.710.99.18.88.88.99.19.710.310.911.512.312.9S1S2Overall index (pps. of GDP)1.97.1of whichInitial budgetary position2.32.7Debt requirement-1.1Ageing costs0.74.3of whichPensions-0.11.7Health care0.30.8Long-term care0.31.4Others0.20.4                                                                       Table 2. Breakdown of the S1 and S2 sustainability gap indicators253545556575852019202120232025202720292031BaselineHistorical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioGraph 1. Deterministic debt projections (% of GDP)p10-p20p20-p40p40-p60p60-p80p80-p902535455565758520192020202120222023202420252026Graph 2. Stochastic debt projections(% of GDP)MedianBaseline 
 
 
 
 
  
 
debt over an infinite horizon. The initial budgetary 
position  measures  the  effort  required  to  cover 
future 
interest  payments.  The  ageing  costs 
component  accounts  for  the  need  to  absorb  the 
projected 
public 
expenditure  such  as  pensions,  health  care  and 
long-term  care.  For  S1,  the  debt  requirement 
measures  the  additional  adjustment  needed  to 
reach the 60% of GDP debt target. 

in  ageing-related 

change 

Finally,  the  heat  map  presents  the  overall 
fiscal  sustainability  risk  classification  (Table 
A19.2).  The  short-term  risk  category  is  based  on 
the  S0  indicator,  an  early-detection  indicator  of 
fiscal  stress  in  the  upcoming  year.  The  medium-
term  risk  category  is  derived  from  the  debt 
sustainability  analysis  (DSA)  and  the  S1  indicator. 
The DSA assesses risks to sustainability based on 
several  criteria:  the  projected  debt  level  in  10 
years’  time,  the  debt  trajectory  (‘peak  year’),  the 
plausibility  of  fiscal  assumptions  and  room  for 
tighter  positions  if  needed  (‘fiscal  consolidation 
space’),  the  probability  of  debt  not  stabilising  in 
the  next  5  years  and  the  size  of  uncertainty.  The 
long-term  risk  category  is  based  on  the  S2 
indicator and the DSA. 

generally 

that  government  debt  is  projected  to  rise  from 
around 43% of GDP in 2022 to about 61% of GDP 
in  2032  in  the  baseline  (Table 1).  The  significant 
sensitivity  of  the  debt  path  to  possible  shocks  to 
fiscal,  macroeconomic  and  financial  variables,  as 
illustrated  by  alternative  scenarios  and  stochastic 
simulations, 
risk 
assessment  (Graphs  A19.1  and  A19.2).  Moreover, 
the sustainability gap indicator S1 signals that an 
adjustment  of  1.9  pps.  of  GDP  of  the  structural 
primary  balance  would  be  needed  to  reduce  debt 
to 60% of GDP in 15 years’ time (Table 2). Overall, 
the medium risk reflects the currently large deficit 
and  some  budgetary  pressure  related  to  age-
related expenditure. 

confirms 

this 

Long-term  risks  to  fiscal  sustainability  are 
high.  Over  the  long  term,  the  sustainability  gap 
indicator  S2  (at  7.1  pps.  of  GDP)  points  to  high 
risks,  compared  to  medium  risks  according  to  the 
DSA, leading overall to a high risk assessment. The 
S2  indicator  suggests  that,  to  stabilise  debt  over 
the  long  term,  it  will  be  necessary  to  address 
budgetary  pressures  stemming  from  population 
ageing,  especially  those  related  to  pension,  long-
term care and health care expenditure (Table 2). 

short-term 

Overall, 
fiscal 
sustainability are low. The Commission’s early-
detection  indicator  (S0)  does  not  signal  major 
short-term fiscal risks (Table A19.2).  

risks 

to 

Medium-term  risks  to  fiscal  sustainability 
are medium. Both elements of the Commission’s 
medium-term  analysis  lead  to  this  conclusion. 
First,  the  debt  sustainability  analysis  (DSA)  shows 

Table A19.2: Heat map of fiscal sustainability risks for Czechia 

(1) Debt level in 2032: green: below 60% of GDP, yellow: between 60% and 90%, red: above 90%. (2) The debt peak year 
indicates whether debt is projected to increase overall over the next decade. Green: debt peaks early; yellow: peak towards the 
middle of the projection period; red: late peak. (3) Fiscal consolidation space measures the share of past fiscal positions in the 
country that were more stringent than the one assumed in the baseline. Green: high value, i.e. the assumed fiscal position is 
plausible by historical standards and leaves room for corrective measures if needed; yellow: intermediate; red: low. (4) Probability 
of the debt ratio exceeding in 2026 its 2021 level: green: low probability, yellow: intermediate, red: high (also reflecting the initial 
debt level). (5) The difference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 
2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.  
Source: European Commission (for further details on the Commission’s multi-dimensional approach, see the 2021 Fiscal 
Sustainability Report). 

58 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallMEDIUMMEDIUMMEDIUMMEDIUMMEDIUMLOWDebt level (2032), % GDP6150706662Debt peak year20322032203220322032Fiscal consolidation space54%33%83%54%54%Probability of debt ratio exceeding in 2026 its 2021 level68%Difference between 90th and 10th percentiles (pps. GDP)28Short termMedium termLong termOverall                               (S0)Overall     (S1+DSA)S1Debt sustainability analysis (DSA)S2Overall     (S2+DSA)OverallHIGHHIGHDeterministic scenariosStochastic projectionsLOWMEDIUMMEDIUMMEDIUM