COMMISSION STAFF WORKING DOCUMENT 2023 Country report - Czechia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Czechia and delivering a Council opinion on the 2023 Convergence Programme of Czechia
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Czechia, economic policy, economic recovery, economic reform, energy policy, fiscal policy, housing policy, renewable energy, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 603 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country report - Czechia Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Czechia and delivering a Council opinion on the 2023 Convergence Programme of Czechia {COM(2023) 603 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

negative impact on housing affordability,  with 
Czechia having the least affordable housing in 
the  EU  in  the  past  5  years.  Low  housing 
affordability  entails 
significant  economic 
efficiency  costs  as  it  prevents  an  optimal 
allocation  of  resources  (see  section  ‘Further 
priorities ahead’). 

Czechia  is  progressing  towards  all  UN 
Sustainable  Development  Goals  (SDGs), 
but  still  lags  behind  the  EU  average  in 
some  areas,  mainly 
in  SDG  targets 
related  to  environmental  sustainability. 
There  is  room  to  improve  in  particular  on 
indicators  related  to  climate  action  (SDG  13). 
In contrast to the EU’s overall trends, Czechia’s 
share of net greenhouse gas emissions keeps 
increasing.  On  the  other  hand,  the  country 
performs  extremely  well  on  SDG  targets 
related  to  fairness,  such  as  no  poverty  (SDG 
1), decent work and economic growth (SDG 8), 
and reduced inequalities (SDG 10). 

The consequences of Russia’s  
invasion of Ukraine weigh on  
the economy 

Czechia’s  economy  has  been  heavily 
exposed  to  the  effects  of  Russia’s 
invasion  of  Ukraine.  Consumer  price 
inflation increased to 14.8% in 2022, driven by 
fast-growing  prices  for  commodities  and 
production inputs.  

has 

facing 

Czechia 
cost 
been 
competitiveness  pressures.  As  a  small, 
highly open economy with the highest share of 
exporting  firms  among  EU  Member  States, 
particularly 
the  manufacturing  sector, 
Czechia is vulnerable to external shocks due to 
its  high  integration  in  global  value  chains. 
Because  of  higher  commodity  prices  and  unit 
labour  costs,  Czechia’s  cost  competitiveness 

in 

The Czech economic recovery is 
hampered by global challenges 

financial 

situation 

Czechia’s  post-pandemic  recovery  was 
disrupted  by 
the  Russian  war  of 
aggression  against  Ukraine.  In  2022,  the 
Czech  economy  grew  by  2.5%,  dampened  by 
the  worsening 
of 
households,  slowing  external  demand  and 
receding  problems  in  global  value  chains. 
to  have 
Economic  activity 
increased  by  0.1%  quarter-on-quarter  in  the 
first quarter of 2023, but is forecast to regain 
momentum  after  that,  surpassing  its  pre-
pandemic  level  towards  the  end  of  this  year. 
GDP  growth  is  forecast  at  0.2%  in  2023  and 
2.6% in 2024.  

is  estimated 

funds. 

Investment activity is set to benefit from 
cohesion  policy  and  Recovery  and 
Resilience  Facility 
Investment 
growth and foreign demand are expected to be 
the main drivers of economic activity in 2023, 
despite  investment  being  negatively  impacted 
by  a  deterioration  in  firms’  financial  situation 
and  tightening  financial  conditions.  Household 
consumption  is  expected  to  stagnate  in  2023 
on  the  back  of  a  decline  in  real  disposable 
income.  However,  it  is  set  to  be  the  main 
growth driver again in 2024. 

Despite  challenging  economic  conditions, 
a  gradual  correction  of  macroeconomic 
vulnerabilities is underway. The challenging 
macroeconomic context has contributed to the 
emergence  of  a  number  of  vulnerabilities 
related  to  housing  prices and  competitiveness 
that  are  assessed  in  the  in-depth  review  for 
Czechia (1).House  price  increases  are  having  a 

(1)  European Commission (2023), In-Depth Review for 
Czechia, Commission staff working document 
(COM(2023) 628 final). 

2 

 
 
 
                                                 
has  declined.  However,  cost  pressures  are  set 
to  ease  in  2023,  supported  by  government-
imposed  caps  on  energy  prices  and  related 
indirect effects. At the same time, a decline in 
real  income  and  a  tight  monetary  policy  are 
expected  to  prevail  in  2023,  amid  stagnating 
economic  growth.  This  will  bring  the  average 
annual  increase  in  the  Harmonised  Index  of 
Consumer Prices (HICP) to 11.9% in 2023 and 
3.4% in 2024. 

Nominal wage growth has been strong in 
Czechia.  While  already  high  before  the 
pandemic,  it  rose  sharply  in  2022  and  is 
expected to remain high over the next 2 years. 
Nominal 
employee 
increased  by  7.6%  in  2022.  However,  real 
wages  declined  in  2022  as  a  result  of  high 
inflation,  after  having  grown  strongly  in  the 
past 3 years.  

compensation 

per 

Energy  dependency  remains  a  major 
vulnerability. Czechia’s high reliance on fossil 
fuels  calls  for  a  faster  roll-out  of  renewables 
and  energy  efficiency  investments,  as  well  as 
diversification  of  its  supply  sources.  A  broad 
range  of  technologies,  including  solar,  wind, 
geothermal,  hydrogen  and  biomethane,  could 
be  developed  further  as  a  substitute  for 
natural gas imports, particularly in households 
and  industry.  Czechia  will  face  increasing 
challenges  resulting  from  natural  hazards 
related to droughts and water stress. This will 
require  more  efforts  in  forest  and  water 
management.  

A return to prudent fiscal policy 

Expansionary  fiscal  policy,  especially  in 
2020  and  2021,  has  weakened  a  strong 
public  finance  position.  Faced  with  the 
challenges arising from the pandemic and the 
energy  crisis  resulting  from  Russia’s  invasion 
of  Ukraine,  Czechia  has  used  fiscal  policy  to 
sustain  the  economy.  This  includes  measures 
to support the most affected sectors, maintain 
employment  and  boost  economic  recovery.  As 
the  energy  crisis  unfolded,  public  spending  on 
social  protection  was  increased  to  help  the 
population  cope  with  a  higher  cost  of  living. 
Energy  price  caps  have  been  implemented  to 

help  households,  small  and  medium-sized 
enterprises  (SMEs)  and  companies  deal  with 
the  hike  in  energy  prices.  Given  the  high 
inflation  and  its  negative  effects  on  the  low-
income  population,  targeted  measures  to 
provide support to the most vulnerable should 
be  a  priority  for  the  fiscal  policy.  However, 
some  of  the  measures  taken  in  the  past  3 
years  have  not  been  of  a  temporary  or 
targeted  nature.  For  example,  lowering  the 
personal  income  tax  added  around  1.5%  of 
GDP permanently to the structural deficit. The 
indexation of social  security benefits has also 
been  higher than  the  growth in  corresponding 
revenues.  As  a  result,  the  budget  deficit  is 
likely  to  remain  above  pre-pandemic  levels 
with 3.6% of GDP in 2022, 3.6% in 2023 and 
3.0%  in  2024.  The  general  government  debt-
to-GDP  ratio  is  forecast  to  increase  from 
42.0%  in  2021  to  43.1%  in  2024,  still  low 
compared  to  the  EU  average.  To  tackle  the 
deficit,  the  government  presented  a  package 
of  measures  aimed  at  lowering  the  deficit  by 
around 1 percentage point of GDP in 2024, but 
the exact details are still not finalised.   

Graph 1.1: Key fiscal indicators 

Source: Eurostat, European Commission 

Fiscal  challenges  are  set  to  increase  in 
the  long  run.  According  to  the  Commission’s 
latest  Debt  Sustainability  Analysis  (see  Annex 
21),  the  debt-to-GDP  ratio  is  expected  to 
remain on an increasing path by 2033, though 
starting  from  a  relatively  low  level  compared 
to other EU countries. In the medium and long 
term,  given  the  projected  increase  in  age-
related  spending,  these  debt  developments 
could  increase  the  fiscal  sustainability  risks. 
According  to  the  Commission’s  2021  Ageing 
Report,  a  projected  doubling  of  the  old-age 
dependency  ratio,  the  capping  of  the  Czech 

3 

01020304050-8-6-4-2022015201620172018201920202021202220232024% of GDPGross debt (rhs)Budget balance (lhs)forecast% of GDP 
 
  
retirement  age  as  well  as  a  still  high  number 
of  people  taking  early  retirement  would  lead 
to  an  expected  increase  in  total  ageing  costs 
of  around  6  percentage  points  by  2070,  split 
between spending on pensions, healthcare and 
long-term  care.  These  challenges  will  need  to 
be  addressed  to  safeguard  the  long-term 
sustainability  of  public 
finances,  while 
maintaining adequate pensions. 

Unlocking the potential of  
the Czech economy 

Addressing the risks of widening regional 
disparities can boost economic and social 
progress  in  Czechia. While  more  developed 
regions suffer from unaffordable housing and 
pressures on the suburban transport networks, 
less  developed  regions  face  issues  arising 
from  demographic  pressures,  social  exclusion 
and  insufficient  focus  on  key  areas  such  as 
energy  transition  innovation  and  digitalisation 
(see  Annex  17).  Prague  is  the  only  region 
classified as a strong innovator. 

EU 

and 

plan 

Czechia 

benefits 

cohesion 

resilience 

In addition to support from the Recovery 
and  Resilience  Facility  (see  section  ‘The 
is 
recovery 
from 
underway’), 
sizeable 
funds. 
Implementation  of  cohesion  policy  funds  is 
well  advanced  both  for  the  2014-2020 
programming  period  as  well  as  the  2021-
2027 programming period. In 2021-2027, the 
Just  Transition  Fund  will  enable  further 
economic diversification and modernisation of 
(Karlovarský, 
Czechia’s  three  coal  regions 
Ústecký  and  Moravskoslezký).  This,  together 
with  structural  funds,  could  help  address  the 
challenges linked to regional disparities. 

The  Czech  labour  market  continued  to 
improve, though labour shortages and the 
impact  of  the  energy  crisis  raise  some 
concerns.  Employment  in  Czechia  has  been 
increasing  since  2020,  albeit  at  a  slow  rate, 
bringing  the  employment  rate  to  81.3%  in 
EU). 
74.6% 
2022 
The unemployment  rate  is  set  to  remain  low, 
increasing from 2.2% in 2022 to an estimated 

(above 

the 

for 

2.8% in 2023 and 2.6% in 2024. The share of 
economically  active  population  has  increased 
steadily over the last few years, from 78% in 
2014 (Graph 1.2).  

Graph 1.2: Labour market indicators 

Source: Eurostat 

There  are  disparities  in  labour  market 
and  social  outcomes  between  population 
groups.  Further  attracting  certain  groups  to 
the  labour  market  can  ease  existing  labour 
and  skills  shortages.  The  gender  pay  and 
employment  gaps  remain  high,  driven  partly 
by  the  limited  availability  of  and  participation 
in  early  childhood  education  and  care  (see 
Annexes 14 and 15).  

can  unlock 

Strengthening  active 
labour  market 
policies  plays  a  key  role.  In  particular 
upskilling  and  career  guidance, 
increasing 
access to childcare and providing more flexible 
working  arrangements, 
the 
untapped  potential  of  young  people,  women 
and low-skilled workers in Czechia. It can also 
implementation  of  the 
help  support  the 
European Pillar of Social Rights (see Annex 14) 
and  reach  the  national  employment  target  by 
2030.  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  above  65) 
and  regions  (e.g.  Severozápad).  Dedicated 
support through the European Social Fund Plus 
(ESF+)  continues  to  promote  the  employment 
of  disadvantaged  groups  and  address  skills 
needs. 

Skills mismatches weigh on the potential 
of  the  Czech  labour  market,  on  the  back 
of changing business needs and the green 
and  digital  transition.  Regional  and  sector 
divergences remain present (see Annex 8). The 

4 

01234564,7004,8004,9005,0005,1005,2005,3005,4005,5002015Q12015Q22015Q32015Q42016Q12016Q22016Q32016Q42017Q12017Q22017Q32017Q42018Q12018Q22018Q32018Q42019Q12019Q22019Q32019Q42020Q12020Q22020Q32020Q42021Q12021Q22021Q32021Q42022Q12022Q22022Q32022Q4% of the labour forceThousands personsEmployment (lhs)Labour force (lhs)Unemployment rate (rhs) 
 
  
pupils 

education and training system face challenges 
to  reduce  socio-economic  inequalities  that 
affect  educational  outcomes,  especially  for 
Roma 
(see  Annex  15).  Adult 
participation  in  learning  is  below  both  the  EU 
average and the national target by 2030 (see 
Annex 14). While 60% of the Czech population 
has  at  least  basic  digital  skills,  there  is 
significant  scope  for  achieving  the  national 
target  on  skills  (80%)  by  2030.  Tertiary 
educational attainment is among the lowest in 
the  EU  (see  Annex  15).  The  labour  market 
potential  of  people  displaced  from  Ukraine 
remains  underused,  with  80%  of  Ukrainian-
born workers performing low-qualified jobs (2). 

Social policy developments 

While  the  overall  risk  of  poverty  for  the 
Czech population is low, some households 
struggle  to  make  ends  meet (3).  In  2021, 
the share of people at risk of poverty or social 
exclusion  was  10.7%,  well  below  the  EU 
average  of  21.7%.  The  lack  of  affordable 
housing  and  social  housing  and  the  high  rate 
of  insolvencies  and  foreclosures  (affecting 
7.8%  of  the  Czech  population)  are  factors 
behind this risk (see Annex 14). Limited access 
to housing also affects people displaced from 
Ukraine, with around half of them still living in 
private  accommodation  provided  on  a 
solidarity basis and one-third of Roma coming 
from Ukraine facing material deprivation (4). 

There  is  limited  access  to  and  varying 
quality  of  community-based  services. 
Population  ageing  affects  the  provision  of 
healthcare and long-term care services, which 
also  face  shortages  of  professionals, 
in 
particular  paediatricians 
(see  Annex  16). 
Moreover,  language  barriers  and  unfamiliarity 
with  the  Czech  system  make  it  difficult  for 
Ukrainian 
to  access  healthcare, 
especially  mental  health  services.  More 

refugees 

(2)  European Commission (2022), Czech Republic: Refugees 
from Ukraine face precarious situations in the labour 
market, European Website on Integration.  

(3)  Housing Initiative: Housing Exclusion Report 2021 

targeted  action  for  low-income  households, 
including  for  community-based  high-quality 
social  services,  can  help  Czechia  reach  the 
national poverty target by 2030.  

A total of 326 000 displaced people from 
Ukraine  received temporary  protection  in 
Czechia,  making  the  country  one  of  the 
biggest recipients per capita in the EU (5). 
The country has taken important measures to 
make  it  easier  to  integrate  them  in  the  short 
term (6).  However,  limited  school  places  and 
the  shortage  of  qualified  teachers  in  some 
regions  make  it  difficult  to  accommodate  the 
large  number  of  pupils  arriving  from  Ukraine 
(over  50 000  in  September  2022)  in  formal 
ESF+ 
education 
contributes  to  a  total  EUR  16.5  million  for 
training  and  EUR 14  million  for  housing 
support to Ukrainian refugees. 

training (7). 

and 

The 

While 
incomes  have  supported  house 
price rises, lower interest rates have also 
played  a  significant  role  in  increasing 
demand  for  housing  in  previous  years. 
However,  the  price  pressures  seem  to  have 
eased  in  part  thanks  to  an  increase  in  the 
number of homes being built as well as a rise 
in interest rates for mortgages. To improve the 
housing  situation,  there  is  a  need  for  a 
legislation  to  be  adopted  on  social  and 
affordable  housing  as  well  as  for  more 
suitable 
fund 
absorption  capacity  of  municipalities,  and 
investment  in  social  housing  refurbishment. 
The  prevention  of  evictions  will  help  avoid 
homelessness.  

territorial  planning,  higher 

Competitiveness 

Czechia  lags  behind  the  EU  average  in 
higher  education  rates.  This  is  crucial  for 

(5)  Ministry of the Interior of Czechia, Statistics related to 

the war in Ukraine, April 2023. 

(6)  European Commission (2022), Integration of refugees 
from Ukraine in the Czech Republic 2022, European 
Website on Integration. 

(7)  European Commission (2022), Education and Training 

(4)  PAQ research (2022): The Voice of Ukrainians. 

Monitor, Country Report, Czechia.  

5 

 
 
                                                 
 
                                                 
and  improve  public  procurement  practices  in 
terms  of  quality-based  competition.  In  2022, 
42%  of  contracts  awarded  had  just  a  single 
bidder, the fourth worst in the EU, and around 
81% of contracts were awarded without using 
the quality-based criterion. 

firms’ 

competitiveness 

The numerous crises pose new challenges 
and 
for 
productivity.  The  Czech  economy  is  highly 
dependent on manufacturing and exports, and 
its energy-intensive and automotive industries 
have  been  affected  by  higher  energy  prices 
and  supply  chain  bottlenecks  in  key  raw 
materials.  Overall  labour  productivity  remains 
subdued  in  Czechia,  reaching  85%  per  person 
in  purchasing  power  standards  of  the  EU 
average  in  2021.  For  industry,  real  labour 
productivity  per  person  increased  by  4.1%  in 
2021,  below  the  EU  average  of  7%.  This 
indicates  further  potential  for  productivity 
growth. 
In  addition,  strengthening  weak 
science  business  links  and  with  it  improving 
the  transfer  of  technology  and  knowledge 
could 
industrial 
competitiveness. 

Czechia’s 

boost 

also 

capital  development, 
skills  and  human 
innovation  and  competitiveness.  The  share  of 
those aged 25-34 holding a tertiary degree is 
close  to  the  national  target  of  35%,  but 
remains below the EU average of 42% and the 
EU-level target of 45% by 2030. Furthermore, 
the dropout rate is also high as almost half of 
all studies are not completed. The employment 
rate of tertiary education graduates (86.7%) is 
only  slightly  above  that  of  upper  secondary 
education  graduates  (81.2%),  the  smallest 
difference  in  the  EU.  The  wage  premium  is 
also  small  (16%  vs  EU-22  +25%),  illustrating 
the  low  value  placed  on  qualifications  in  the 
Czech economy. 

is 

slow.  Higher 

Progress  in  boosting the  competitiveness 
and  labour  market  relevance  of  higher 
education 
education 
struggles to equip young people with the skills 
demanded by the labour market. For example, 
76% of Czech businesses report difficulties in 
finding ICT specialists, the highest share in the 
EU.  Higher  education  has  also  experienced 
lower budgetary resources in the past decade. 
Although  the  last  systemic  reform  of  higher 
education  took  place  in  2016,  further  efforts 
are  needed  to  increase  the  labour  market 
relevance  and  innovation  potential  of  higher 
education and support the transition towards a 
knowledge-driven economy.  

Czechia  is  an  open  economy  and  well-
integrated into the single market. Its trade 
integration  in  the  EU  is  one  of  the  highest, 
supported  by  trade  in  goods  (the  fourth 
highest  as  a  percentage  of  GDP  in  the  EU). 
While  Czechia’s  growth  engine,  industry  is 
vulnerable  to  external  shocks  due  to  its  high 
level  of  integration  in  global  value  chains. 
Regulatory  restrictiveness  in  Czechia  is  higher 
than  the  EU  average  for  the  regulated 
professions  of  architect,  civil  engineer,  lawyer 
and  estate  agent.  Other  pressing  concerns 
related to Czechia’s business environment are 
the  administrative  and  regulatory  burden 
late 
together  with  access  to  skills  and 
payments, which represent a major obstacle to 
investment.  Late  payments 
(around  30% 
higher  compared  to  the  EU  average)  continue 
to  be  a  major  impediment  to  SME  resilience 
and  growth.  There  is  still  scope  to  boost 
competition on the public procurement market 

6 

 
 
Box 1: 

Energy policy response in Czechia 

Czechia  has  adopted  several  support  measures  to  cushion  the  impact  of  energy  price 
inflation  on  households  and  businesses.  The  Commission’s  2023  Spring  Forecast 
projects the country’s gross budgetary costs to amount to 1.8% of GDP in 2023. Most 
measures do not preserve the price signal and appear to be untargeted. 

Notable measures include price caps on electricity and gas, support for energy-intensive 
companies,  partial  compensation  for  household  energy  bills  for  October-December 
2022,  support  for  heating  plants  to  reduce  household  heating  prices  or  temporarily 
covering the surcharges for renewables from the state budget. The largest measure is a 
cap  on  electricity  (EUR  200  per  MWh  excluding  VAT)  and  on  gas  prices  (EUR  100  per 
MWh excluding VAT) from January 2023 onwards for households, SMEs as well as for 
large companies. The measure is in place until the end of 2023.   

Czechia  applies  national  measures  in  implementation  of  the  Council  Regulation  (EU) 
2022/1854.  These  include  a  levy  on  the  energy  revenues  above  certain  price  levels 
differentiated  by  sources (8)  and  a  levy  on  surplus  profits  of  companies  in the energy 
sector (9). The levy applies to companies in the crude petroleum, natural gas, coal and 
refinery sectors, but also to certain companies in the financial sector. 

To  improve  the  security  of  energy  supply,  Czechia  reached  its  gas  storage  level 
obligations  and  activated  the  ‘use  it  or  lose  it’  mechanism  to  withdraw  the  Gazprom 
storage  capacity  at  the  Damborice  site  under  the  state's  special  auction  measures.  It 
took emergency heating measures to cut gas demand and issued a handbook to guide 
the Czech state institutions towards achieving energy savings, contributing to a 17.7% 
reduction  in  natural  gas  consumption  from  August  2022  to  January  2023.  Moreover, 
Czechia  is  updating  its  electricity  load  distribution  (loadshedding)  rules,  has  sought  to 
diversify  its  fossil  fuel  imports,  has  launched  an  energy  savings  campaign,  and  has 
started revising the legislative framework to incentivise the uptake of renewable energy 
sources.  

(8)  For example EUR 180/MWh for wind, solar and 

geothermal, EUR 70/MWh for nuclear or EUR 170/MWh 
for lignite. 

(9)  Member States can keep or introduce national 
measures that are equivalent to the solidarity 
contribution set in Council Regulation (EU) 2022/1854 
provided they are compatible with the objectives of the 
Regulation and generate higher or comparable 
proceeds. These measures must also cover the 
extraordinary and unexpected profits of businesses 
active in the crude petroleum, natural gas, coal and 
refinery sectors. 

7 

 
 
                                                 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

Czechia’s  recovery  and  resilience  plan 
(RRP) aims to address the key challenges 
related  to  digital  transformation,  the 
green  transition,  the  education  and 
labour  market,  public  administration, 
research  and  innovation  and  healthcare. 
It consists of 37 reforms and 85 investments 
that are supported by more than EUR 7 billion 
in  grants,  representing  over  3%  of  2021  GDP 
(see  Annex  3  for  more  details)  to  help  the 
country  tackle  pressing  social  and  economic 
challenges.  

The implementation of Czechia’s recovery 
and resilience plan is underway, however 
with risk of some delays. Czechia submitted 
one  payment  request,  corresponding  to  37 
milestones  and  targets 
in  the  plan  and 
in  an  overall  disbursement  of 
resulting 
EUR 928  million.  Further 
improvement  to 
administrative  capacity  and  prioritisation  of 
the  key  reforms  and  investments  are  needed 
for timely implementation of the plan. Czechia 
has  not  yet  submitted  a  proposal  for  the 
amendment  of  its  plan,  nor  a  REPowerEU 
chapter,  but  discussions  between  Czechia  and 
the  Commission  are  ongoing.  In  addition, 
Czechia  also  indicated  its  intention  to  submit 
an additional loan request. The following, more 
detailed 
being 
implemented under the RRP in no way implies 
formal  Commission  approval  or  rejection  of 
any payment requests.  

of  measures 

review 

Czechia’s  green  transition  is  in  progress, 
with 42% of its total allocation measures 
devoted 
to  climate  objectives.  The 
government  has  adopted  the  Circular  Czechia 
2040  strategy,  which  sets  the  goals  and 
principles  crucial  to  Czechia’s  transition  to  a 
circular  economy.  Projects  to  make  public 
buildings  and  lightning  systems  more  energy 
efficient  and  electrify 
railways  are  well 
line  with  Czechia’s  country 
in 
advanced, 
specific recommendation of 2022 (CSR 4). On 
disaster  prevention,  achievements  include  the 

8 

retention 

further  steps 

of  watercourses 

completion  of  450  projects  to  increase  the 
and 
water 
reservoirs.  In  the  coming  years,  Czechia  will 
take 
the  green 
transition,  for  example  by  reforming  waste 
railway 
management,  modernising  further 
lines  and  installing  renewable  energy  sources 
for households. 

towards 

tools 

is  moving  forward  with  the 
Czechia 
digital transformation of its economy and 
of  public  administration  in  line  with  the 
recommendation  of  2020  (CSR  3).  The 
Central  European  Digital  Media  Observatory 
was launched, which will provide  analysis and 
the  spread  of 
digital 
to  combat 
improve  media 
disinformation  online  and 
literacy.  Progress  has  also  been  made  in  the 
public  sector  in  digitalising  the  permitting 
procedure  in  the  construction  sector.  The 
reform will simplify and accelerate the process 
of 
issuing  building  permits.  Moreover,  a 
framework  of  rules  and  standards  has  been 
adopted for developing and providing e-health 
and  telemedicine  services.  Czechia’s  digital 
transformation  will  continue  in  the  next  few 
years 
public 
administration  services  available  to  citizens, 
completing a use case for European Blockchain 
Services 
Infrastructure  and  deploying  the 
demonstrative  application  of  5G  technology 
for cities and industrial areas. 

by  making 

digital 

new 

New  measures  support  Czechia’s  smart, 
sustainable  and  inclusive  growth.  The 
introduction  of  new  financial  instruments  by 
the  Czech  National  Development  Bank 
addresses  the  challenges  facing  small  and 
accessing 
enterprises 
medium-sized 
the 
in 
sustainable 
recommendation  of  2020  (CSR  3).  A  new 
investment  will  support  five  R&D  consortia  in 
medical  and  related  social  sciences.  At  the 
same  time,  the  newly  established  National 
Coordination  Group  for  Support  for  Industrial 
Research  will  harmonise  the  industrial  R&D 

line  with 

financing, 

in 

 
 
policies 

line  with 

the 
in 
support 
recommendations of 2019 and 2020 (CSR 3). 
Further  support  to  businesses  that  implement 
circular  solutions  and  water  saving  measures 
in  the  industry  will  stimulate  smart  and 
sustainable growth in Czechia. 

Czechia’s  social  and  territorial  cohesion 
is  supported  by  achievements  financed 
from the Recovery and Resilience Facility. 
These  include  the  completion  of  45  level 
crossings  with 
increased  protection,  25 
kilometres  of  cycle  paths,  sidewalks  and 
barrier-free  routes,  and  3  modernised  railway 
bridges  and  tunnels.  On  labour  market  policy, 
the 
tripartite  Re-skilling  and  Upskilling 
Committee will coordinate the development of 
lifelong 
in  Czechia. 
These  will  be  accompanied  by  a  reform  of 
childcare  financing  and  by  the  creation  of  a 
reskilling  and 
public  database, 
upskilling courses to support lifelong learning. 

learning  programmes 

including 

resilience.  Eight  of 

The  RRP  delivers  on  strengthening 
Czechia’s  health,  economic,  social  and 
institutional 
the 
milestones  achieved  constitute  improvements 
in  the  control  and  audit  environment,  in  line 
with the recommendation of 2019 (CSR 1). In 
particular,  Czechia  took  action  to  safeguard 
the  financial  interests  of  the  EU  during  the 
implementation of the Recovery and Resilience 
Facility. The parliament adopted among others 
an  amendment  to  the  law  on  the  registration 
of  beneficial  owners  so  that  it  is  in  line  with 
the  EU  Anti-Money  Laundering  Directive. 
Another  amendment  was  made  to  the  Courts 
and  Judges  Act  to  strengthen  institutional 
resilience.  This  improves  the  transparent  and 
uniform  system  for  recruiting  and  selecting 
Institutional 
court  officials. 
judges  and 

resilience will be further supported this year by 
systematically  collecting  and  analysing  data 
on corruption in the country. 

in 

by 

completing 

Czechia  has  also  improved  its  health 
resilience 
important 
reforms  and  investments  related  to  its 
healthcare  system, 
line  with  the 
recommendations  of  2019  (CSR  1)  and 
2020 (CSR 1), as well as Europe’s Beating 
Cancer  Plan.  For  instance,  the  new  2022-
2030  National  Oncological  Programme  sets 
screening 
scope  and  quality 
out 
programmes  for  cancer  prevention.  Health 
resilience  will  be  further  strengthened  in  the 
coming years by reforming long-term care and 
by  projects  to  improve  the  education  of 
healthcare professionals. 

the 

the 

digital 

literacy 

Investments  and  reforms  support  the 
future  of  the  next  generations.  The 
curricula  of  primary  schools,  lower  secondary 
schools  and  gymnázia  have  been  revised  to 
and 
strengthen 
computational  thinking  skills  of  pupils,  in  line 
with the recommendations of 2019 and 2020 
(CSR 2). In addition, more than 70 000 digital 
devices  were  purchased  by  schools  for 
distance  learning  in  primary  and  secondary 
schools.  In  the  tertiary  education  system,  a 
new call was launched that will support Czech 
universities in their transformation to adapt to 
new  forms  of  learning  and  changing  labour 
market  needs.  Policies  for  future  generations 
will  continue 
to  make  a  difference  by 
to 
equipping 
implement the new curricula and by starting to 
develop new university facilities. 

schools  with 

IT  devices 

Box 2:  Key deliverables under the RRP in 2023-2024 

  Reforms of waste management and mobility plans  

  Long-term care reform 

  Investments in modernising district heating systems and railway transport 

  Investment in digital school equipment to implement the new IT curricula and in digital 

services offered to citizens 

9 

 
 
 
FURTHER PRIORITIES AHEAD 

finances, 

Beyond  the  challenges  tackled  in  its 
recovery  and  resilience  plan,  Czechia 
faces  additional  ones.  Policy  attention  and 
further  progress  are  required  in  particular 
related  to  the  long-term  sustainability  of 
housing  market, 
the 
public 
administrative  capacity  as  well  as  improving 
green  and  digital  skills.  Addressing  these 
challenges  will  also  help  make 
further 
progress in achieving the SDGs, where Czechia 
currently  has  room  for  further  improvement, 
namely  SDG  4  (Quality  education),  SDG  9 
(Industry,  innovation  and  infrastructure)  and 
SDG 13 (Climate action). 

Long-term sustainability of public 
finances, including pension and 
healthcare systems 

While the public debt level is still low, the 
structural  deficit  and  medium-term  risks 
increased  in  the  last  3  years.  Capitalising 
on  a  history  of  fiscal  discipline,  Czechia  still 
has  a  low  public  debt-to-GDP  ratio  compared 
to  other  EU  countries  (44.1%  of  GDP in  2022 
compared  to  the  EU  average  of  85.3%). 
However,  the  past  3  years  have  brought  a 
significant  increase  in  the  headline  budget 
deficit  compared  to  pre-pandemic  levels.  The 
include  a  mixture  of 
reasons 
for 
temporary  COVID-19 
support  measures, 
measures  to  address  the  cost  of  living  crisis, 
and  permanent  measures  that  increased  the 
structural deficit (such as a cut in the personal 
income tax not offset by other revenues). Debt 
sustainability  challenges  are  expected 
to 
intensify  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 from 33% in 

this 

2019  to  a  peak  of  59.2%  by  2060  according 
to the Commission 2021 Ageing Report (10). 

Pension  spending  is  expected  to  rise 
especially after 2030, but challenges also 
remain in the short term. While the pension 
age  is  still  increasing  until  2030,  in  the 
absence  of  any  future  change,  public  pension 
spending is expected to increase from 8.8% of 
GDP  in  2030  to  11.8%  in  2060  according  to 
the  2021  Ageing  Report.  However,  challenges 
also  remain  in  the  short  term.  The  automatic 
line  with  high 
indexation  of  pensions 
inflation  surpassed  the  growth  in  pension 
contributions as salaries have grown less than 
inflation,  leading  to  a  deficit  in  the  pension 
system.  

in 

Measures  are  needed  to  address  fiscal 
sustainability.  The  Czech  government  aims 
to present a comprehensive plan for improving 
fiscal  sustainability  and  a  pension  reform  in 
2023. It has also approved reductions in social 
security  contributions  to  promote  part-time 
work for specific groups such as older people, 
young  parents,  students  and  people  with 
disabilities  with  the  aim  to  increase  the 
participation  rates  of  these  groups  in  the 
labour  market.  Other  possible  measures  to 
address  the  sustainability  of  the  system 
include  adjusting  the  retirement  age  in  line 
with 
life  expectancy, 
incentivising the increase in participation rates 
of people over 60 (where these are below the 
EU  average),  adjusting  pension 
indexation 
rates  to  take  into  consideration  the  fiscal 
sustainability  of  the  pension  system  or  taking 
measures  to 
labour  supply. 
increase  the 
Measures to increase  fiscal  revenues  are  also 
an option, as the overall tax revenue is low in 
relation  to  Czechia’s  GDP  (35.9%  of  GDP 
compared  to  40.6%  EU  average).  This  can 

increase 

the 

in 

(10)  European Commission, 2021, https://economy-

finance.ec.europa.eu/publications/2021-ageing-report-
economic-and-budgetary-projections-eu-member-
states-2019-2070_en 

10 

 
 
 
                                                 
less 
include  making  more  use  of  taxes 
detrimental  to  growth  like  recurrent  property 
taxation,  capital  taxes  other  than  corporate 
income tax or environmental taxes (see Annex 
19). Improving tax compliance could also help 
strengthen  tax  revenues  as  a  VAT  gap  at 
11.9% (as of 2020), is still above the EU-wide 
gap of 9.1%. 

and 

Despite 

long-term 

Healthcare 
care 
sustainability  also  represent  a  challenge 
due  to  population  ageing  and  system 
significant 
inefficiency. 
improvements,  Czechia  still  performs  below 
the  EU  average  in  many  areas  related  to 
health  status  and  healthcare  outcomes  (see 
Annex  16).  Czechia  remains  in  the  lower  half 
of EU countries on life expectancy at birth, and 
treatable  mortality  is  higher  than  the  EU 
average.  Large  disparities  remain  in  health 
in  socio-
outcomes  across 
regions  and 
economic  status.  The  share  of 
in-patient 
health  services  and  long-term  in-patient  care 
in  total  health  services  provided  is  still  high 
compared  to  the  EU  average.  There  is  scope 
for  improving  home  care  and  community-
based care as well as strengthening the role of 
doctors  as  gatekeepers.  With  an  ageing 
population,  it  is  expected  that  health  needs 
related  to  chronic  diseases  will  also  increase. 
Public  expenditure  on  healthcare  is  projected 
to increase by 0.9 percentage points of GDP by 
2070,  adding  to  the  costs  associated  with  an 
ageing population. 

Strengthening the capacity of 
public administration and 
efficiency of public procurement 

Over the next decade, Czechia is expected 
to  absorb  around  EUR  40  billion  of  EU 
the  key 
funds.  This  will  help  address 
development  challenges  outlined 
the 
country-specific  recommendations  addressed 
to  Czechia.  All  the  2021-2027  cohesion 
programmes 
2014-2020 
programming  period,  Czechia  has  progressed 
with  implementation,  and  no  loss  of  funds  is 
expected.  

adopted 

the 

in 

capacity 
prepare 

implementation 
to 
procedures 

On  the  implementation  of  EU  funds, 
specific  challenges 
remain  at  both 
national and regional level. The two largest 
funding  sources  (see  Annexes  3  and  4)  –  the 
Recovery  and  Resilience  Facility  and  cohesion 
policy  funds  (EUR  25.7  billion)  –  will  require 
and 
increased 
efficient 
and 
successfully  deliver  public  sector  investment 
projects. The two largest funding sources,  the 
RRF  (grants  of  EUR  7  billion  in  the  recovery 
and  resilience  plan  already  adopted,  with  a 
potential for further substantial increase (up to 
EUR  11  billion)  as  part  of  the  revision  of  the 
plan,  including  the  uptake  of  the  loans)  and 
cohesion  policy  funds  (summing  up  to  EUR 
25.7  billion),  will  require  increased  capacity 
and  efficient  procedures  to  prepare  and 
successfully 
sector 
investment projects (more details in Annexes 3 
and  4),  especially  if  investment  growth  is 
expected  to  be  the  main  driver  of  economic 
activity  also 
in  2022,  the 
in  2023.  As 
absorption  of  funds  still  faced  challenges  in 
the areas of digitalisation of the economy and 
public  administration  as  well  as  energy 
efficiency.  Sufficient  implementation  capacity 
is  needed  to  address  the  twin  transition  and 
successfully  use  the  opportunities  created  by 
the  European  Green  Deal  and  the  Digital 
Europe Programme.  

implement 

public 

and 

performance 

At  central  government 
level,  several 
layers  of  administrative  capacity  require 
further  attention.  Overall,  Czechia’s  public 
government 
sector 
effectiveness  has  increased  to  around  the 
average  in  the  EU-27  (see  Annex  13).  The 
country  approved  the  ‘Client-oriented  Public 
Administration  2030’  strategy  to  improve  the 
quality  of public services. In addition, the Civil 
Service  Act  was  amended  in  2022.  However, 
the 
is  a  general 
there 
performance of the civil service.  

lack  of  data 

There is a need for Czechia to improve its 
policymaking cycle. Greater emphasis put on 
evidence-informed  policymaking  and  strategic 
planning,  as  well  as  on  strengthening  inter-
ministerial  coordination  across  and  between 
tiers of government could improve the quality 
of  policy  making.  Specific 
skills  and 
to  be  strengthened, 
competences  need 

11 

 
 
particularly  in  the  field  of  green  and  digital 
projects.  Strategic  planning  would  need  to 
build  on  the  synergies  between  local  needs 
and  central  objectives,  as  well  as  on  the 
capacity  of  public 
increased  analytical 
administration.  

The  public  procurement  framework  is  a 
crucial  element  for  timely  and  efficient 
public  investment.  Czechia  is  below  the  EU 
average  of some performance indicators such 
as  the  proportion  of  contracts  awarded  to  a 
single  bidder. While  this  has  improved  over 
time, there is still scope for improvement.  

is 

to 

due 

rates 

getting  worse 

implementation.  Support 

Targeted  efforts  could  make  regions  and 
municipalities more efficient, including in 
EU  fund 
for 
municipalities,  cities  and  regions  with  low 
critical, 
investment  absorption 
otherwise there is a risk of the socio-economic 
situation 
the 
consequences of the COVID-19 pandemic and 
the Russian war of aggression against Ukraine. 
The  example  of 
region 
(Severozápad),  the  only  region  not  converging 
to  the  EU  average  GDP  (still  below  65%  in 
2020), shows that low absorption capacity is a 
contributing  factor  to  the  growing  disparities 
between the North-West and other regions. To 
this  end,  targeted  technical  assistance  could 
be  provided  to  municipalities  and  territorial 
partners in regions with the lowest absorption 
rates. 

the  North-West 

Housing market faces challenges 

Housing  supply  lags  behind  the  strong 
demand,  which  worsens  the  availability 
of housing and contributes to the growth 
incomes  have 
of  housing  prices.  While 
supported  house  price  rises,  lower  interest 
rates  have  also  played  a  significant  role  in 
increasing  demand  for  housing.  However,  the 
price pressures seem to be partially mitigated 
by  an  increase  in  residential  construction,  as 
well  as  a  rise  in  interest  rates  for  housing 
the  housing 
improvement  of 
loans.  The 
situation  requires  the  adoption  of  legislation 
on  social  and  affordable  housing  as  well  as 
higher 
adequate 

territorial 

planning, 

absorption  capacity  of  municipalities,  and 
investment in refurbishment of social housing. 
The  prevention  of  evictions  will  help  to  avoid 
homelessness. 

in 

for 

feeding 

the  demand 

affordability 

Housing 
Czechia 
continues  to  be  weak,  despite  lower 
demand  caused  by  increased  interest 
rates.  Comparing  house  price  increase  to 
income  shows  a  sharp  acceleration  compared 
to  a  decade  ago (11).  Acquiring  property  is 
difficult  especially  for  low  and  middle-income 
rental 
groups, 
property,  the  affordability  of  which  is  also 
declining.  According  to  the  OECD  housing 
survey (12), 
limited  mobilisation  of 
available  land  reserves  weighs  on  housing 
development  opportunities  at  local  level  in 
Czechia.  Municipal  rental  stock  is  very  limited 
and  there  are  still  no  incentives  for  rental  or 
cooperative housing, which would increase the 
supply  of  affordable  housing.  Moreover,  the 
integration of people fleeing from Ukraine and 
staying  in  Czechia  could  further  increase  the 
demand for housing.  

the 

Housing  affordability  is  more  acute  for 
low-income groups due to the absence of 
a  legal  framework  to  provide  systemic 
social  housing  support.  The  lack  of  a 
definition  of  roles  at  national  and  regional 
level  impedes  a  comprehensive  approach  to 
social  housing. The  proportion  of  social 
housing  out  of  the  total  stock  of  rental 
properties  is  0.4%  in  Czechia,  well  below  the 
EU  average  of  7-8% (13).  In  recent  years, 
investment  in  new  social  housing  has  relied 
mostly on EU funding. As a result, the number 
of  households  in  need  of  housing  is  currently 
estimated to be 35 000 to 62 000 (14).  

(11)  European Commission, 2023, https://economy-
finance.ec.europa.eu/system/files/2023-
04/ip197_en_1.pdf 

(12)  OECD, 2021, Housing Affordability in Cities in the Czech 
Republic, OECD Urban Studies, OECD Publishing, Paris, 
https://doi.org/10.1787/bcddcf4a-en. 

(13)  OECD, 2020, OECD Affordable Housing Database, 

OECD, Paris. 

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

12 

 
 
                                                 
instance, 

is  needed  to  ensure 
Broad  reform 
adequate  and  affordable  housing 
in 
Czechia.  As  part  of  the  reform  efforts, 
incentivising  the  availability  of  land  suitable 
for  building  homes  at  municipal  level,  and 
rebuilding  and  refurbishing  existing  housing 
units  can  have  positive  effects  on  housing 
supply  and  prices.  For 
recent 
estimates  show  that  reforms  that  incentivise 
the  renting  and  private  development  of 
housing  could  boost  utilisation  of  vacant 
properties, currently at 22% in rural areas and 
10%  in  urban  areas.  Effective  coordination 
between  different  public  bodies  would  be  key 
to  building  and  providing  affordable  and 
quality 
rental 
housing. Czechia’s  RRP  addresses  supply  of 
housing only partially with measures related to 
the new construction law and digitalisation of 
construction permits. 

including 

housing, 

Managing security of energy  
supply and stepping up 
diversification efforts  

Since the start of the Russian invasion of 
Ukraine,  Czechia  has  reduced  its  strong 
reliance  on  fossil  fuel 
imports  from 
Russia.  The  country  almost  fully  replaced  its 
Russian  gas  supplies  with  gas  imports  from 
Norway  and  overseas  liquefied  natural  gas 
(LNG)  imports.  Yet,  further  efforts  towards 
diversification are needed to ensure security of 
supply.  Energy  security  risks  remain  given  the 
uncertainties  in  global  LNG  demand,  weather 
increasing 
conditions  and 
reliance  on  natural  gas.  Fossil  fuels  remain  a 
key  component 
in  Czechia’s  energy  mix, 
reaching  69%  in  2020,  with  natural  gas 
accounting for 18%. More than 30% of Czech 
households  still  use  gas  for  heating  and 
another third relies on district heating, which is 
also  heavily  dependent  on  gas.  Oil  use 
currently  accounts  for  22%  of  the  Czech 
energy  mix.  Reducing  Czechia’s  reliance  on 
fossil  fuels  is  an  essential  part  of  ensuring 
security of supply. 

the  country’s 

Coal  and  nuclear  remain  important  for 
Czechia’s  energy  mix  for  electricity. 

13 

in  power 
the  share  of  coal 
However, 
generation  has  been  decreasing  in  recent 
years  (from  50.4% in  2016  to  41% in  2021). 
In the heating sector, there has been a gradual 
switch  from  coal  reliance  towards  the  use  of 
natural  gas,  although  this  still  makes  the 
energy  system  highly  reliant  on  fossil  fuels. 
The  Czech  government 
to 
creating conditions conducive to a coal phase-
out by 2033. Given the level of dependency on 
fossil  fuels,  including  Russian  oil,  Czechia  has 
been  exposed  to  a  high  risk  of  supply 
disruption  and  price  spikes,  with  major 
negative  effects  for  households  and  industry 
(see Annex 7). 

is  committed 

last  year, 

in  gas  and 
With  the  price  spikes 
electricity  costs 
improving 
energy  efficiency  and  rolling  out  new 
measures  have  become  a  major  priority 
in  Czechia  to  manage  supply  security.  In 
to  abolish 
response,  Czechia  was  quick 
subsidies  for  condensing  gas  boilers 
in 
households. Moreover, the New Green Savings 
Programme  has  succeeded  in  making  energy 
savings  in  residential  buildings  and  helping 
older  people  and 
low-income  households 
address  energy poverty.  Continuous  efforts  to 
reduce gas demand through energy efficiency 
actions  would  reduce  the  possibility  of  price 
spikes  and  limit  the  cost  of  gas  purchases. 
Finally,  while  energy  prices  have  decreased, 
uncertainty  remains  regarding  next  winter, 
which requires continued efforts to structurally 
reduce gas demand. 

Advancing the green transition 

Further  action  is  needed  to  improve 
energy  efficiency  in  both  the  residential 
and  industrial  sectors.  Challenges  remain 
linked  to  complex  administrative  procedures 
for accessing subsidies. This includes a lack of 
information  in  general  and  lack  of  a  skilled 
workforce  to  support  the  country’s  renovation 
wave 
and 
capabilities  for  the  green transition), including 
administrative 
additional 
measures  are  needed  to  increase  awareness 
on  energy  efficiency  projects  and  prepare  for 
them.  Around  8.7%  of  the  Czech  population 

staff.  Overall, 

objectives 

(enabling 

skills 

 
 
lives  in  energy  poverty.  Besides  the  financial 
support 
to  carry  out  energy  efficiency 
investments  for  the  most  vulnerable,  Czechia 
should also put in place a nationwide network 
of advisors on energy and climate measures to 
offer support to the most vulnerable. 

Further  work  is  needed  to  empower  energy 
communities  (‘LEX  RES  2’)  and  introduce  a 
one-stop  shop  for  renewables  to  ensure 
possibilities  for  grid  connections  and  grid 
expansion.  The  introduction  of  ‘go-to  areas’ 
would also help develop renewables. 

Labour  shortages  in  key  sectors  related 
to the green transition  have increased in 
recent years.  This  is  also  linked  to  a  lack  of 
relevant  skills  creating  bottlenecks  in  the 
transition  to  a  net-zero  economy.  In  2022, 
labour shortages were reported in Czechia for 
seven  occupations  that  require  specific  skills 
related  to  the  green  transition  (e.g.  plumbers 
pipefitters, 
electrical 
mechanics)  (15).  In  addition,  labour  shortages 
were 
reported  as  a  factor  constraining 
production in industry (for 23.6% of firms) and 
construction  (for  46.6%  of  firms).  Upskilling 
and reskilling for the green transition, including 
for  those  most  affected,  and  promoting 
inclusive  labour  markets  are  essential  policy 
levers  to  accelerate  the  transition  to  net-zero 
and ensure its fairness (see Annex 8). 

electricians 

and 

to 

has 

from 

deployment 

Renewables 
not 
penetration 
increased significantly, and further action 
is  needed  to  tackle  existing  regulatory 
challenges 
of 
the 
renewables.  The  development  of  renewable 
energy  sources  as  well  as  the  production  of 
electricity 
renewables  have  been 
stagnating. The regulatory framework and the 
lack of subsidy support have been identified as 
the main obstacles to renewables deployment. 
While  there 
is  considerable  potential  for 
updating  and  streamlining  administrative  and 
permitting procedures (see Annexes 7 and 12), 
there have been some improvements: Czechia 
has  amended  its  Energy  Act  (‘Lex  RES  1’)  to 
raise the limit for installing photovoltaic plants 
without  a  licence,  with  changes  also  made  to 
the  Construction  Act  to  facilitate  installation. 

(15)  Based on the European Labour Authority 2023 EURES 
Report on labour shortages and surpluses 2022, i.e. 
data submitted by the EURES National Coordination 
Offices. Skills and knowledge requirements are based 
on the European Skills Competences and Occupations 
(ESCO) taxonomy on skills for the green transition. 
Examples are analysed on the basis of the share of 
ESCO green skills in relevant sectors. Data is not 
comparable across countries and covers a wide variety 
of sectors. 

challenges 

Czechia needs to ensure a higher level of 
investment  in  grid  capacity,  especially  in 
distribution  grids,  to  accommodate  the 
uptake of renewables. Unlocking major new 
investments  to  upgrade  grid  capacity  and 
the 
addressing 
overbooking  of  available  capacities  will  be 
needed  to  rapidly  deploy  renewables  in  the 
future  Czech  energy  mix.  A  supportive 
regulatory environment could further boost the 
deployment  of  renewables  in  the  country  by 
encouraging grid expansion, the installation of 
small systems and smart metering. 

linked 

to 

The  deployment  of  renewables  and  clean 
technologies  is  essential  for  reducing 
high fossil fuel use in the industry sector. 
The  further  deployment  of  solar  power  plants 
and overall modernisation has the potential to 
contribute  to  greater  energy  efficiency  in  the 
industry  sector  (28%  of  2021  final  energy 
consumption).  Given  Czechia’s  dependence  on 
non-renewable  energy  sources  and  its  high 
level of industrialisation, the industry sector (in 
particular  the  automotive  sector)  is  expected 
to 
in 
implementing the green transition. 

considerable 

challenges 

face 

of 

up 

and 

speeding 

manufacturing 

the 
Simplifying 
permitting  procedure  are  key  actions  for 
the 
net-zero 
technologies  and  their  components,  as 
well  as  facilitating  the  market  access  of 
these products. Investments in the industrial 
transition 
in 
clean 
capacities 
manufacturing 
technologies, in research and innovation and in 
skills  are  crucial  for  strengthening  industrial 
competitiveness, 
the 
in 
as 
Commission’s Green Deal Industrial Plan.  

towards  net-zero  emissions, 

laid 

out 

for 

Investments 
in  renewable  gases  can 
increase  energy  supply  security  and 
ensure  a  competitive  economy  with  new 
business  and  economic  opportunities. 
Czechia  has  still  not  defined  hydrogen  as  an 

14 

 
                                                 
energy  carrier  in  its  national  legislation,  and 
has  therefore  still  not  recognised  its  use  for 
energy  purposes.  Moreover,  support 
for 
developing biomethane could also help reduce 
dependence  on  natural  gas.  There  is  currently 
only  one  operating  biomethane  station  in 
Czechia,  and  the  transformation  of  biogas 
stations  to  biomethane  is  falling  short  of 
initiative 
expectations. 
provides a unique opportunity to scale up and 
support  energy-related  measures  in  order  to 
further  promote  Czechia’s  decarbonisation 
objectives. 

REPowerEU 

The 

and 

vehicles 

Investment  in  sustainable  mobility  needs 
to  be  accelerated,  particularly  in  zero-
required 
emission 
infrastructure, as well as digitalising and 
electrifying  rail.  The  deployment  of  zero-
emission  road  mobility  has  been  very  modest 
in  Czechia  to  date,  with  the  share  of  new 
electric vehicle registrations reaching 3.8% (16). 
The  expected 
zero-emission 
roll-out  of 
vehicles  such  as  trucks  will  require  the 
deployment  of  dedicated 
charging  and 
refuelling infrastructure in the coming years. A 
revision  of  the  National  Action  Plan  for  Clean 
these  outstanding 
Mobility  could 
challenges.  

target 

protection 

The  transition  towards  a  green  economy 
needs  to  be  coupled  with  sufficient 
environmental 
ambitions. 
Czechia  would  benefit  from  investing  more  in 
tackling  environmental  protection  and  climate 
adaptation  challenges (17).  Between  2014  and 
2020,  environmental 
in 
Czechia were estimated to be at least EUR 4.4 
billion,  while  investment  stood  at  around  EUR 
2.9  billion,  leaving  a  gap  of  at  least  EUR  1.5 
billion  per  year (18).  The  gap  in  investments  is 
further exacerbated by climate change, putting 
the 
pressure 
agricultural sector and carbon sinks. 

on  water  management, 

investment  needs 

(16)  European Alternative Fuels Observatory (europa.eu) 

(17)  Environmental objectives include pollution prevention 

and control, water management and industries, circular 
economy and waste, biodiversity and ecosystems 
(Environmental Implementation Review 2022 – country 
report Czechia and factsheet).  

(18)  When also accounting for needs estimated at EU level 

only (e.g. water protection, higher circularity, biodiversity 
strategy).  

15 

 
                                                 
 
KEY FINDINGS 

Czechia’s  RRP 
includes  measures  to 
address a  series  of  structural challenges 
through:  

  facilitating 

the  digital 

transition  by 
digitalising  public  administration  and 
businesses,  deploying  digital  technologies 
and supporting digital skills education; 

  advancing 

the 

transition 

by 
green 
renovating  buildings  and  making  them 
more energy efficient, incentivising the use 
in 
of  sustainable 
cleaner,  more  efficient  energy  sources  and 
recycling  infrastructure,  and  by  supporting 
biodiversity; 

transport, 

investing 

  addressing social challenges by investing in 
healthcare 
care 
infrastructure and improving the excellence 
of research in medical sciences;  

long-term 

and 

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 system 
and the healthcare system;  

  strengthening 

the  capacity  of  public 
administration, both at central and regional 
level,  and 
the  efficiency  of  public 
procurement,  especially  in  the  context  of 
implementing the RRP and cohesion policy; 

increased 

  accelerating  the  decarbonisation  of 

its 
reducing  gas  demand 
economy  and 
in 
investment 
through 
renewables  and  energy  efficiency,  coupled 
with an improved regulatory and permitting 
framework  for  new  renewable installations 
and upgrade of grid infrastructure;  

  addressing  labour  market  challenges  by 
implementing  new  schooling  curricula, 
promoting  adult  learning  and  promoting 
female 
force  participation  by 
extending childcare facilities’ capacity. 

labour 

  strengthening 

institutional  resilience  by 

improving its anti-corruption framework;  

  reducing  fossil  fuel  dependence  by  making 
investments and reforms that facilitate the 
uptake of renewable energy, expanding grid 
capacity,  increasing  energy  savings  and 
supporting 
and 
energy 
investments 
technologies 
in  net-zero 
manufacturing,  including  by  simplification 
and  speeding  up  of  permitting  procedures 
for net-zero manufacturing projects; 

efficiency, 

  boosting 

the 

capacity  of 
innovation 
domestic  businesses,  strengthening  the 
connection  with  the  public  research  sector 
and improving access to finance for SMEs;  

  increasing 
housing, 
overarching 
framework;  

the 

supply  of  affordable 
including  by  establishing  an 
legislative 
and 

policy 

  having  already  implemented  reforms  and 
investments  that  address  part  of  the 
identified 
also 
maintaining efforts towards completing the 
whole recovery plan.  

challenges, 

while 

  supporting growth in labour productivity by 
addressing skills mismatches and investing 
in  green  and  digital  skills,  especially in  the 
regions affected by the green transition;  

  strengthening 

by 
social 
addressing regional  disparities in access to 
social services and essential infrastructure. 

inclusion 

Czechia  should  accelerate  the  implementation 
of  its  RRP  and  swiftly  finalise  the  REPowerEU 
chapter,  with  a  view  to  rapidly  initiating  its 
implementation. 

16 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

A22.  Macroeconomic imbalance procedure assessment matrix 

19 

22 

22 

24 

27 

29 

31 

32 

32 

37 

42 

44 

44 

46 

49 

51 

55 

57 

57 

59 

61 

63 

65 

65 

67 

69 

70 

73 

 
 
 
LIST OF TABLES 

A2.1. 
Summary table on 2019-2022 CSRs 
A3.1. 
Key elements of Czechia’s RRP 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key Energy Indicators 
A8.1. 
Key indicators for a fair transition in Czechia 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Situation of Czechia on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework. 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level in Czechia 
A18.1.  Financial soundness indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Czechia 
A21.2.  Heat map of fiscal sustainability risks - Czechia 
A22.1.  Assessment of macroecnomic imbalances matrix 

LIST OF GRAPHS 

Progress towards the SDGs in Czechia in the last 5 years 
Czechia’s progress on the 2019-2022 CSRs (2023 European Semester) 
Disbursements per pillar 
Total grants disbursed under the RRF 
Fulfilment status of milestones and targets 
Cohesion policy funds 2021-2027 in Czechia: budget by fund 
Synergies between cohesion policy funds and the RRF with its six pillars in Czechia 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Czechia 
Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
Energy mix (top) and electricity mix (bottom), 2021 
Thematic – environmental investment needs and current investment, p.a. 2014-2020 
Underground gas storage levels in Czechia 
Gas Consumption per sector, 2021 
Gas consumption per industrial sector, 2021 (% of total gas consumption in industry) 
Czechia’s retail energy prices for industry (top) and households (bottom) 
Public R&I investment in Energy Union R&I priorities 
Fair transition challenges in Czechia 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
Trend in material use 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.2. 
A3.1. 
A3.3. 
A4.1. 
A4.2. 
A4.3. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A7.4. 
A7.5. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  New graduates in science and engineering per thousand population aged 25-34 in 2020 
A12.1.  Labour productivity per person (in PPS and in % of the EU) 
A12.2.  Total factor productivity 
A12.3.  Business environment and productivity drivers 
A13.1.  a) Public administration: share of men and women in senior positions, b) Higher education attainment, c) Adult learning 
A15.1. 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2019-2070 
A17.1.  GDP per capita (2010) and GDP per capita growth (2011-2020) 
A19.1.  Tax revenue from different tax types, % of total tax revenue 
A19.2.  Tax wedge for single and second earners, % of total labour costs, 2022 

Isolation index of disadvantaged students and low-achieving students, PISA 2018 

20 

25 
27 
31 
32 
37 
42 
45 
46 
50 
51 
55 
58 
59 
61 
63 
65 
67 
69 
71 
72 
73 

23 
24 
27 
27 
28 
29 
29 
30 
32 
33 
34 
37 
38 
38 
39 
40 
42 
43 
44 
44 
50 
51 
51 
52 
56 
59 
61 
61 
63 
68 
68 

 
 
 
LIST OF MAPS 

A17.1.  Change in GDP per capita index in Czech NUTS 2 regions (2010-2020) 

63 

21 

 
 
 
 
CROSS-CUTTING INDICATORS 
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  and  the 
environmental crisis, 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  the  SDGs  in  an 
EU context.  

While Czechia has improved on almost all of 
SDGs related to environmental sustainability, 
it  is  lagging  behind  the  EU  average  on  SDG 
13  (Climate  action).  Another  worrying  trend  is 
that Czechia’s net greenhouse gas emissions keep 

increasing (SDG 13; from 11.9 tonnes per capita in 
2016 to 12.1 tonnes in 2021), in stark contrast to 
the  decrease  in  emissions  in  the  EU  on  average 
(from 8.2 tonnes per capita in 2016 to 7.4 tonnes 
in  2021).  Czechia’s  negative  trend  towards  rising 
pollution  is  further  reflected  in  the  indicators  on 
the  material  footprint  (SDG  12;  from  16.6  tonnes 
per  inhabitant  in  2016  to  15.6  tonnes  in  2020) 
and  generation  of  waste  (SDG  12;  from  2.402  kg 
per  capita  in  2016  to  3.598  kg  in  2020).  On  a 
more  positive  note,  the  country  is  taking  positive 
steps  to  decarbonise  its  energy  mix  by  increasing 
its share of renewable energy (SDG 7; from 14.9% 
in 2016 to 17.7% in 2021).  

Czechia  continues  to  improve  and  performs 
very  well  on  a  number  of  SDGs  related  to 
fairness  (SDGs  1  and  10),  while  it  needs  to 
catch up on some other SDGs (SDGs 3, 4, 7), 
above all on SDG 5 (Gender equality). Czechia 
performs  particularly  well  on  SDG  1  (No  poverty) 
and  SDG  10  (Reduced  inequalities),  with  both 

Graph A1.1: Progress towards the SDGs in Czechia in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators – Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all indicators for the specific goal 
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is 
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values, as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country.  
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

22 

 
 
 
 
 
 
significantly above the EU average (SDG 1: 64.3% 
and  SDG  10:  71.5%).  Czechia’s  positive  stance  on 
reducing poverty (SDG 1) is reflected in a number 
of  indicators  such  as  people  at  risk  of  poverty  or 
social  exclusion,  the  severe  material  and  social 
deprivation  rate,  or  the  in  work  at-risk-of-poverty 
rate,  all  of  which  significantly  outperform  the  EU 
average. Czechia’s share of the population unable 
to  keep  their  homes  adequately  warm  (SDG  7; 
from  3.8%  of  the  population  in  2016  to  2.2%  in 
2021) keeps decreasing, which is another positive 
sign.  However, 
for 
improvement,  mainly  on  SDG  5  (Gender  equality). 
On  the  positive  side,  there  have  already  been 
some  positive  trends in  closing  the  gender  gap  in 
tertiary  educational  attainment  and  the  gender 
pay  gap  in  unadjusted  form  (from  21.5%  of 
average gross hourly earnings of men in 2016 to 
15.0% in 2021). 

some 

room 

there 

is 

Czechia  performs  particularly  well  on  SDG  8 
(Decent  work  and 
economic  growth), 
although  it  still  needs  to  catch  up  with  the 
EU  average 
in  other  SDGs  related  to 
productivity  (SDGs  4  and  9).  Czechia’s  long-
term unemployment rate (SDG 8) continues to fall 
(from  1.7%  of  the  active  population  in  2016  to 
0.6% in 2022), well below the EU average (2.4% in 
2022).  Czechia  also  recorded  a  positive  trend  in 
the share of households with a high-speed internet 
connection  (SDG  9;  from  21%  of  households  in 
2016  to  52.5%  in  2021),  gradually  catching  up 
with  the  EU  average  (70.2%  of  households  in 
2021).  However,  there  is  still  some  room  for 
improvement  in  the  indicators  related  to  tertiary 
educational attainment (SDG 9; 34.9% in 2021, EU 
average 41.2% in 2021).  

financial 

resources 

Czechia  continues  to  improve  on  all  SDGs 
related  to  macroeconomic  stability  (SDGs  8, 
16,  17),  but  still  needs  to  catch  up  with  the 
EU average on certain aspects (SDGs 16 and 
17).  The  Czech  government  is  encouraged  to 
in  general 
invest  more 
government  total  expenditure  on  law  courts  (SDG 
16;  EUR  67.9  per  capita  in  2021,  against  the  EU 
average  of  EUR  107.0  in  2021).  The  country’s 
Corruption Perceptions Index score (SDG 16) of 56 
in 2022 is also relatively high compared to the EU 
average  of 66,  on  a  scale  from  0  (highly  corrupt) 
to  100  (very  clean).  Czechia  maintains  very 
positive  macroeconomic 
reflected 
mainly in low general government gross debt (SDG 
17;  44.1%  in  2022),  which  is  significantly  below 
the  EU  average  (84%  in  2022).  Czechia  could  do 

standards, 

more 
in  particular  on  official  development 
assistance  (SDG  17;  0.13%  of  gross  national 
income, EU average 0.50% in 2021). 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

23 

 
 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Czechia’s progress on the 2019-2022 
CSRs (2023 European Semester) 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (19) 
addressed to Czechia as part of the European 
Semester.  These  recommendations  concern  a 
wide  range  of  policy  areas  that  are  related  to  12 
of  the  17  Sustainable  Development  Goals  (see 
Annexes  1  and  3). The  assessment  considers  the 
policy action taken by Czechia to date (20) and the 
commitments  in  its  recovery  and  resilience  plan 
(RRP) (21).  At  this  stage  of  RRP  implementation, 
36%  of  the  CSRs  focusing  on  structural  issues 
from  2019-2022  have  recorded  at  least  ‘some 
progress’,  while  64%  recorded  ‘limited  progress’ 
(see  Graph  A2.1).  As  the  RRP  is  implemented 
further,  considerable  progress 
in  addressing 
structural CSRs is expected in the years to come. 

Source: European Commission. 

(19)  2022 CSRs: EUR-Lex - 32022H0901(03) - EN - EUR-Lex 

(europa.eu) 
2021 CSRs: EUR-Lex - 32021H0729(03) - EN - EUR-Lex 
(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(03) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(03) - EN - EUR-Lex 
(europa.eu) 

(20)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(21)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

24 

Limited progress64%Some progress27%Substantial progress9% 
 
                                                 
             
 
 
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

25 

Table 2.1: Summary table on 2019-2022 CSRsCzechiaAssessment in May 2023*RRP coverage of CSRs until 2026**Revelant SDGs2019 CSR 1Limited ProgressImprove long-term fiscal sustainability of the pension and health-care systems. Limited ProgressSDG 3, 8, 16Adopt pending anti-corruption measures.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023, 2024 and 2026. SDG 162019 CSR 2Some ProgressFoster the employment of women with young children, including by improving access to affordable childcare, and of disadvantaged groups. Limited ProgressRelevant RRP measures planned as of 2022, 2023, 2024 and 2025. SDG 4, 5, 8, 10Increase 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 being implemented as of 2020, 2022 and planned as of 2025.SDG 4, 8, 102019 CSR 3Some ProgressFocus investment-related economic policy on transport, notably on its sustainabilitySome ProgressRelevant RRP measures being implemented as of 2022 and 2025.SDG 10, 11, digital infrastructureSome ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2025. SDG 9, 10, 11, and low carbon and energy transition, including energy efficiency , taking into account regional disparities. Limited ProgressRelevant measures being implemented as of 2021, 2022 and planned as of 2024 and 2026. SDG 7, 9, 10, 11, 13Reduce the administrative burden on investment Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023 and 2026.SDG 8, 9and support more quality-based competition in public procurement. Limited ProgressSDG 9Remove the barriers hampering the development of a fully functioning innovation ecosystem.Limited ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2025.SDG 92020 CSR 1Some ProgressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreNot applicableSDG 8, 16Ensuretheresilienceofthehealthsystem,strengthentheavailabilityofhealthworkers,primarycareandtheintegrationofcare,anddeployment of e-health services.Some ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2024.SDG 32020 CSR 2Some ProgressSupport employment through active labour market policies, Some ProgressRelevant RRP measures being implemented as for 2022 and planned as of 2025.SDG 8the provision of skills, including digital skills, and access to digital learning.Limited ProgressRelevant RRP measures being implemented as of 2020, 2021 and planned as of 2024 and 2025.SDG 42020 CSR 3Some ProgressSupport small and medium-sized enterprises by making greater use of financial instruments to ensure liquidity support, Limited ProgressRelevant RRP measures being implemented as of 2022.SDG 8, 9reducing the administrative burden and improving e-government. Some ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2023. SDG 8, 9, 16Front-load mature public investment projects andSome ProgressSDG 8, 16 promote private investment to foster the economic recovery.Limited ProgressRelevant RRP measures planned as of 2023.SDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonhigh-capacity digital infrastructure and technologies, Limited ProgressRelevant RRP measures being implemented as of 2021, 2022 and planned as of 2025. SDG 9clean and efficient production and use of energy,Limited ProgressRelevant measures being implemented as of 2021, 2022 and planned as of 2024 and 2026. SDG 7, 9, 13andsustainabletransportinfrastructure,includinginthecoalregions.Limited ProgressRelevant RRP measures being implemented as of 2022 and 2025. SDG 10, 11Ensureaccesstofinanceforinnovativefirmsandimprovepublic-private cooperation in research and development.Limited ProgressRelevant RRP measures being implemented as of 2022 and planned as of 2025.SDG 8, 92021 CSR 1Some ProgressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Substantial ProgressNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Some ProgressNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition.Substantial ProgressNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Limited ProgressNot applicableSDG 8, 16 
 
 
 
  
 
Table (continued) 

Note:            
* See footnote (20). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission. 
Source: European Commission. 

26 

2022 CSR 1Some ProgressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtothe evolving situation.Substantial ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Limited ProgressNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Some ProgressNot applicableSDG 8, 16Takemeasurestoensurethelong-termfiscalsustainabilityofpublicfinances, including the sustainability of the pension system.Limited ProgressSDG 82022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 8 September 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation.2022 CSR 3Limited ProgressStrengthentheprovisionofsocialandaffordablehousing,includingbyadoptingaspecificlegislativeframeworkforsocialhousingandimproved coordination between different public bodies.Limited ProgressSDG 1, 2, 10, 162022 CSR 4Limited ProgressReduceoverallrelianceonfossilfuelsanddiversifyimportsoffossilfuel.Limited ProgressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 7, 9, 13Acceleratethedeploymentofrenewables,streamlinepermitprocedures and make grid access easier.Limited ProgressRelevant RRP measures planned as of 2023 and 2026.SDG 7, 8, 9, 13Increasetheenergyefficiencyofdistrictheatingsystemsandofthebuildingstockbyincentivisingdeeprenovationsandrenewableheatsources.Limited ProgressRelevant RRP measures planned as of 2023 and 2024.SDG 7RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

control system for the implementation of the RRF 
and  law  on  the  registration  of  beneficial  owners, 
as  well  as  investments  for  the  reconstruction  of 
three  railway  bridges,  45  safer  railway  level 
crossings and digital tools for education. 

Table A3.1: Key elements of Czechia’s RRP 

Source: RRF Scoreboard 

Graph A3.1: Total grants disbursed under the RRF 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience against future shocks. The RRF also 
contributes  to  implementation  of  the  SDGs  and 
Specific 
helps 
to 
Recommendations 
Czechia 
(see 
submitted  its  current  recovery  and  resilience  plan 
(RRP)  on  2  June  2021.  The  Commission’s  positive 
assessment  on  19 July 2021  and  Council’s 
approval on 8 September 2021 paved the way for 
disbursing  EUR 7  billion  in  grants  under  the  RRF 
over the 2021-2026 period. 

Country 
Annex 2). 

address 

the 

Since  the  entry 
into  force  of  the  RRF 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States  to  amend  their  recovery  and  resilience 
plans  for  a  variety  of  reasons.  In  line  with  article 
11(2)  of 
the  maximum  financial 
contribution for Czechia was moreover updated on 
30  June  2022 to  an  amount  of  EUR  7.7  billion  in 
grants.  No  revision  was  submitted  at  the  time  of 
publication of this country report yet. 

the  RRF, 

Czechia’s progress in implementing its plan is 
published  in  the  Recovery  and  Resilience 
Scoreboard (22).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 
the RRF as a whole, in a transparent manner. The 
graphs  below  show  the  current  state  of  play  as 
reflected on the Scoreboard. 

EUR 1.84 billion has so far been disbursed to 
Czechia  under  the  RRF.  The  Commission 
disbursed  EUR 915  million  to  Czechia  in  pre-
financing  on  28  September  2021,  equivalent  to 
13%  of  the  financial  allocation.  Czechia’s  first 
payment  request  was  positively  assessed  by  the 
Commission, taking into account the opinion of the 
Economic and Financial Committee, leading to EUR 
928.2  million  being  disbursed  in  financial  support 
(net  of  pre-financing)  on  22 March 2023.  The 
related  37  milestones  and  targets  cover  reforms 
of  school  curricula  to promote digital  literacy  and 
digital  skills,  eHealth,  the  country's  audit  and 

(22)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

27 

Current RRPScope Initial planCID adoption date  8 September 2021Total allocation EUR 7 billion in grants (3% of 2021 GDP)Investments and reforms 85 investments and 37 reforms Total number of milestones and targets244€ 1.84billion 
 
                                                 
 
     
 
 
   
 
 
 
 
Graph A3.2: Disbursements per pillar 

Note: Each disbursement reflects progress in the implementation of the RRF, across the six policy pillars. This graph displays how 
disbursements under the RRF (excluding pre-financing) relate to the pillars. The amounts were calculated by linking the milestones 
and targets covered by a given disbursement to the pillar tagging (primary and secondary) of their respective measures. 
Source: RRF Scoreboard 

Graph A3.3: Fulfilment status of milestones and 
targets 

Note: This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard 

28 

Satisfactorily fulfilledNot fulfilled0 mln50 mln100 mln150 mln200 mln250 mlnGreen transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic,social andinstitutionalresiliencePolicies for thenext generation 
 
     
 
 
 
 
     
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives. 

Graph A4.1: Cohesion policy funds 2021-2027 in 
Czechia: budget by fund 

Million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

In  2021-2027  in  Czechia  cohesion  policy 
funds (23)  will  invest  EUR  14.1  billion  in  the 
green  transition  and  EUR  1.7  billion  in  the 
digital  transformation,  as  part  of  the 
country’s total allocation of EUR 26.7 billion. 
In  particular,  the  European  Regional  Development 
Fund  (ERDF) will  be  instrumental  in  promoting 
energy  efficiency  and  will  help  to  improve  the 
energy  performance  of  around  754 852  square 
meters  of  public  buildings,  as  well  as  the  energy 
performance  of  1 260  commercial  buildings.  The 
Cohesion  Fund  will  support  climate  adaptation 
measures  enhancing  water  retention,  resulting  in 
2 156 hectares of green infrastructure being built 
or upgraded.  Particular attention needs to be paid 
to  accelerating  the  building  of  very  high  capacity 
networks across Czechia’s regions, as deep  digital 
divides  persist  between  urban  and  rural  areas  in 
terms  of  coverage  and  exploitation.  The  Just 
Transition  Fund  will  enable  further  economic 
diversification  and  modernisation  of  Czechia’s 
three  coal  regions  (Karlovarský,  Ústecký  and 
Moravskoslezký). Nearly 50% of the programme is 
allocated  to  35  projects  ‘of  strategic  importance’, 
which should transform the country’s coal regions 

(23)  European Regional Development Fund (ERDF), Cohesion Fund 
(CF), European Social Fund+ (ESF+), Just Transition Fund 
(JTF) excluding Interreg programmes. The total amount 
includes national and EU contributions. Data source: 
Cohesion Open Data.  

the 

labour  market,  enable  access 

through  their  diverse  focus  (on  employment, 
education,  research,  regeneration  of  brownfields, 
etc.).  The  European  Social  Fund  Plus  (ESF+) 
allocates EUR 2.7 billion to enhance the resilience 
of 
to 
community-based social services and increase the 
inclusiveness  of  the  education  and  training.  Inter 
alia,  ESF+  will  provide  access  to  early  childhood 
education  and  care  (ECEC)  for  5 000  children  and 
support  20 000  teachers 
in  developing  their 
competencies. 

Of  the  investments  mentioned  above,  EUR 
2.2  billion  will  be  invested  in  line  with 
REPowerEU objectives. This is on top of the EUR 
1.9  billion  dedicated  to  REPowerEU  under  the 
2014-2020  budget.  EUR  1.3  billion  (2021-2027) 
and EUR [1.6] billion (2014-2020) is for improving 
energy  efficiency;  EUR  [0.6]  billion  (2021-2027) 
and  EUR  [0.3]  billion  (2014-2020)  for  renewable 
energy  and  low-carbon  R&I;  and  EUR  [0.4]  billion 
(2021-2027) for smart energy systems. 

Graph A4.2: Synergies between cohesion policy 
funds and the RRF with its six pillars in Czechia 

Million EUR in current prices (CP funds: total amount, including 
EU and national co-financing; RRF primary pillars)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR 22.7 billion available to Czechia (24), with 
an  absorption  of  84% (25). 
Including  national 
financing,  the  total  investment  amounted  to  EUR 
29.6 billion – around 2.2% of GDP for 2014-2020. 

Czechia  continues  to  benefit  from  cohesion 
policy 
support  economic 
to 
recovery,  step  up  convergence  and  provide 

flexibility 

(24)  Cohesion policy funds include the ERDF, CF, ESF and the 

Youth Employment Initiative (YEI), excluding ETC 
programmes. According to the ‘N+3 rule’, the funds 
committed for 2014-2020 must be spent by 2023. REACT-
EU is included in all figures. The total amount includes EU 
and national co-financing. Data source: Cohesion Open Data. 

(25)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

29 

7,80629%13,81652%3,15812%1,9317%CFERDFESF+JTF13,367 1,172 5,491 4,701 1,592 1,494 14,117 1,653 4,036 3,429 475 2,018 0200040006000800010000120001400016000Green transitionDigitaltransformationSmart, sustainableand inclusivegrowthSocial and territorialcohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgenerationEU CP 2014-2020 (million EUR)EU CP 2021-2027 (million EUR) 
 
  
                                                 
   
                                                 
 
 
vital support to regions following the COVID-
19  pandemic.  The  Recovery  Assistance  for 
Cohesion and the Territories of Europe instrument 
(REACT-EU) (26)  under  NextGenerationEU  provides 
EUR 1.2 billion on top of the 2014-2020 cohesion 
policy  allocation  for  Czechia.  REACT-EU  financed 
2 066 new beds for COVID-19 patients and 1 356 
sets  of  technical  equipment  for  integrated  rescue 
systems to better address the impacts of the crisis 
and  to  provide  prompt  and  efficient  assistance to 
people  in  need.  With  SAFE  (Supporting  Affordable 
Energy),  the  2014-2020  cohesion  policy  funds 
may  also  be  mobilised  by  Czechia  to  support 
vulnerable  households, 
jobs  and  companies 
particularly affected by high energy prices.  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
to 
the  Sustainable  Development  Goals 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
and 
(Industry, 
notably 
infrastructure)  and  SDG 7  (affordable  and  clean 
energy) (27). 

innovation 

SDG 9 

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in 
Czechia 

5 largest contributions to SDGs in EUR million (current prices) 
Source: European Commission  

Other  EU  funds  make  significant  resources 
available  for  Czechia.  The  common  agricultural 
policy  (CAP)  made  available  EUR  10.9  billion  in 
2014-2022.  It  will  keep  supporting  Czechia  with 
EUR 5.6 billion in 2023-2027. The two CAP Funds 
(European  Agricultural  Guarantee  Fund  and 
European 
Rural 
Development),  contribute  to  the  European  Green 
Deal while ensuring long-term food security. They 

Agricultural 

Fund 

for 

promote  social,  environmental  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas  in  coordination  with  other  EU  Funds. 
The European Maritime, Fisheries and Aquaculture 
Fund allocates EUR 30 million to Czechia in 2021-
2027. 

Czechia  also  benefits 
from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far  allocated  EU  funding  of  EUR  462.6  million  to 
17  specific  projects  on  strategic 
transport 
networks.  Similarly,  Horizon  Europe  has  so  far 
allocated more than EUR 127 million for Czech R&I 
on  top  of  the  EUR  512  million  earmarked  under 
the  previous  programme  (Horizon  2020).  The 
Public  Sector  Loan  Facility  set  up  under  the  Just 
Transition  Mechanism  makes  EUR  125  million  of 
grant  support  from  the  Commission  available  for 
projects  located  in  Czechia  for  2021-2027,  which 
will  be  combined  with  EIB  loans  to  support 
investments  by  public  sector  entities 
just 
transition regions.  

in 

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  to  mitigate  the 
impact of COVID-19. The Council granted financial 
assistance  to  Czechia  of  EUR  4.5  billion  in  loans, 
which supported around 31% of workers and 23% 
of firms in 2020. 

Instrument 
designing 

(TSI) 
The  Technical  Support 
and 
in 
Czechia 
supports 
implementing  growth-enhancing 
reforms, 
including  those  set  out  in  its  recovery  and 
resilience  plan  (RRP).  Czechia  has  received 
significant support since 2016. Some examples (28) 
include  the  diversification  of  energy  sources  and 
decarbonisation,  in  line  with  the  REPowerEU  plan, 
and 
evidence-based 
policymaking  in  the  public  administration.  The  TSI 
is  also  helping  Czechia  roll  out  specific  reforms 
and  investments  included  in  its  RRP,  e.g.  support 
for 
integrated 
digitalised 
administration  system  for  foreigners  to  ensure 
their prompt integration in the labour market. 

capacity 

building 

fully 

and 

for 

a 

(26)  REACT-EU allocation on Cohesion Open Data. 

(27)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

(28)  Country factsheets on reform support are available here. 

30 

10,945 3,466 5,017 2,827 1,187 10,292 3,519 2,533 2,018 1,963 02,0004,0006,0008,00010,00012,000SDG 9 Industry,innovation,infrastructureSDG 7 Affordable andclean energySDG 8 Decent work andeconomic growthSDG 4 Quality educationSDG 1 No povertyEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
   
                                                 
 
                                                 
indicators. 

It  has  medium 

Compared  to  the  EU  average,  Czechia  shows 
an overall lower level of capacities across all 
RDB 
resilience 
capacities  in  the  digital  and  the  geopolitical 
dimensions,  but  medium-high  capacities  in  the 
social  and  economic  and  green  dimensions. 
Czechia  shows  stronger  capacities  than  the  EU 
average in the areas 'value chains and trade’, ‘raw 
material  and  energy  supply’  and  ‘ecosystems, 
biodiversity,  sustainable  agriculture’ (34),  while 
there is room for improving capacities in the areas 
‘security  and  demography’  and  ‘health,  education 
and work’ (in relation to treatable and preventable 
mortality,  formal  childcare  access  and  adult 
learning).  Czechia  also  displays  below-average 
capacities  when  it  comes  to  ‘climate  change 
(regarding 
mitigation 
environmental  patents  and  renewable  energy 
consumption), 
space’, 
‘digital 
‘cybersecurity’ and ‘financial globalisation’. 

adaptation’ 

public 

and 

for 

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

ANNEX 5: RESILIENCE 

This  Annex 
illustrates  Czechia’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (29).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (30)  and  capacities (31)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and their underlying areas for Czechia and the EU-
27 (32).  

indices,  which 

the  digital  and 

According  to  the  set  of  resilience  indicators 
under  the  RDB,  Czechia  displays  generally  a 
similar  level  of  vulnerabilities  compared  to 
the  EU  average.  Czechia  shows  medium 
vulnerabilities  in  the  green  dimension  of  the  RDB 
and  medium-low  vulnerabilities  in  the  social  and 
economic, 
the  geopolitical 
specifically,  Czechia  has 
dimensions.  More 
medium-high vulnerabilities related to ‘inequalities 
and the social impact of the transitions’ and ‘value 
chains  and 
It  also  shows  higher 
vulnerabilities  compared  to  the  EU  in  the  areas 
‘cybersecurity’ (mainly due to ICT security incidents 
in enterprises) and ‘financial globalisation’, while it 
displays  lower  vulnerabilities  in  the  areas  ‘health, 
education  and  work’ (33),  ‘economic  and  financial 
stability  and  sustainability’, 
‘climate  change 
mitigation and adaptation’ and some areas in the 
digital and geopolitical dimensions. 

trade’. 

(29)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(30)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(31)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(32)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

(1) Data are for 2021, and EU-27 refers to the value for the 
EU as a whole. Data underlying EU-27 vulnerabilities in the 
area ‘value chains and trade’ are not available as they 
comprise partner concentration measures that are not 
comparable with Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

(33)  Due to its low levels of self-reported unmet need for medical 

(34)  Mainly driven by extensive organic farming and intra-EU 

care, NEET and the long-term unemployment rate. 

trade openness.  

31 

CZEU-27CZEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
                                                 
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

and 

Czechia’s green transition requires continued 
action  on  energy  efficiency,  sustainable 
transport, 
water 
The 
management 
implementation  of  the  European  Green  Deal  is 
underway in Czechia. This annex offers a snapshot 
of its key elements (35). 

sustainable 

others. 

among 

Czechia  is  projected  to  reach  its  new  2030 
climate target for the effort sharing sectors, 
if  it  implements  the  additional  measures 
planned (36).  Data  for  2021  on  greenhouse  gas 
emissions  in  these  sectors  are  expected  to  show 
the  country  has  generated  slightly  more  than  its 
annual emission allocations (37). Current policies in 
Czechia  are  projected  to  reduce  these  emissions 
by  22%  relative  to  2005  levels  in  2030.  This  is 
more  than  sufficient  to  reach  the  current  effort 
sharing  target.  The  additional  measures  tabled 
would  bring  a  sharper  reduction  in  emissions  to 
37%, exceeding the new target (raised to meet the 
EU’s  55%  objective)  for  reductions  of  26% (38).  In 
its recovery and resilience plan (RRP), Czechia has 

(35)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(36)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839.  

(37)  Czechia’s annual emission allocations for 2021 were some 
60.9 Mt CO2eq, and its approximated 2021 emissions were 
at 61.8 Mt CO2eq (see European Commission, Accelerating 
the transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343). Greenhouse gas emissions in the effort 
sharing sectors above the annual emission allocations do not 
imply non-compliance with the Effort Sharing Regulation, as 
the latter provides for specific flexibility instruments that 
may be used for compliance. 

(38)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021.  

allocated  41.6 %  of  its  Recovery  and  Resilience 
Facility  grants  to  key  reforms  and  investments  to 
attain  climate  objectives (39).  Compared  to  2005 
levels, Czechia’s own climate ambition is to reduce 
economy-wide  greenhouse gas emissions by 30% 
by 2030 (40). 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency. 

Czechia is not on track to meet its net carbon 
removals  target  for  2030  in  the  land  use 
sector.  Czechia’s  forests  have  been  emitting 
growing  amounts  of  greenhouse  gases  since 
2018.  Overall  greenhouse  gas  emissions  from 
Czechia’s land use sector reached 8.35 Mt CO2eq in 
2021.  For  2030,  Czechia’s  land  use,  land-use 
change  and  forestry  (LULUCF)  target  implies  to 
remove  1 228  kt CO2eq  (see  Table  A6.1) (41). 
Czechia’s land use sector is projected to remain a 
source of net emissions until 2026.  

Fossil  fuels  still  play  a  major  role 
in 
Czechia’s energy mix. In 2021, solid fossil fuels 
accounted  for  30%  of  Czechia’s  energy  mix,  and 
natural  gas  for  18%  (see  Graph  A6.2).  While  the 
share  of  coal  in  the  energy  mix  has  been 
decreasing  in  the  last  decade  (40%  in  2011),  the 
share  of  gas  has  been  kept  quite  stable  (17%  in 
2010).  The  share  of  renewable  sources  has  been 

(39)  For example, investments in sustainable, secure and 

connected mobility and hydrological planning to tackle water 
scarcity. Several measures planned for 2021 and 2022 were 
completed, including reforms on circular economy and 
investments on road and rail safety.  

(40)  Under Czechia’s national energy and climate plan (NECP). An 
update of the plan, mandated by Regulation (EU) 2018/1999 
(the Governance Regulation), is underway.  

(41)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

32 

01020304050607020052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
     
                                                 
 
 
increasing but at a very slow rate, reaching 13% in 
2021  (an  increase  of  6pp  in  comparison  with 
2010).  Czechia’s  electricity  mix  is  also  quite 
dependent  on  fossil  fuels,  which  made  up  around 
50% of the electricity mix in 2021, compared with 
renewable  sources  which  made  up  14%  (see 
Graph A6.2). 

Graph A6.2: Energy mix (top) and electricity mix 
(bottom), 2021 

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. 

Increasing  the  pace  at  which  renewable 
energy is deployed is crucial to decarbonising 
Czechia’s  energy  system  and  addressing  its 
dependency  on  Russian  fossil  fuels.  Czechia’s 
target of 22% of share of energy from renewable 
sources  in  gross  final  energy  consumption  by 
2030, 
considered 
unambitious  in  the  2020  assessment  by  the 
Commission.  Czechia  will  need  to  substantially 
strengthen  its  renewable  energy  target  in  the 
updated  NECP  to  reflect  the  more  ambitious  EU 

in  NECP,  was 

included 

climate  and  energy  targets  in  the  Fit  for  55 
Package and in the REPowerEU Plan. Czechia’s RRP 
aims to install a capacity of 270 MW photovoltaics 
in companies by 2026 and to create opportunities 
for  the  municipalities  and  the  public  to  actively 
contribute  to  the  energy  transition,  as  it  contains 
the  objective  of  establishing  40  new  energy 
communities.  District  heating  systems  in  Czechia 
are  still  mostly  based  on  fossil  fuels.  Further 
incentives  to  modernise  and  rehabilitate  these 
systems  and  integrate  renewable  heating  sources 
into  them,  complemented  by  energy  efficiency 
their 
investments, 
transformation. 

accelerate 

would 

consumption 

Despite  the  ongoing  measures  to  increase 
is  still  a  wide 
energy  savings,  there 
investment  gap  in  energy  efficiency  given 
the  expected  upwards  revision  of  energy-
saving  targets  as  part  of  the  REPowerEU 
plan. Czechia’s NECP targets for primary and final 
energy 
(PEC  and  FEC)  were 
considered  low  and  modest  ambition  respectively 
in  the  2020  Commission  assessment.  Based  on 
the energy consumption trajectory for 2018-2021, 
Czechia  is  expected  to  be  on  track  to  meet  its 
2030 target for PEC, and is not expected to be on 
track  to  meet  its  2030  target  for  FEC,  as  these 
were  notified  in  its  NECP (42).  Czechia  achieved 
only  71%  of  the  energy  savings  required  under 
Article  7  of  the  Energy  Efficiency  Directive.  The 
three  energy  components,  containing 
RRP’s 
measures to support energy efficiency in state and 
residential 
and 
decarbonisation  of  district  heating  help  put 
Czechia  on  the  path  towards  decarbonisation. 
However,  they  only  represent  around  10%  of  the 
required  investments  under  the  2030  long-term 
renovation strategy. Overall, the RRP did not bring 
in 
additional  financing 
Czechia,  as  shortly  before  its  adoption  significant 
national  funds  from  the  revenue  from  the  EU 
Emissions  Trading  System  (ETS)  were  withdrawn 
from energy efficiency financing and inserted into 
the  general  budget.  Energy  efficiency  is  also 
financed  from  Cohesion  Funds  and  the  national 
budget.  Czechia  has 
increasing 
saving 
substantially  awareness  of 
opportunities among the population (e.g. the Smart 
Choice  campaign  running  only  between  October 

to  energy  efficiency 

failed  on 

buildings, 

lighting, 

energy 

public 

(42)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase 

33 

41%9%14%36%Solid fossil fuels,peat and oil shaleGasRenewablesNuclear30%18%22%17%13%Solid fossil fuels,peat and oil shaleGasOilNuclearRenewables 
  
                                                 
there 

2020  and  May  2021),  and 
is  no 
comprehensive  framework  to  incentivise  private 
investment.  Czechia  has  limited  administrative 
resources  and  skills  for  energy  efficiency;  more 
specifically,  it  does  not  have  an  energy  agency 
that would roll out energy efficiency programmes. 

for 

In terms of sustainable mobility, Czechia has 
The  market 
improvement. 
room 
development  for  zero-emission  road  mobility  has 
been very modest in Czechia to date but seemingly 
has picked up pace in recent years. Only a third of 
the  Czech  railway  network  is  electrified.  In  2020, 
Czechia  exceeded  applicable  limits  for  particulate 
matter  (PM10)  in  two  air  quality  zones  in  the 
country. Furthermore, several air quality zones had 
an ozone concentration that is too high. 

Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a. 2014-2020 

Source: European Commission. 

economy, 

Czechia  would  benefit  from  investing  more 
into  environmental  protection,  promoting 
addressing 
circular 
pollution (43). 
2020, 
and 
environmental  investment  needs  in  Czechia  were 
estimated  to  be  at  least  EUR  4.4  billion  while 
investment stood at about EUR 2.9 billion, leaving 
a  gap  of  at  least  EUR  1.5  billion  per  year  (see 
Graph A6.3) (44). Czechia’s environmental financing 

and 
2014 

Between 

for investments relies on national financing in over 
two thirds of cases. Czechia also has the potential 
to rely more on environmental taxes to limit water 
pollution,  to  promote  waste  management  and  to 
pollution (45) 
internalise 
(see Annex 19). 

cost 

the 

air 

of 

Climate  change  is  affecting  many  sectors  in 
Czechia (46), implying challenges especially to 
water  and  forest  management.  Affected 
systems  include  agriculture,  biodiversity,  energy, 
forestry, mobility, urban areas, and civil protection. 
The RRP has measures on water management and 
flood  protection.  Nevertheless,  there  is  scope  for 
increasing  the  use  of  nature-based  solutions  and 
to  prioritise  sustainable  water  management  by 
restoring  terrestrial  and  freshwater  ecosystems. 
Agriculture  is  one  of  the  systems  that  puts 
significant  pressure  on  surface  waters  and  puts 
the  most  pressure  on  ground  waters.  Czechia  is 
among  the  Member  States  with  the  highest 
portions of groundwater bodies that do not have a 
good chemical status, mainly due to nitrates. 47% 
of  Czechia’s  agricultural  land  is  threatened  by 
water  erosion,  and  49%  suffers  from  high  soil 
compaction due to the large proportion of erosion-
sensitive crops in crop rotation, large monocropped 
parcels,  missing  small-scale  landscape  variation, 
and  the  effects  of  regulation  of  water  streams. 
Large  areas  of  spruce  forest  are  being  felled  due 
to the presence of bark beetles.  

Czechia  provides  fossil  fuel  and  other 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 
food  and  energy  security  and  mitigating 
social  effects.  In  2020,  Czechia  spent  EUR  0.5 
billion  on  fossil  fuel  subsidies,  putting  low-carbon 
alternatives  to  a  disadvantage.  Environmentally 
harmful  subsidies  have  been  identified,  via  an 
initial  assessment,  in the agriculture,  forestry  and 
fishing, electricity, gas, steam and air conditioning, 
services,  water  supply,  sewerage  and  waste  and 
construction  sectors.  Examples  of  such  subsidies 
include the excise tax refund for diesel fuel used in 
agriculture,  the  reduced  energy  tax  rate  for  light 
fuel  oil  used  in  mobile  machinery,  the  excise  tax 

(43)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Czechia) 

(45)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay, Ensuring that polluters pay 
(europa.eu) 

(44)  When also accounting for needs estimated at EU level only 

(46)  See Czechia’s submissions under Article 19(1) of the 

(e.g., water protection, higher circularity, biodiversity 
strategy).  

Governance Regulation, available at the Climate Adapt 
website of the European Environment Agency.  

34 

7157923688821391.3299969429291780,0200,0400,0600,0800,01000,01200,01400,0Pollutionprevention andcontrolWater (industries,excl. protection)Circular economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
          
                                                 
                                                 
exemption  on  the  use  of  natural  gas,  the  excise 
tax  exemption  and  tax  relief  for  natural  gas  for 
industrial  consumers  or  the  reduced  CO2 tax  rate 
on diesel used in agriculture (47). A mapping of all 
environmentally  harmful  subsidies  by  Czechia 
would help prioritise candidates for reform. 

By  earmarking  a  higher  share  of  the  ETS 
revenue  for  climate  action,  Czechia  could 
reduce  its  exposure  to the  cost of  carbon.  In 
2021,  Czechia’s  revenue  from  the  ETS  amounted 
to  some  EUR  604  million.  In  2020  and  2021,  its 
spending  on  climate  and  energy-related  purposes 
was  below  50%,  the  minimum  set  out  under  the 
ETS Directive. 

(47)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 
of the toolbox contains detailed examples of subsidies on 
the candidates for reform. 

35 

 
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

36 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp61,71%-2%-2%-5%--26,0%-411Net carbon removals from LULUCF (2)kt CO2eq-8.258-4.4991.0027.77811.2688.358-1228n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%7%15%15%16%17%18%22%Energy efficiency: primary energy consumption (3)Mtoe42,540,440,539,837,539,641,4Energy efficiency: final energy consumption (3)Mtoe26,125,525,325,324,526,223,7201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP2,12,02,02,01,91,82,42,22,2Environmental taxes (% of total taxation) (4)% of taxation 6,05,75,45,75,45,15,95,65,5Government expenditure on environmental protection% of total exp.1,92,12,12,01,92,01,71,61,6Investment in environmental protection (5) % of GDP0,60,70,80,7--0,40,40,4Fossil fuel subsidies (6)EUR2021bn0,50,50,60,50,5-53,050,0-Climate protection gap (7) score 1-4----1,91,21,5Net greenhouse gas emissions1990 = 10065,066,065,062,060,060,076,069,072,0Greenhouse gas emission intensity of the economykg/EUR'100,680,640,620,570,59-0,310,30-Energy intensity of the economykgoe/EUR'100,240,230,230,220,22-0,110,11-Final energy consumption (FEC)2015=100102,6105,4104,7104,4101,2108,3102,994,6101,1FEC in residential building sector2015=100104,7106,4104,0102,9105,6116,9101,3101,3106,8FEC in services building sector2015=100103,8106,8105,1107,2100,399,6100,194,3100,7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'101,461,361,231,111,05-0,90,9-Years of life lost due to air pollution by PM2.5per 100.000 inh.938,9979,21079,4729,5642,8-581,6544,5-Years of life lost due to air pollution by NO2per 100.000 inh.117,2117,5124,0100,968,5-309,6218,8-Nitrates in ground watermg NO3/litre18,718,418,117,718,7-21,020,8-Land protected areas% of total21,121,9-21,921,921,926,226,426,4Marine protected areas% of total------10,7-12,1Organic farming% of total utilised agricultural area14,014,114,815,215,315,68,59,1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0,10,30,31,61,32,05,48,910,7Number of AC/DC recharging points (AFIR categorisation)---113122753915188626330028432518Share of electrified railways%34,234,234,234,234,234,356,6n/a56,6Hours of congestion per commuting driver per year23,422,823,323,0n/an/a28,7n/an/aMobility'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetCzechiaEUFiscal and financialindicatorsEnergyPollutionBiodiversityClimate 
 
   
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

Russian 

Being fully dependent on Russian gas before 
invasion  of  Ukraine,  Czechia 
Russia’s 
decreased 
dependence 
gas 
significantly and aims to  be  dependent  from 
Russian  energy  supplies  in  the  short  term. 
Renewables  still  play  a  minor  role  in  the  energy 
system  and  an  ambitious  roll-out  of  renewables 
system. 
requires  upgrades 
to 
in 
Continuous  energy  efficiency  measures, 
particular  for  the  most  vulnerable,  have  helped 
ensure  energy  security  in  Czechia.  This  Annex (48) 
sets out actions carried out by Czechia to achieve 
the  REPowerEU  objectives,  including  through  the 
implementation of its recovery and resilience plan, 
in  order 
improve  energy  security  and 
affordability  while  accelerating  the  clean  energy 
transition,  and  contributing  to  enhancing  the  EU’s 
competitiveness in the clean energy sector (49). 

its  energy 

to 

The  Czech  gas  transmission  system  plays  a 
key  role  in  supplying  gas  in  the  region  and 
increased regional cooperation would help in 
the event of security of supply issues. Czechia 
fulfilled  its  gas  storage  obligations  last  winter, 
reaching 94.88% by 1 November 2022 (almost 15 
percentage  points  above  its  legal  obligation),  and 
ended  the  heating  season  with  a  filling  gas 
storage  at  54%  on  15  April  2023 (see  Graph 
A7.1) (50).  Its  gas  transmission  system  has  been 
used  to  transport  Russian  gas  coming  to  Europe 
via  Slovakia  and  Germany.  Czechia  is  therefore 
well interconnected with these two Member States 
and has a robust internal gas network. Moreover, it 
has  a  Stork  I  unidirectional  interconnector  with 
Poland,  which  means  it  can  supply  up to  1  billion 
cubic metres (bcm) per year of natural gas to the 
Polish  region  of  Silesia.  Czechia  can  also  import 

(48)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty, including the most 
vulnerable ones, by Annex 9 as the transition to a circular 
economy will unlock significant energy and resource savings, 
further strengthening energy security and affordability, and 
by Annex 12 on industry and single market complementing 
ongoing efforts under the European Green Deal and 
REPowerEU. 

(49)  in line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

(50)  Regulation of the European Parliament and of the Council 
amending Regulations (EU) 2017/1938 and (EC) No 
715/2009 with regard to gas storage and Implementing 
Regulation (EU) 2022/2301 of 23 November 2022 setting 
the filling trajectory with intermediary targets for 2023 for 
each Member State with underground gas storage facilities 
on its territory and directly interconnected to its market area. 

has 

Czechia 

from  Poland  via 

gas 
the  Poland-Slovakia 
interconnector and existing infrastructure between 
Slovakia and Czechia. All existing cross-border gas 
pipelines would be sufficient to meet the country’s 
yearly gas demand (8-9 bcm/year). As part of the 
diversification  of  natural  gas  supplies,  Czechia 
replaced  part  of  its  Russian  gas  with  gas  imports 
from  Norway  and  liquefied  natural  gas  (LNG) 
imports  from  overseas,  which  are  distributed  to 
the  country  through  the  Dutch  LNG  terminal  in 
Eemshaven.  Moreover, 
eight 
underground  storage  facilities (51)  with  a  total 
capacity  of  around  3.54  bcm,  representing  more 
than  a  third  of  its  total  yearly  demand.  Since 
2022,  the  underground  storage  facility  in  Dolni 
Bojanovice,  which  previously  only 
supplied 
Slovakia,  is  now  connected  to  the  Czech  gas 
market.  An  oil  supply  disruption  via  the  Druzhba 
pipeline (still representing around half of Czech oil 
consumption)  would  affect  the  supply  in  the 
country  and  in  the  region.  The  IKL  pipeline  (the 
other  crude  oil  pipeline  in  the  country)  and  TAL 
pipelines  (which  receive  oil  via  the  oil  port  in 
Trieste  and  are  connected  to  IKL)  provide  an 
alternative  supply  route  for  the  country’s  oil 
imports. 

Graph A7.1: Underground gas storage levels in 
Czechia 

Source: JRC calculation based on AGSI+ Transparency 
Platform, 2022 (Last update 2 May 2023) 

Fossil  fuels,  particularly  coal,  still  dominate 
the  electricity  generation  mix,  and  the 
current  energy  crisis  has  brought  additional 
challenges. The commitment to phase out coal by 
2038  means  that  the  electricity  system  faces 
significant challenges. Before the gas price spikes, 

(51)  Czechia has eight underground storage facilities managed by 
four storage system operators: Dambořice (managed by 
Moravia Gas Storage), Uhřice (managed by MND Energy 
Storage), Háje, Třanovice, Štramberk, Tvrdonice, Dolni 
Dunajovice, Lobodice (managed by RWE Gas Storage) and 
Dolni Bojanovice (managed by SPP Storage). 

37 

 
 
                                                 
 
                                                 
 
 
as 

the 

in  Czechia, 

Czechia counted on an energy transition from coal 
to gas. Coal-fired power plants started closing as a 
first  sign  of  spontaneous  energy 
transition. 
However, it is difficult to close a coal power plant 
or  boiler  where  district  heating  is  connected  to  it, 
as  Czechia  lacks  a  plan  to  decarbonise  district 
heating.  Given  the  situation  in  the  gas  markets, 
Czechia  was  quick  in  abolishing  subsidies  for 
condensation gas boilers in households and it has 
been  subsidising  the  change  from  coal  boilers  to 
heat  pumps  or  biomass  boilers.  Energy  efficiency 
measures  have  been  contributing  to  energy 
government 
security 
concentrated on quick information campaigns and 
guidelines  for  public  buildings.  Moreover,  the  New 
Green  Savings  Programme has  been  one  of  the 
most  effective  programmes  for  energy  savings  in 
family houses and apartment buildings. It supports 
the  reduction  of  energy  intensity  in  residential 
buildings, the construction of houses with very low 
energy  intensity,  the  environmentally  friendly  and 
efficient  use  of  energy  sources  and  renewable 
energy  sources.  At  the  end  of  2022,  the  New 
Green  Savings  Light  Programme 
intended  to 
reduce  energy 
support  simple  measures 
consumption and support insulation in low-income 
households  (see  Annex  8).  In  its  first  phase,  the 
program will provide a total of EUR 63 million (CZK 
1.5 billion). Each applicant can receive a maximum 
of  EUR  6,350  (CZK  150,000).  Over  the  period 
August  2022  –  March  2023,  17%  of  gas 
consumption has been saved in Czechia compared 
to the previous 5-years average. 

to 

transmission 

the  most  well 
While  being  one  of 
networks, 
interconnected 
national grids need to be upgraded to allow a 
higher  penetration  of  renewable  energy 
sources.  Being  connected  to  the  systems  of 
neighbouring  countries,  Czechia’s  transmission 
system plays an important role in maintaining grid 
stability  in  Central  Europe.  Czechia  is  one  of  the 
few  net  exporter  countries  of  electricity in  Europe 
and has a high level of interconnectivity (see Table 
A7.1). With renewable energy production playing a 
greater  role  in  the  electricity  system,  an  increase 
of  the  capacity  of  the  grids  would  be  deemed. 
integration  of 
in 
Existing  bottlenecks 
renewables,  such  as  the  grid  connection  capacity 
booking  system  for  renewables  and  the  current 
structure of electricity charges, are not making the 
installation  of  small  systems  more  attractive  and 
do  not  provide  the  framework  to  create  better 
conditions  for  higher  penetration  of  decentralised 
sources of electricity. 

the 

Graph A7.2: Gas Consumption per sector, 2021 

Source: Eurostat 

Graph A7.3: Gas consumption per industrial sector, 
2021 (% of total gas consumption in industry) 

Source: Eurostat 

and 

industry 

unprecedented 
risking 

Czechia 
in 
Households 
price 
energy 
witnessed 
irreversible  negative 
increases, 
effects  on  the  Czech  industrial  sector.  More 
than a third of Czech households still use gas for 
heating  and  another  third  use  district  heating, 
where  gas  also  plays  a  significant  role.  To  shield 
consumers  connected  to  low-voltage  distribution 
networks (households, small businesses as well as 
some  public  institutions)  from  soaring  prices,  the 
government  decided  to  cap  electricity  and  gas 
prices (52). The Czech economy is highly dependent 
on manufacturing and exports, which primarily go 
to  Germany  and  other  EU  Member  States.  As  one 
of the most energy-intensive economies in the EU, 
plastics,  chemical  production,  metallurgical  and 
steel  industries  have  not  only  been  impacted  by 
higher  energy  prices,  but  also  the  supply  of  key 

(52)  Vláda schválila zastropování cen energií. Pomůže jak 

domácnostem, tak firmám | MPO 

38 

28.5%29.8%1.3%12.9%26.8%0.7%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery0.0%5.0%10.0%15.0%20.0%25.0%Iron and steelChemical and petrochemicalNon-ferrous metalsNon-metallic mineralsTransport equipmentMachineryMining and quarryingFood, beverages and tobaccoPaper, pulp and printingWood and wood productsConstructionTextile and leather 
        
 
       
                                                 
raw  materials  has  shaken  the  Czech  industrial 
model. 

Graph A7.4: Czechia’s retail energy prices for 
industry (top) and households (bottom) 

(1) On electricity, the band consumption is DC for households 
and ID for industry. 
(2) On gas, the band consumption is D2 for households and I4 
for industry. 
Source: Eurostat 

Renewable energy does not play a major role 
in  the  Czech  electricity  system  and  its 
ambitions  for  2030  are  modest.  According  to 
IRENA, Czechia’s deployment of renewable energy 
reached  a  total  of  4934  MW  in  2022,  but 
increased only slightly in recent years (an increase 
of  720MW  compared  to  2015).  The  cumulative 
capacity  of  both  solar  and  wind 
in  2022 
represented  around  2.99  GW  or  13.5%  of  total 
electricity  capacity.  Since  2019,  there  are  no  new 
installations of wind energy. On solar PV, 381 MW 
were  installed  in  2022,  an  annual  increase  of 
16.9% (still below of the EU average – 21.8%) (53). 
In 2022, the amendment to the Act on Supported 
Energy  Sources  came  into  force  and  an  auction-
based subsidy scheme was launched for electricity 
generated from renewable energy sources (biogas, 
small  hydropower  plants  and  wind 
farms), 
targeting  42  MW.  The  Czech  authorities  are 
assessing the results and plan to launch a second 
introduced  an 
call. 

In  addition,  Czechia  has 

communities, 

amendment to the Energy Act to raise the limit for 
installing  solar  farms  without  a  licence.  There  is 
still  potential  for  measures  to  simplify  and 
streamline  permit  procedures,  such  as  identifying 
suitable  areas  for  developing  renewable  energy. 
Czechia  still  lacks  the  main  legal  instrument  for 
supporting 
establishing  energy 
decentralisation  and  enabling  consumers 
to 
actively  participate  in  the  energy  transition.  The 
use  of  renewable  and  decarbonised  gases  in 
Czechia  is  rather  low,  and  the  efforts  needed  to 
reach  the  decarbonisation  goals  in  this  area  are 
therefore  high.  Only  low  carbon  hydrogen  with 
electricity  from  nuclear  power  plants  is  produced 
in  Czechia.  Regarding  biomethane,  Czechia  has  a 
potential of 3.7 bcm/year and the development of 
reducing 
can 
biomethane 
dependence on Russian natural gas. 

contribute 

to 

for 

buildings. 

funds 
public, 

significant 
of 

The  lack  of  technical  and  administrative 
assistance  could  put  at  risk  the  deployment 
the  energy 
of 
education 
renovation 
and 
residential 
ambitious 
The 
requires  a 
transformation  of  building  stock 
workforce  trained  in  construction  and  integrated 
renovation, including heating appliance installers in 
sufficient numbers and with the relevant skill sets. 
Czechia  is  not  carrying  out  checks  on  products 
covered  by  ecodesign  and  energy  labelling.  This 
generates  serious  concerns  with  respect  to  the 
level playing field among economic operators and 
uncertainty  as  to  the  compliance  levels  of  the 
concerned products, and therefore possible missed 
energy and CO2 savings (54). 

Czechia  improved  its  energy  research  and 
innovation  (R&I)  between  2014  and  2020, 
but  still  lags  behind  the  EU  R&I  investment 
target and remains one of the countries with 
the  lowest  investment  in  renewables.  Public 
investment in R&I increased from 0.026% in 2014 
to 0.037% in 2020 (as a share of GDP). A positive 
change  was  also  noted  in  private  investment. 
However,  this  increase  was  significantly  smaller, 
ending  in  0.047%  of  Czech  GDP.  Over  the  same 
time  span,  patents  related  to  the  Energy  Union 
almost tripled, with 4.1 patent families per million 
inhabitants in 2019. The distribution of public and 
private  investments  and  patents  continues  to  be 
dominated by traditional fields of interest: nuclear 
safety,  sustainable  transport,  efficient  and  smart 

(53)  IRENA - Renewable capacity statistics 2023 

(54)  The internet-supported information and communication 
system for the pan-European market surveillance 

39 

050100150200250300350400450€/MWhGas CzechiaGas EUElectricity CzechiaElectricity EU050100150200250€/MWhGas CzechiaGas EUElectricity CzechiaElectricity EU 
       
                                                 
                                                 
systems.  In  the  last  5  years,  while  the  overall 
amount  increased,  there  has  been  a  clear  shift in 
prioritisation  of  public  spending  as  20%  less  has 
been attributed to nuclear safety in terms of total 
investment. The government has started investing 
more in digitalisation, in particular in smart system 
solutions.  

Graph A7.5: Public R&I investment in Energy Union 
R&I priorities 

Source: JRC SETIS (2022) 

40 

2%9%3%25%22%39%4%4%18%28%7%15%39%56%23%2%2%2%201020142021[% per priority]CCUSNuclear safetySustainable transportEfficient systemsSmart systemRenewables4043118Total [mn Euro] 
     
 
Table A7.1: Key Energy Indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2021) 
(2) FSRU included 
Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022) 

41 

EU20182019202020212018201920202021Import Dependency [%] 37%41%39%40%58%61%57%56%of Solid fossil fuels 6%9%13%14%44%44%36%37%of Oil and petroleum products 99%98%101%97%95%97%97%92%of Natural Gas 97%110%86%92%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal11%11%9%4%40%44%49%47%of Crude Oil54%49%49%50%30%27%26%25%of Natural Gas 100%100%100%100%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)83892833098705688038870568156885082-Combustible Fuels51063532795278352338504744493347677-Nuclear26841241042834029921302463004330731-Hydro3071320230402679317534373620-Wind573497591609700699602-Solar 2264213121992365233723382316-Geothermal 0000000-Other Sources8096103125124118136-Net Imports of Electricity (GWh)-12515-10974-13037-13907-13097-10153-11075-   As a % of electricity available for final consumption -21.3%-18.4%-21.4%-22.7%-21.4%-17.2%-17.8%-Electricity Interconnection (%)19.3%21.7%25.4%27.5%24.3%28.6%20152016201720182019202020212022Gas Consumption (in bcm)7.98.58.78.38.78.89.58.5Gas Imports - by type (in bcm)7.58.18.98.09.57.68.7n.a.Gas imports - pipeline7.58.18.98.09.57.68.7n.a.Gas imports - LNG0.00.00.00.00.00.00.0n.a.Gas Imports - by main source supplier (in bcm) (1)Russia7.58.18.88.09.57.68.7n.a.Norway0.00.00.10.00.00.00.0n.a.2019202020212022LNG TerminalsNumber of LNG Terminals (2)0000LNG Storage capacity (m3 LNG)0000Underground StorageNumber of storage facilities99910Operational Storage Capacity (bcm)3.73.73.74.52019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)n.a.n.a.n.a.n.a.as a % of total VC investments in Czech Republicn.a.n.a.n.a.n.a.Research & Innovation spending in Energy Union R&i priorites (2)Public R&I (EUR mln)124.191.3117.9n.a.Public R&I (% GDP)0.055%0.042%0.049%n.a.Private R&I (EUR mln)102.3n.a.n.a.n.a.Private R&I (% GDP)0.05%n.a.n.a.n.a.ELECTRICITYCZECH REPUBLICENERGY DEPENDENCECLEAN ENERGYDIVERSIFICATION OF GAS SUPPLIES 
 
 
 
      
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

The 

aspects 

This  Annex  monitors  progress  of  Czechia  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
in 
notably  for  workers  and  households 
Council 
situations. 
vulnerable 
Recommendation  on  fair  transition (55)  guides 
Czechia’s  efforts  to  tackle  the  employment  and 
social 
and 
environmental policies, adding to the territorial just 
transition  plans  and  projects  supported  by  the 
European  Social  Fund  Plus 
(ESF+).  Czechia’s 
recovery and resilience plan (RRP) outlines reforms 
investments  for  the  green  transition (56). 
and 
Together,  these  funds  will  ensure  that  carbon 
neutrality  in  Czechia  goes  hand  in  hand  with  new 
job  opportunities  and  improved  well-being  for 
affected regions and their citizens (57). 

climate, 

energy, 

of 

in 

intensity  of 

labour  shortage 

Czechia  has  a  high  employment  share  in 
declining  and  transforming  sectors,  but  also 
the 
a  significant 
construction  sector.  The  greenhouse  gas  (GHG) 
emissions 
the  Czech  workforce 
declined  from  20.1  to  17.7  tonnes  per  worker 
between  2015  and  2021,  but  it  is  still  above  the 
EU  average  of  13.7  tonnes  (see  Graph A8.1  and 
Table A8.1).  Employment 
in  Czechia’s  energy-
intensive industries (EII) represented 6.7% of total 
employment  in  2021  (in  2020,  6.8%  vs  3.0%  in 
the EU). In 2021, the three coal regions in Czechia 
had  the  highest  share  of  employment  in  energy-
intensive  industries  and  the  highest  long-term 
unemployment  in  the  country.  Employment  in 
mining and quarrying decreased by 29% between 
2015 and 2021 (58). Up to 36 000 job positions in 
the mining industry  are at risk of disappearing by 
2025 (59).  Over  the  same  period,  manufacturing 
jobs  in  the  automotive  sector  increased  by  9.7%, 
while they decreased by 6.5% in the basic metals 
sector.  This trend may  accentuate  the  reliance  on 
foreign  workforce  and  increase  the  impact  of 
automation. Total jobs in the environmental goods 

(55)  Council Recommendation of 16 June 2022 on ensuring a fair 

transition towards climate neutrality, 2022/C 243/04. 

(56)  See 2022 Country Report Annex 6 and 3 for an overview. 

(57)  As part of the Czech Just Transition Fund (JTF) programme 
adopted in September 2022, the regions of Karlovarsky, 
Ustecky and Moravskoslezky will now have at their disposal 
EUR 1.64 billion in EU grants to implement a just transition 
of their local economy. Source: DotaceEU - Home 

(58)  Eurostat online codes [nama_10_a64_e] and 

[env_ac_egss1] 

(59)  Territorial Just Transition Fund programme of Czechia. 

Source: DotaceEU – Home. 

and  services  sector  (EGSS)  grew  by  only  2.5% 
in  the  EU), 
during  2015-2019  (versus  8.3% 
reaching 2.3% of total employment, slightly above 
the  EU  average  (see  Annex  9).  Czechia’s  high  job 
vacancy rate in construction (10.8% vs 4.0% in the 
EU  in  2022),  professional,  scientific  and  technical 
activities  (5.7%  vs  3.9%  in  the  EU) (60)  could 
hamper  the  successful  transition  to  sustainable 
and greener infrastructure and buildings. 

industries,  workers’  participation 

Upskilling  and  reskilling  are  key  for  smooth 
labour  market  transitions  and  preserving 
jobs  in  transforming  sectors.  In  the  energy-
intensive 
in 
education and training has increased from 9.5% in 
2015 to 10.3% in 2022, just below the EU average 
(10.4%). 37% of citizens believe they do not have 
the  necessary  skills  to  contribute  to  the  green 
transition,  compared  to  38%  in  the  EU (61).  The 
Just  Transition  programme  provides  EUR  68 
million  to  support  the  adaptation  of  workers, 
enterprises,  and  entrepreneurs.  The 
‘Kompas’ 
project,  co-financed  by  the  ESF,  helps  predict 
labour  market 
the 
trends,  which  allows 
requalification courses to be better targeted. 

Graph A8.1: Fair transition challenges in Czechia 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1). 

Energy  poverty  has  declined  in  recent  years, 
but  for  vulnerable  households  the  burden  of 
energy  costs  was  already  high  since  2021. 
The  share  of  the  population  unable  to  keep  their 
homes  adequately  warm  declined  from  5%  in 
2015 to 2.2% in 2021 (EU: 6.9%) (62). In particular, 

(60)  Eurostat (JVS_A_RATE_R2)   

(61)  Special Eurobarometer 527. Fairness perceptions of the 

green transition (May – June 2022). 

(62)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

42 

00.511.522.5GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestCZ Latest (vs EU Latest)CZ 2015 (vs EU Latest) 
 
                                                 
  
                                                 
 
 
Table A8.1: Key indicators for a fair transition in Czechia 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID). 

5 000  projects  aimed  at  developing  awareness 
and  knowledge  regarding  energy  savings  and  the 
reduction of emissions. 
Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

the 

(AROP)  population  had 

7.7%  of  the  population  at  risk  of  poverty  was 
affected  in  2021  (EU:  16.4%  in  2021),  and  1.8% 
of  lower-middle-income  households  (in  deciles  4-
5) in 2021 (EU: 8.2% in 2021). Before the energy 
price  hikes,  59.2%  of  the  total  population  and 
(expenditure-based)  at-risk-of-
82.7%  of 
residential 
poverty 
expenditure  budget  shares  on  electricity,  gas,  and 
other  fuels  above  10%  of  their  household 
budget (63).  This  is  well  above the  EU  averages  of 
26.9%  and  48.2%,  respectively,  and  it  highlights 
the  need  to  improve  the  energy  efficiency  of 
housing  stock.  The  elderly,  single  parents  and 
Roma  are  especially  at  risk  of  falling  through  the 
safety net. 

Energy  support  measures  taken  in  2021 and 
2022 were not always targeted to vulnerable 
groups. As a result of energy price changes from 
August  2021  to  January  2023,  relative  to  the  18 
months  prior  (see  Annex  7),  the  fraction  of 
individuals  living  in  households  that  spend  more 
than  10%  of  their  budget  on  energy  would  have 
increased  by  11.5 pp  for  the  whole  population  in 
the  absence  of  policy  support  and  behavioural 
responses,  and  by  5.0 pp  for  those  at  risk  of 
poverty  (expenditure-based),  well  below  the  EU 
average  (16.4 pp  and  19.1 pp) (64).  Expenditure 
shares  of  low-  and  lower-middle-income  groups 
would have increased the most, notably for gas at 
levels  comparable  to 
(see 
Graph A8.2). Among the (expenditure-based) AROP 
population,  the  share  of  individuals  living  in 
for  private 
households  with  budget  shares 
transport  fuels  above  6%  stood  at  32.4%  in 
January  2023  (versus  37.1%  in  the  EU),  an 
increase by 8.1 pp due to the increase in transport 
fuel prices since August 2021 (compared to 5.3 pp 
in the EU) (65). The RRP includes support for almost 

the  EU  average 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

Public  transport  can  play  a  key  role  in 
reducing  air  pollution.  Citizens 
in  Czechia 
perceive  public  transport  to  be  available  (74%  vs 
EU:  55%),  affordable  (74%  vs  EU:  54%)  and  of 
good  quality  (81%  vs  EU:  60%).  The  average 
carbon  footprint  of  the  top  10%  of  emitters 
among  the  population  in  Czechia  is  4.8  times 
higher  than  that  of  the  bottom  50%  (see  Graph 
A8.1). 
In  Czechia,  the  average  levels  of  air 
pollution  in  2020  stood  above  the  EU  average 
(12.5  vs  11.2  µg/m  PM2.5),  with  91%  of  the 
population  living  in  regions  exposed  to  critical 
levels  of  air  pollution (66),  leading  to  significant 
health impacts, notably on vulnerable groups, and 
6 901 premature deaths annually (67). 

(63)  Based on the European Classification of Individual 

Consumption according to Purpose (ECOICOP): CP045. 

(66)  Two times higher than the recommendations in the WHO Air 

(64)  EMPL-JRC GD-AMEDI/AMEDI+ see technical brief. 

Quality Guidelines (annual exposure of 5µg/m3) 

(65)  ECOICOP Metadata, CP0722. 

(67)  EEA- Air Quality Health Risk Assessment 

43 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10CZ GasCZ ElectricityEU GasEU ElectricityIndicatorDescriptionCZ 2015CZ LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes20.117.7 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %6.96.8 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %9.510.3 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %52.2 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %24.232.4 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters4.94.8 (2020)5 (2020) 
                                                 
   
                                                 
 
  
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic  benefits.  It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

Czechia’s  circular  economy  transition  needs 
improving to meet the EU’s circular economy 
goals.  The  EU’s  2020  circular  economy  action 
plan (CEAP) aims at doubling the circular material 
use rate between 2020 and 2030. Czechia’s use of 
circular materials increased from 7.5% in 2016 to 
11.4% in 2021, closing the gap with the EU’s 2021 
average  of  11.7%.  The  CEAP  also  aims  to 
significantly  decrease  the  EU’s  material  footprint. 
In  2020  Czechia’s  material  footprint  (15.6  tonnes 
per  head)  was  above  the  2020  EU-27  average 
(13.7  tonnes  per  head).  As  regards  health  and 
safety  in  circular  jobs,  fatal  accidents  in  waste 
management  and  materials  recovery  are  above 
the average of all economic sectors and above the 
EU average in Czechia (68). 

Czechia  recently  adopted  new  policies  to 
address  circular  economy  challenges,  but 
more  measures  are  needed.  A  strategic 
framework  for  Czechia’s  transition  to  a  circular 
economy  by  2040  (‘Circular  Czechia  2040’)  was 
adopted  by  the  Czech  government  in  December 
2021.  The  implementing  action  plan  for  2022-
2027,  currently  under  preparation,  is  one  of  the 
important  reforms  included  in  the  national  RRP. 
improving  waste 
The  main  priorities  are 
management,  improving  security  of  supply  and 
reducing  dependence  on  material 
resources 
imported  from  outside  the  EU,  increasing  the 
competitiveness of enterprises, and reducing fossil 
fuel consumption. 

Czechia  is  improving  its  waste  management 
practices  and  recycling  performance,  but 
further  effort  is  still  needed.  Some  46%  of 
Czechia’s  municipal  waste  was  still  landfilled  in 
2021,  almost  more  than  double  the  EU  average 

(68)  Eurostat [HSW_N2_02] for NACE Rev. 2 sector E38; 9.17 

fatal accidents p. 100 000 employed in 2018-2020 vs 2.30 
for all sectors in CZ; 6.33 in the EU-27 for sector E38 

the 

(23%).  While  Czechia  has  not  met  the  2020 
recycling  target  for  municipal  waste,  it  is  not 
assessed as being at risk of missing the EU 2025 
recycling  of  municipal  and 
targets  for 
packaging  waste,  although  it  will  need  to  make 
further  efforts  to  meet  the  more  ambitious 
recycling  targets  for  the  period  of  up  to  2035 
through  improvements  in  separate  collection  and 
treatment of waste with a view to recycling.  

Graph A9.1: Trend in material use 

Source: Eurostat 

Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

The industrial system is not yet circular.  The 
economy,  particularly  industry,  is  less  efficient  at 
using  materials  than  the  EU  average,  with  a 
resource  productivity  of  1.9  purchasing  power 

44 

0.020.040.060.080.0100.0120.00.02.04.06.08.010.012.014.016.018.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Czechia (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Czechia (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita)339489494500543570-1000100200300400500600700201620172018201920202021Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27 
 
 
                                                 
                
 
            
 
standard  per  kilogramme  compared  to  the  EU 
average  of  2.3  in  2021  (see  Annex  5).  However, 
resource  productivity  has  increased  since  2016, 
indicating  significant  potential  to  boost  repair, 
reuse and the use of secondary raw materials. The 
government introduced a reduction of value added 
tax  (VAT)  from  21%  to  10%  on  the  repair  of 
bicycles, shoes, clothing and textile products from 
1  May  2020.  Primary  raw  materials  remain 
reducing 
cheaper 
incentives for industry and citizens to use circular 
materials. 

circular  materials, 

than 

The  built  environment  system  continues  to 
exacerbate 
resources 
the  depletion  of 
despite  recent  improvements.  The  recovery 
rate  of  construction  and  demolition  waste  has 
increased  since  2016  and  remains  above  the  EU 
average in 2020 (96% versus 89%).  Under public 
procurement 
January  2021, 
contracting  authorities  must  comply  with  social, 
environmental  and  innovative  requirements  when 
purchasing  goods  and  services.  However,  the  law 
does  not  establish  any  concrete  requirements.  As 
such,  it  is  up  to  procurers  to  decide  which 
requirements they fulfil and how they define them.  

from  1 

law, 

The  agri-food  system  has  yet  to  design  out 
food  waste  and  efficiently  manage  water 
resources.  Czechia’s  food  waste  is  below  the  EU 
average,  with  91  kg  per  head  versus  131 kg  per 

head in 2020. Czechia’s composting and anaerobic 
digestion  per  head  has  significantly  increased 
since 2016, but remained below the EU average in 
2021 at 73 kg per head versus 100 kg. Czechia is 
struggling  to  meet  EU  targets  on  diverting 
landfills,  as 
biodegradable  waste  away  from 
biowaste  accounted  about  30%  of  mixed 
municipal  waste  in  2020  and  was  landfilled  or 
incinerated.  Increasing  anaerobic  digestion  could 
enhance  Czechia’s 
strategic  autonomy  by 
generating  biomethane  and/or  producing  organic 
fertilisers.  Relevant  measures  to  limit  soil  erosion 
are  identified  as:  increasing  crop  biodiversity  by 
limiting the size of one crop, supporting grassland 
management  and  introducing  landscape  features 
(field boundaries, hedges). 

There remains a financing gap in the circular 
economy, 
including  waste  management. 
Additional  investments  will  be  required  to 
address  growing  needs.  The  financing  gap  was 
estimated  at  EUR  574  million  per  year  between 
2014  and  2020.  Over  this  period,  investment 
needs  were  estimated  to  be  at  least  EUR  942 
million  per  year,  while  investment  baselines  were 
EUR 368 million per year (see Annex 6). Czechia is 
already  using  funds  from  the  ERDF  and  the  RRF, 
but further investments are needed. 

Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use, 
including composting and digestion; (3) the recovery rate of construction and demolition waste includes waste which is prepared 
for reuse, recycled or subject to material recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 
2015 data; (5) food waste includes primary production, processing and manufacturing, retail and distribution, restaurants and 
food services, and households.  
Source: Eurostat, European Environment Agency 

45 

AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)15.716.916.817.115.6-13.72020YoY growth in persons employed in the circular economy (%)1------2.92019Water exploitation index plus (WEI+) (%)10.7       13.6       10.7       12.1       --3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)1.61.71.81.81.91.92.32021Circular material use rate (%)27.59.110.511.311.611.411.72021Recycling rate (% of municipal waste)33.632.132.233.340.543.349.62021Built environmentRecovery rate from construction and demolition waste (%)392.0---96.0-89.02020Soil sealing index (base year = 2006)4103.4-106.5---108.32018Agri-foodFood waste (kg per capita)5----91.0-131.02020Composting and digestion (kg per capita)23.050.050.056.070.073.0100.02021 
 
       
 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Czechia’s  performance  on  digital  skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  Czechia  allocates  22%  of  its  total  RRP 
budget to digital targets (EUR 1.6 billion) (69). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (70).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (71). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (72). 

A  relatively  large  proportion  of  the  Czech 
population  has  at  least  basic  digital  skills, 
but  the  current  lack  of  digital  experts 
hampers  the  digital  transformation  of  the 

lowest  score 

economy.  In  2023,  three  out  of  five  individuals 
have at least basic digital skills, which is above the 
EU average of 54%. The share of ICT specialists as 
a proportion of total employment is in line with the 
EU  average  (4.6%  versus  EU  average  of  4.5%). 
However,  only  10%  of  ICT  specialists  in  Czechia 
are  women  –  the 
in  the  EU. 
Nevertheless,  76%  of  Czech  enterprises  report 
difficulties in hiring ICT specialists (73). The ongoing 
education  reform  (supported  by the  Recovery  and 
Resilience Facility) is expected to stimulate interest 
in advanced digital technologies already in primary 
schools. The government provides programmes to 
bring  additional  ICT  specialists  to  Czechia  from 
outside  the  EU,  in  particular  from  Ukraine (74). 
Czechia  is  home  to  the  Central  European  Digital 
Media  Observatory  (CEDMO),  a  project  supported 
by the RRF – this initiative monitors the spread of 
disinformation and aims to limit its impact.  

in 

The 

challenges 

digital 
faces 
Czechia 
infrastructure/connectivity. 
country’s 
improvement  in  its  very  high  capacity  network 
(VHCN) coverage recently stalled and only 37% of 
households  are  covered  by  Fibre  to  the  Premises 
(FTTP),  while  the  EU  average  is  56%.    Moreover, 
the take-up of fast and gigabit broadband remains 
one  of  the  lowest  in  the  EU.  Concerning  mobile 
broadband,  high  prices  to  consumers (75)  are  the 
main deterrent for take-up, this trend is amplified 
by  the  inflation  rate  as  some  telecom  operators 
raised  their  prices  in  January  2023.  The  mobile 
broadband  take-up 
is  slightly  below  the  EU 
average (85%  of individuals  in  Czechia versus  EU 
average  of  87%).  Telecom  operators  are 
increasing  their  overall  5G  coverage  (83%  of 
populated  areas  covered  versus  49%  last  year), 
focusing  mainly  on  cities  and  the  main  transport 
routes.  Czechia  scores  around  the  EU  average  for 
overall  5G  coverage  and  for  5G  coverage  on  the 
3.4-3.8 GHz spectrum band.  

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

(70)  The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(71)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(72)  The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

Czech  SMEs  are  almost  in  line  with  the  EU 
average  on  digital  transformation.  The 
country  performs  well  in  online  sales  but  the 
turnover  from  e-commerce  is  stagnating.  Czech 
enterprises are above the EU average in their use 
of  cloud  solutions.  However,  Czechia  is  below  the 

(73)  Please refer to the Annex 12 

(74)  https://www.mvcr.cz/clanek/kvoty-pro-ekonomickou-migraci-

programy-schvalene-vladou-za-ucelem-dosazeni-
ekonomickeho-prinosu-pro-cr.aspx  

(75)  Study on Mobile and Fixed Broadband Prices in Europe 2021, 

EC, 2022. 

46 

 
 
                                                 
                                                 
 
EU  average  in  using  artificial  intelligence  and  big 
data.  According  to  a  study  by  SAP  and  Ipsos (76), 
more  than  half  of  medium  and  large  Czech 
enterprises  have  a  team  dedicated  to  digital 
transformation.  The  Czech  start-up  scene 
is 
growing.  According  to  a  report  by  Mavericks (77), 
200 
capital 
received 
investments 
in  2022.  Czechia  contributes  to 
European  research  and  experimentation  in  digital 
technologies.  In  2022,  a  leading  technological 
centre  in  Ostrava  –  IT4Innovations  –  installed  a 
new supercomputer (Karolina), which is one of the 
30 most powerful supercomputers in Europe.  

start-ups 

venture 

Czechia  continues  to  make  progress  on  the 
digitalisation  of  public  services.  A  new 
government  agency  is  expected  to  steer  the 
digitalisation of the central administration. Czechia 
has 3 electronic identification (eID) means notified 
to  the  European  Commission  under  the  eIDAS 
Regulation.  The  country  is  following  an  ambitious 
strategy  and  is  planning  to  increase  the  use  and 
popularity  of  e-government  solutions  by  allowing 
citizens  to  carry  ID  cards  or  driving  licences  in  a 
mobile app instead of physical cards. However, the 
access  to  e-health  records  is  low  with  a  score  of 
47  out  of  100,  whereas  the  EU  average  score  is 
71. 

(76)  https://news.sap.com/cz/2022/12/firmy-v-cesku-planuji-

investovat-pres-60-miliard-korun-do-digitalizace-do-roku-
2025/  

(77)  https://www.mavericks.legal/ 

47 

 
                                                 
Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence. 

Source: Digital Economy and Society Index 

48 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA60%60%54%80%% individuals2021202120212030ICT specialists (1)4.2%4.6%4.6%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage33%52%53%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)33%36%37%56%-% households20202021202220222030Overall 5G coverage0%49%83%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA42%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA68%69%90%% SMEs202220222030Big data (3)9%9%9%14%75%% enterprises20202020202020202030Cloud (3)NA40%40%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA5%5%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA757677100Score (0 to 100)2021202220222030Digital public services for businessesNA818484100Score (0 to 100)2021202220222030Access to e-health recordsNANA4771100Score (0 to 100)202320232030Czechia 
 
  
 
 
 
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance of Czechia’s research and innovation 
system,  which  is  essential  for  delivering  the  twin 
green and digital transition. 

resilience plan (RRP) does not introduce significant 
reforms to this end and reform processes need to 
be  pursued  in  line  with  the  national  research  and 
innovation (R&I) strategies. 

Czechia is a ‘moderate innovation performer’ 
but the gap between its performance and the 
EU average is narrowing. According to the 2022 
edition of the European Innovation Scoreboard (78), 
its 
by 
performance 
19.8 percentage  points,  at  a  higher  rate  than  the 
EU’s (9.9 pp). Despite this improvement, its overall 
performance is still slightly below the EU average 
(92.6% of the EU performance). 

innovation 

increased 

R&D  intensity (79)  remains  below  the  EU 
average  but  it  is  steadily  increasing.  R&D 
intensity increased the fastest between 2010 and 
2014  (from  1.33%  of  GDP  in  2010  to  1.96%  in 
2014)  and  stabilised  thereafter,  reaching  2%  in 
2021.  Business  enterprise  expenditure  on  R&D 
(BERD)  followed  the  same  trend  (from  0.77%  of 
GDP in 2010 to 1.10% in 2014) reaching 1.25% in 
2021. In contrast, public expenditure on R&D as a 
percentage  of  GDP  reached  its  peak  in  2015 
(0.87%)  and  then  decreased  to  0.74%  in  2021, 
slightly below the EU average of 0.76% (80). 

In  terms  of  the  quality  of  scientific  and 
technological  outputs,  Czechia  is  performing 
below  the  EU  average.  The  share  of  scientific 
publications  among  the  top  10%  most  cited 
publications  is  increasing  but  is  still  only  around 
half  of  the  EU  average  (4.5%  in  2019  versus 
9.8%).  Czechia  performs  below  the  EU  average 
with  regards  to  international  co-publications  as 
percentage  of  total  number  of  publications.  In 
addition, patent applications remain well below the 
EU  average,  with  no  sign  of  improvement  over 
time (0.8 per billion of GDP in 2009, in comparison 
to  0.7  in  2019).  These  values  show  the  need  to 
improve the quality of the science and technology 
system  to  make  investments  more  productive. 
While  providing  investments,  the  recovery  and 

(78)  2022 European Innovation Scoreboard, Country profile: 

Czechia ec_rtd_eis-country-profile-cz.pdf (europa.eu). The 
EIS provides a comparative analysis of innovation 
performance in EU countries, including the relative strengths 
and weaknesses of their national innovation systems (also 
compared to the EU average). 

(79)  R&D intensity is defined as gross domestic expenditure on 

R&D as a percentage of GDP. 

(80)  Czechia’s innovation strategy for 2019-2030 sets targets for 
increasing R&D funding (by 2% by 2020, 2.5% by 2025 and 
3% by 2030). 

innovation  need 
Conditions  for  business 
improving.  Venture  capital  as  a  percentage  of 
GDP has increased in the past 5 years but remains 
below the EU average (0.022% in 2021 versus EU 
average  of  0.074%).  There  are 
insufficient 
incentives  for  creating  spin-offs  and  regulatory 
barriers (81). Also, innovators wanting to start up a 
company  face  difficulties  due  to  low  levels  of 
investment  in  early  stages  (pre-seed,  seed,  start-
up  and  later-stage  venture).  Investment  in  these 
stages  appears  to  be  high-risk  for  investors  and 
banks,  mainly  due  to  the  absence  of  relevant 
corporate  history,  lack  of  collateral  or  lack  of 
information  for  assessing  firms’  credit  risk  or  the 
valuation  of  their  intangible  assets (82).  The  RRP 
includes investments to facilitate access to finance 
for innovative small and medium-sized enterprises 
(SMEs)  and  start-ups,  measures  to  support  SME 
internationalisation and the launch of a new quasi-
of 
for 
equity 
entrepreneurship. 

instrument 

promotion 

the 

R&I  performance  is  hampered  by  persistent 
difficulties  in  developing  a  highly  skilled 
workforce  in  science  and  engineering.  The 
number of tertiary education graduates in science 
and  engineering  is  sharply  decreasing  (14.5  per 
thousand  population  aged  25-35  in  2010  versus 
10.6 in 2020), an area where the country already 
performs  well  below  the  EU  average  of  16  in 
2020. In addition, Czechia scores 23rd within EU-27 
in  terms  of  the  share  of  population  aged  25-34 
who  have 
tertiary 
education.  Labour  force  shortages  and  skills 
mismatches  are  often  identified  as  one  of  the 
innovation  diffusion (83). 
biggest  hurdles 
Gender  gaps  among  researchers  in  all  sectors 
persist  and  Czechia  ranks  well  below  the  EU 
average (84). Across the 24 EU Member States and 
Associated  Countries  with  available  data,  Czechia 
was  among  the  Member  States  with  the  lowest 
percentage  of  self-employed  women  among 

successfully 

completed 

for 

(81)  OECD Report on Innovation Diffusion in the Czech Republic, 

2020. 

(82)  OECD Financing SMSs and Entrepreneurs, 2022. 

(83)  OECD Report on Innovation Diffusion in the Czech Republic, 

2020. 

(84)  Statistics | Eurostat (europa.eu) 

49 

 
 
                                                 
                                                 
 
technology 

science  and  engineering  and  information  and 
professionals, 
communications 
according  to  the  Commission’s  2021  She  Figures 
report.  The  RRP  helps  to  address  these  problems 
with  measures  to 
improve  the  relevance  of 
education  to  the  changing  needs  of  the  labour 
market. 

Graph A11.1: New graduates in science and 
engineering per thousand population aged 25-34 
in 2020 

Science-business  linkages  are  weak  and  the 
full potential to foster stronger collaboration 
remains  untapped.  Public  expenditure  on  R&D 
financed  by  domestic  business  enterprises  as 
percentage  of  total  public  expenditure  on  R&D 
remains around half of the EU average (3.22% in 
2020  compared  with  the  EU  average  of  7.45%) 
and  has  declined  over  time.  Also,  Czechia  lags 
behind  the  EU  average  in  terms  of  researchers 
employed  by  businesses  (4.3  per  thousand  active 
population  against  the  EU  average  5.1  in  2020). 
The  RRP  aims  to  incentivise  stronger  science-
the 
business 
existing support schemes, but it does not plan any 
major administrative and regulatory simplification 
of the collaborative processes. 

linkages,  chiefly  by  continuing 

Source: Eurostat 

Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data 
Source: Eurostat, OECD, DG JRC, Science Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

50 

0510152025IEFRPTATDKFIDEHUHREUESSIITLTELBESEPLNLCZEESKLVBGCYMTLUR&D intensity (GERD as % of GDP)1.331.921.931.9922.26Public expenditure on R&D as % of GDP0.550.870.730.770.740.76Business enterprise expenditure on R&D (BERD) as % of GDP0.771.041.191.211.251.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 4.64.45::9.8PCT (Patent Cooperation Treaty) patent applications per billion GDP (in PPS)0.710.7::3.3Public-private scientific co-publications as % of total publications4.75.56.76.7:7.1Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0160.030.0270.025:0.054New graduates in science & engineering per thousand pop. aged 25-3414.513.110.910.6:16Total public sector support for BERD as % of GDP0.1630.180.16::0.194R&D tax incentives: foregone revenues as % of GDP0.0330.0550.048::0.1Share of environment-related patents in total patent applications filed under PCT (%)15.1 7.111.3 ::13.3 Venture capital (market statistics) as % of GDP0.020.0030.0070.0090.0220.074Employment in fast-growing enterprises in 50% most innovative sectors6.76.56.1::5.52021Finance 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 2020Czechia201020152019EU average (1) 
  
 
 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

it  recovered 

The  multiple  crises  impose  new  challenges 
for  firms’  competitiveness.  The  disruptions  to 
production  and  supply  chains  have  already 
affected  labour  productivity  in  industry  in  2020. 
Even  though 
in  2021,  Russia’s 
invasion  of  Ukraine  has  further  exacerbated 
problems in global supply chains. The rise in prices 
of  energy  and 
raw  materials  are  causing 
considerable  new  disruptions  and  are  having  a 
severe  impact  on  both  SMEs  and  industry,  in 
particular 
industries, 
manufacturing,  and  construction.  A  high  level  of 
economic  and  geopolitical  uncertainty  affects 
Czech  businesses  in  their  investment  plans  and 
threatens their competitiveness.  

intensive 

energy 

Graph A12.1: Labour productivity per person (in 
PPS and in % of the EU) 

Source: European Commission calculations, based on AMECO 

Overall  labour  productivity  continues  to  be 
subdued in Czechia, reaching 85% per person 
in PPS of the EU average in 2021. In 2021 and 
2022  Czechia’s  added  value  growth  relied  on 
employment growth, but a stronger contribution is 
needed  from  productivity  through  investment  in 
digitalisation, innovation, education, and skills. Real 
labour productivity per person employed increased 
by  0.7%  in  2022  after  the  pandemic-related 
decline of 3.9% in 2020 (85). Productivity growth in 
manufacturing  is  considerably  higher  than  in 
services  and  construction.  However,  for  industry, 
real 
labour  productivity  growth  per  person 
decreased to 0.8% in 2022 (compared to 4.1% in 
2021), below the EU average of 1.4%. Total factor 
productivity  performance  continues  to  be  above 
the EU average, but remains below its direct peer 
Slovakia, 
for 
(Graph  A12.2).  Moreover, 
productivity  growth 
reforms  are  needed  to  address  skills  shortages 

illustrating 

potential 

further 

and  fast  changing  labour  market  needs.  76%  of 
Czech  businesses  report  difficulties  in  finding  ICT 
specialists, the highest share in the EU (55%) (86).  

The measures in the Czech recovery and resilience 
plan  (RRP)  aimed  at  supporting  higher  education 
institutions have potential to strengthen their role 
in boosting advanced skills, driving innovation and 
economic 
labour 
and 
productivity. 

improving 

growth, 

Graph A12.2: Total factor productivity 

Source: European Commission calculations based on AMECO 

to 

to  external  shocks,  due 

Czech businesses are well integrated into the 
Single  Market  and  global  value  chains. 
Czechia’s trade integration in the EU is one of the 
highest among all Member States, expressed as a 
share  of  national  GDP (50.4%  in  CZ  vs  the  EU 
average of 42%).  However, the Czech economy is 
vulnerable 
its 
dependence  on  industry,  exports,  and  high  degree 
of  integration  into  global  value  chains.  36%  of 
Czech  firms  reported  shortages  of  material  or 
equipment in November 2022, in comparison with 
10%  at  the  beginning  of  2020 (87).  According  to 
the 
the  Czech  Purchasing  Managers' 
manufacturing  performance  in  November  2022 
showed  the  biggest  contraction  since  May  2020. 
The  overall  decline 
steep 
contractions  in  output  and  new  orders,  amid 
challenging  demand  conditions  in  domestic  and 
external markets (88). Most industrial companies in 
Czechia expect recession in the coming months in 

stemmed 

Index, 

from 

(86)  Digital Economy and Society Index (DESI) 2022 

(87)  OECD Economic Outlook, November 2022 

(85)  Eurostat, NAMA_10_LP_ULC 

(88)  Czechia Manufacturing PMI - November 2022 

51 

01020304050607080900305070911131517192123Czech RepublicSlovakiaPolandHungary80.090.0100.0110.0120.0130.0140.0050607080910111213141516171819202122*23*24*CZDESKHUEU28 
 
      
                                                 
      
                                                 
 
 
2023,  a  third  of  companies  fear  losses  and  78% 
are preparing for a drop in profits (89).  

Graph A12.3: Business environment and 
productivity drivers 

strategic 

dependencies 

Czechia  could  play  an  important  role  in 
addressing 
by 
in  critical  raw 
developing  value  chains 
materials.  Given  the  strong  importance  of  the 
automotive 
industry  for  the  Czech  economy, 
Czechia has recognised e-mobility and the battery 
industry  as  a  new  strategic  sector  for  the 
economy.  The  primary  lithium  reserves  together 
with  secondary  manganese  reserves  located  in 
Czechia  could  enable  it  to  develop  the  full  value 
chain, 
lithium/manganese  mining  and 
processing  through  battery  and  electric  vehicle 
manufacturing  to  recycling  processes  (see  also 
Annex  7).  Intensifying  the  public  dialogue  on  the 
conditions under which the raw materials could be 
sustainably  extracted,  processed,  and  recycled 
would help raise awareness about the importance 
of  raw  materials  for  the  green  and  digital 
transition in Czechia and the EU. 

from 

improvement, 

Czechia could further benefit from the Single 
Market.  The  Single  Market  Scoreboard  indicates 
scope  for  further 
in  particular 
regarding  the  number  and  duration  of  ongoing 
infringement  procedures,  as  well  as  transposition 
performance,  delaying  the  implementation  of  the 
Single  Market  rules (90).  Regulatory  restrictiveness 
in  Czechia  is  higher  than  the  EU  average  for  the 
regulated  professions  of  architect,  civil  engineer, 
lawyer,  and  estate  agent (91).  Lawyers  in  Czechia 
are subject to legal form, incompatibility rules and 
multidisciplinary  restrictions,  all  of  which  could 
affect the potential of this sector to innovate and 
roll out digital solutions and new business models. 
It  is  also  important  to  consider  the  impact  of  the 
shareholding and/or company form restrictions for 
currently 
architects. 
exclusively  reserved  for  estate  agents  would 
benefit  from  the  possibility  of  opening  access  to 
other  professionals.   The  fragmented  system 
regulating  civil  engineers  could  hinder  the  free 
movement  of  professionals  and 
rules 
spreading  responsibility  over  different  categories 
of professionals in the same area of activity could 
impact the efficiency of service provision.  

The  property 

services 

the 

(89)  National Centre for Industry 4.0 

(90)  Single Market Scoreboard, 2022 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

The  Czech  business  environment  performs 
below  the  EU  average,  mainly  due  to 
administrative  and 
regulatory  burdens. 
Setting up a company (which takes up to 25 days, 
one of the longest times in the EU) as well as the 
administrative  burden  related  to  construction 
permits, are reasons why Czechia ranked 134th out 
of  190  countries  in  a  global  comparison (92).  The 
complexity  of  administrative  procedures  governed 
mainly  by  the  Environmental  Impact  Assessment 
Act  and  the  Construction  Act,  is  one  of  the  main 
obstacles to the development of the RES projects, 
including  solar  and  wind  power  plants  in  Czechia. 
The adoption of the new construction law in 2021 
(a  reform  under  the  RRP)  with  the  full  effect 
planned  from  mid-2023,  digitalisation  of  the 
entire  permitting  process  and  creation  of  a  one-
stop  shop  could  speed  up  and  simplify  permitting 
procedures  in  the  construction  sector,  including 
permitting  procedures  for  renewables,  and  thus 
improve the business environment in Czechia.  

Late  payments  continue  to  be  a  key  barrier 
to SMEs’ resilience and growth. In 2022, 61% 
of  companies  experienced  late  payments  in  the 
past  6  months  compared  with  the  EU  average  of 

(91)  European Commission recommendation on professional 

regulations, COM(2021)385 

(92)  World Bank, Doing business 2020 

52 

1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionCzechia 
                                                 
      
                                                 
professionalisation  of  public  buyers  could  further 
drive efficiency.  

legislation, 

43%. According to an OECD assessment (93), many 
Czech  firms  see  administrative  and  regulatory 
procedures  as  a  major  obstacle  to  investment. 
Together  with  fast-changing 
they 
remain  a  major  barrier  to  doing  business.  There 
are multiple measures in the Czech RRP to reduce 
the administrative burden, but it does not address 
regulatory  weaknesses,  such  as 
some  key 
regulations, 
simplification  and  evaluation  of 
administrative burden on start-ups or professional 
services.  The  relevant  RRP  measures  aiming  at 
reforming  the  Czech-Moravian  Guarantee  and 
Development  Bank  as  a  National  Development 
Bank or establishing new quasi-equity instruments 
for  the  promotion  of  entrepreneurship  have 
improve  access  to  finance  for 
potential  to 
is 
businesses.  However,  further 
needed regarding loan and venture capital. The EIF 
loan  index  is  well  below  the  EU  average  (0.37% 
versus  0.46%),  and  the  trend  is  declining  since 
2014.  In  addition,  SMEs  in  Czechia  report  the 
largest  net  deteriorations  in  terms  of  the  level  of 
interest 
in  Czechia 
versus  -6%  in  the  EU) (94).  There  is  also  only  a 
relatively  small  number  of  start-ups  in  Czechia, 
with  131  start-ups  per  million  inhabitants,  which 
equates  to  the  21st  place  in  the  EU (95).  The 
venture  capital  investments  needed  for  these 
innovative,  albeit  riskier,  companies  were  below 
the  EU  average  in  2021,  at  0.324%  versus 
0.476%  (see  also  Annex  11).  Supporting  the 
establishment  of  ambitious  start-ups  could  help 
the  Czech  economy  bring innovation,  especially  in 
the  field  of  technology,  and  become  more 
competitive through the knowledge economy.  

improvement 

in  2021 

(-27% 

rates 

There  is  still  scope  to  enhance  competition 
on  the  public  procurement  market  and 
improve  public  procurement  practices 
in 
terms  of  quality-based  competition.  In  2022, 
42%  of  contracts  awarded  had  just  a  single 
bidder,  the  4th  worst  in  the  EU,  and  about  81% 
contracts  were  awarded  without  using  quality-
based criteria. Public procurement efficiency could 
be strengthened and optimised by using tools such 
as  centralised  purchasing  and  joint  procurement. 
Centralisation techniques will  help  Czechia  pursue 
broader  economic  goals,  such  as  promoting 
innovation,  creating  competitive  markets,  and 
in 
sustaining  development.  Pursuing  efforts 

(93)  OECD, Product Market Regulation Indicators 2022 

(94)  SAFE 2021 

(95)  Czech Index Prosperity 2022 

53 

 
                                                 
 
 
 
 
 
 
 
Table A12.1: Industry and the Single Market 

(*) Last available year  
Source: (1) AMECO, (2) Eurostat: NAMA_10_LP_A21, (3) ECFIN BCS, (4) Eurostat: jvs_a_rate_r2, (5) COMEXT, (6) Eurostat: 
nrg_inf_epc, (7) Eurostat: BOP_C6_A, (8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: sts_rb_a, (12) Intrum 
(13) SAFE Survey, (14) EIF SME Access to Finance Index. 

54 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)6.26.64.245.23.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)0.30.60.80.70.60.4Real labour productivity per person in industry (% yoy)(2)0.72.8-6.64.10.81.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)9.22.74.83.39.62.9Material shortage (industry), firms facing constraints, % (3)152111364747Labour shortage using survey data (industry), firms facing constraints, % (3)443819232428Vacancy rate (business economy)(4)6.87.86.86.463.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.190.190.170.20.220.18Installed renewables electricity capacity, % of total electricity produced (6)2222.523.424.3n.a.50.9Single Market integrationEU trade integration, % (7)52.750.447.450.452.145.8RestrictionsEEA Services Trade Restrictiveness Index (8)0.050.040.040.040.040.05Public procurement Single bids, % of total contractors (9)495041404229Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)17.817.221.714.617.829.6Bankruptcies, Index (2015=100)(11)n.a.n.a.n.a.n.a.n.a.86.8Business registrations, Index (2015=100) (11)n.a.n.a.n.a.n.a.n.a.121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)574111013Payment gap - public sector, difference in days between offered and actual payment (12)12-110915Share of SMEs experiencing late payments in past 6 months, % (13)n.a.74.255.862.361.143EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.710.460.330.37n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.120.060.050.17n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
   
 
ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
is 
Czechia’s  public  administration,  which 
essential for providing services and carrying 
out  reforms.  The  overall  perceived  effectiveness 
in  Czechia  has 
of  the  public  administration 
increased  to  around  the  average  level  in  the  EU-
27 (96).  The  digital  transformation  of  the  public 
administration  has  progressed,  guided  by  the 
client-oriented public administration 2030 strategy 
and  the  Digital  Czech  Republic  strategy.  These 
complement  the  national  recovery  and  resilience 
plan,  which  aims,  among  other  things,  to  further 
improve  the  internal  working  processes  in  the 
Czech  ministries,  equip 
them  with  suitable 
software  to  share  and  use  data,  create  digital 
points of contact for citizens to interact with public 
administrations and upgrade ePassport operations. 
The six related reforms and investments, totalling 
roughly  EUR  80  million,  are  on  track  or  slightly 
delayed, and were likely to be completed by early 
2023. 

digital 

interaction  with 

People’s 
the 
government  has  increased  substantially.  The 
share  of  people  engaging  online  with  public 
authorities in 2021 was 76%, an improvement of 
12 percentage points on the 2020 figures and well 
above the EU average of 65%. However, Czechia’s 
overall score on e-government benchmark is 64%, 
below the EU average of 73% (Table A13.1). 

Making  the  most  of  staff  in  the  public 
administration  remains  a  challenge.  However, 
the gravity of the issue cannot be fully estimated 
due to a lack of data on public administration HR 
and  performance.  The  Civil  Service  Act  was 
amended in  2022  to  limit  the  terms  of  office  for 
senior  civil  servants,  speed  up  the  selection 
process and open it up to external applicants. The 
amendments  include  offering  the  possibility  of  a 
leave  of  absence  for  study  or  training  purposes. 
This is  expected  to  boost the  rate  of  participation 
of  public  administration  employees 
in  adult 
learning,  given  that  the  share  of  employees  with 
higher education (47.1%) is below the EU average 
of 52% (Graph A13.1b and A13.1c). Gender parity 
in  senior  management  positions  has  declined  and 
was the fourth lowest in the EU-27 in 2022 (Graph 
A13.1a).  Furthermore,  other  challenges  linked  to 
the attractiveness remain, in particular the decline 

(96)  Worldwide Governance Indicators, 2021 data 
(http://info.worldbank.org/governance/wgi/). 

of more than 10% in relative-wages over the last 
20 years (97). 

Evidence-based  policymaking 
in  Czechia 
ranks  close  to  the  EU  average.  Overall,  the 
regulatory  impact  assessment  process  is  well 
developed.  However,  there  are  weaknesses  in 
terms  of  measuring  impacts  and  the  lack  of 
systematic  policy  evaluation.  The  publication  of 
new  guidelines  aims  to  encourage  the  practice  of 
evaluation.  Public  consultations  are  limited  to 
government  legislation,  while  more  than  half  of 
new  primary  laws  are  initiated  by  parliament (98), 
thus  avoiding  the  obligation  to  draft  an  impact 
assessment.  Strategic  planning,  including  inter-
ministerial coordination, remains weak.  

is 

this 

cases.  However, 

The  justice  system  is  performing  efficiently. 
The main challenge is the length of administrative 
cases,  in  relation  to  the  length  of  other  types  of 
cases:  265  days  on  average  for  first  instance 
administrative  cases  in  2021,  as  compared  with 
141  days  for  litigious  first  instance  civil  and 
commercial 
an 
improvement  on  317  days  in  2020  and  356  in 
2019.  The  overall  quality  of  the  justice  system  is 
good.  The  level  of  digitalisation  is  advanced, 
considering  that  procedural  rules  to  permit  digital 
tools in courts are in place. Some digital solutions 
to  initiate  and  follow  proceedings,  especially  in 
civil,  commercial  and  administrative  cases,  are 
already  available.  At  the  same  time,  there  are 
to  using  digital 
it  comes 
challenges  when 
technology 
judicial 
regards 
in  practice.  As 
independence, no systemic deficiencies have been 
reported (99). 

Czechia  performs  below  the  EU  average  on 
certain  fiscal  framework  indicators.  These 
include the Commission’s medium-term budgetary 
framework  index  and  the  strength  of  fiscal  rules 
index,  which  have  been  stable  over  the  past  few 
years.  There  is  still  scope  to  enhance  competition 
on  the  public  procurement  market  and  improve 
public  procurement  practices  in  terms  of  quality-
based competition (see Annex 12).   

(97)  IDEA, Státní zaměstnanci a úředníci: kde pracují a za kolik?, 

Figure 6, January 2022. 

(98)  OECD, Regulatory Policy Outlook 2021, Country profile for 

the Czech Republic, 2021. 

(99)  For a more detailed analysis of the performance of the 
justice system in Czechia, see the 2023 EU Justice 
Scoreboard (forthcoming) and the country chapter for 
Czechia in the 2023 Rule of Law Report (forthcoming). 

55 

 
 
                                                 
                                                 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(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) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions. 
Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour 
Force Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD 
Indicators of Regulatory Policy and Governance (# 10).  

Graph A13.1: a) Public administration: share of men and women in senior positions, b) Higher education 
attainment, c) Adult learning 

Source: (1) 2022 data 
Source:  a) European Institute for Gender Equality; b) and c) European Commission, based on the Labour Force Survey 

56 

CZ201720182019202020212022EU-27(2)153.4 (b)61.0 (b)61.563.875.9 (b)n/a64.82n/an/an/a62.762.663.872.93n/a0.60.60.70.70.90.8442.843.745.143.345.3 (b)47.152.0517.615.513.59.39.9 (b)16.216.9638.236.840.636.643.442.011.072.02.02.02.12.0 (b)1.71.580.40.50.50.60.6n/a0.791.11.11.11.11.1n/a1.5101.63n/an/an/a1.67n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance0102030405060708090100CZEU-27a) Public administration. Share of men and women in senior positionsMenWomen01020304050607080CZEU-27CZEU-27CZEU-27CZEU-27Public admin.,defence andsocial securityEducationHealthcareTotal economyb) Higher education attainmentHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forces0510152025CZEU-27CZEU-27CZEU-27CZEU-27Public admin.,defence andsocial securityEducationHealthcareTotal economyc) Adult learningHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forces 
 
 
   
 
   
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU.  This  Annex  provides  an  overview  of  Czechia’s 
progress in implementing the Pillar’s 20 principles  
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

In  2021,  the  difference 

The  Czech  labour  market  is  among  the  best 
performing in the EU, but certain groups still 
face challenges, including women with young 
children. Despite weakening economic growth, the 
employment  rate  remained  resilient  at  81.3%  in 
Q4-2022  (6.4 percentage  points  (pps)  above  the 
EU  average),  and  unemployment  fell  to  2.3%  in 
the  same  quarter,  only  0.3 pps  above  the  lowest 
level  ever  recorded  in  Q2-2019.  However,  the 
employment  rate  of  women  aged  25-29  was 
29.0 pps  lower  than  men  in  2021  (versus  8.1 pps 
in  the  EU).  The  gender  employment  gap  was 
34.0 pps for women aged 30-34 (versus 12.7 pps 
in  the  EU). 
in  the 
employment  rate  between  women  with  and 
without children (0-6 years) was 46.4 pps. Limited 
availability of early  childhood education and care, 
long  and  unequal  parental  leave,  low  uptake  of 
flexible  work  arrangements  and  gender  biases 
curb  progress  on  female  employment (100).  The 
relatively  high  tax  wedge  on  low-income  workers 
(50%  or  less  of  the  average  wage)  creates 
disincentives  for  second  earners.  Increasing  the 
number  of  women  (aged  20-64)  participating  in 
the  labour  market  could  unlock  EUR 20  billion  in 
additional  GDP  in  Czechia  by  2030 (101)  and 
support  progress  on  its  national  employment 
target  of  82.2%  by  2030.  The  disability 
employment gap was above the EU average. There 
is  scope  for  reducing  youth  unemployment  (7.5% 
in  Q4-2022),  particularly  for  women 
(8.2%), 
compared to the pre-pandemic lows. 

Czechia has taken steps, with the support of 
EU  funds,  to  unlock  the  potential  of  women 
in  the  workforce,  yet  significant  challenges 
persist. 
In  2021,  Czechia  created  financial 
incentives for employers who make part-time jobs 
Legal 
and 

schemes  available. 

job-sharing 

amendments anchored public funding for childcare 
in  children’s  groups (102)  (see  Annex  15).  With  the 
support of the European Social Fund (ESF), 20 000 
places  were  created  in  early  childhood  education 
and  care.  However,  further  efforts  are  needed  to 
significantly  increase  the  participation  of  children 
(aged 0-3) in formal childcare (4.9% in 2021, well 
below  the  EU  average  of  32.6%).  Once  adopted, 
the  Czech  social  economy  law  could  boost  the 
creation  of  more  social  enterprises  leading  to 
increased labour market participation of people in 
vulnerable situations. 

Table A14.1:Social Scoreboard for Czechia 

(1) Update of 27 April 2023. 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 2023; NEET: neither in employment 
nor in education and training; GDHI: gross disposable 
household income. 
Source: Eurostat. 

Czechia is facing significant labour and skills 
shortages,  particularly  of  highly  skilled 
workers. The job vacancy rate (103) stood at 4.4% 

(100) EIGE (2022), Gender Equality Index 2022. 

(101) McKinsey (2021), New potential of economic growth: more 
women in the labour market and in leading positions. 

(102) Source: Ministry of Labour (2022), Analysis of the childcare 
availability. Note: Children’s groups refer to childcare 
provided for children aged between 6 months and 6 years. 

(103) For NACE Rev. 2, activities B-S, ref. ISSN 1977-0375. 

57 

 
 
 
                                                 
 
  
 
                                                 
 
in  Q4-2022,  0.6 pps  lower  than  in  Q4-2021  but 
still  1.5 pps  higher  than  in  the  EU.  Employers 
reported  a  shortage  of  78 000  persons  in  Q4-
2022.  Although  330 000  jobs  are  at  risk  of 
disappearing  by  2030  due  to  automation  and 
technological  change,  500 000  new  ones  are 
expected  to  be  created (104).  Adult  participation  in 
learning  over  the  last  4  weeks  stood  at  9.4%  in 
2022, below the EU  average of 11.9%. The share 
of Roma not in education, employment or training 
stood  at  47%  in  2021,  compared  to  7%  among 
total  population (105).  Further  efforts 
the 
to 
increase  the  attractiveness  and  relevance  of  up- 
and reskilling are needed to support the transition 
towards  a  green  economy  (see  Annex  8).  These 
will  also  help  achieve  the national  skills target  of 
45%  of  adults  in  training  every  year  by  2030. 
Simplifying  the  skills  recognition  system  for 
displaced  people  from  Ukraine  can  ease  some 
labour  and  skills  constraints.  The  ESF+  provides 
EUR 50 million to develop green and digital skills. 

Table A14.1: Situation of Czechia on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months. (2) Number of persons at risk of poverty or social 
exclusion (AROPE), reference year 2019. Base values are 
2019 for employment rate, 2016 for adult participation in 
learning, and the reference year for AROPE is 2019. Latest 
values are 2021 for employment rate (annual), 2016 for 
adult participation, and 2021 for AROPE. AROPE reduction 
does not include population projections. 
Source: Eurostat, DG EMPL 

Limited  social  and  affordable  housing  and 
high  foreclosure  rates  are  factors  behind 
poverty and social exclusion in Czechia. While 
the  share  of  people  at  risk  of  poverty  or  social 
exclusion  is  low  (10.7%  vs  the  EU  average  of 
21.7%  in  2021),  poverty  remains  concentrated  in 
some localities and among Roma. Before Russia’s 

war  of  aggression  against  Ukraine,  165 000 
people were already  in need  of housing, including 
50 000  children.  A  housing  allowance  reform 
contributed  to  an  increase  in  its  take-up  from 
138 000 households in October 2021 to 188 000 
in  October  2022 (106).  The  pending  Social  and 
Affordable  Housing  Act  can  increase  investment 
and support social housing planning. Amendments 
to the construction law and targeted measures to 
prevent  evictions  can  improve  access  to  and 
retention  of  housing  and  help  progress  on  the 
national target of 120 000 fewer people at risk of 
poverty and social exclusion by 2030. 

Inflation  weighs  on  households’  purchasing 
power, while 29% of Czechs have no funds to 
cope  with  unexpected  expenses (107).  668 000 
persons  had  debts  in  foreclosure  in  2021,  with 
20%  of  them  having  10  or  more (108).  The  debt 
relief 
is  an 
important  awareness-raising  tool,  but  has  limited 
impact on the needed systemic change. 

‘Merciful  Summer’ (109), 

initiative, 

Access  to  quality  community-based  services 
remains limited for some people in need. The 
lack  of  community-based  social  and  health 
services  mainly  affects  women,  older  people,  and 
persons with disabilities (110). The modernisation of 
social  care  services  has  so  far  relied  largely  on 
ESF+ support. The absence of clear definitions for 
key terms in legislation and a set deadline for the 
full  deinstitutionalisation  of  care  facilities  hinders 
the  ability  to  provide  adequate  services.  Further 
efforts  are  needed 
the 
deinstitutionalisation  of  children (111).  The  old-age 
dependency  ratio  is  projected  to  increase  from 
31.6% in 2020 to 49.8% in 2050, highlighting the 
need for further investments in long-term care. 

to  progress  on 

(106) IDEA CERGE EI (2022), Rising energy prices and the increase 

in housing benefits: did it help? 

(107) EU-SILC 2020 cit. Fialová, K. a Myslíková, M. (2023). Short 

time financial emergency fund and financial resilience of the 
Czechs. Internal research report.  

(108) Namely, the action of taking possession of a mortgaged 

asset when the debt taker fails to keep up their payments. 
Source: Institute for Prevention and Solving the Foreclosures. 

(109) ‘Merciful Summer II’ was a time-limited initiative (September 
– November 2022) that helped highly indebted persons in 
situations of foreclosure to pay off their debts. 

(110) European Expert Group on Transition from Institutional to 

(104) EU Business and consumer survey and BCG & ASPEN (2022), 

Community-based Care (2020). Final report. 

The future of the Czech labour market. 

(111) Social Inclusion Strategy 2021-2030, Section 4.4, Family 

(105) FRA (2022), Roma Survey 2021, main results. 

support. 

58 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203081.3(2022)22.8(2016)-141(2021)Adult learning1 (%)4560Employment (%)82.278Poverty reduction2 (thousands)-120-15 000 
 
   
 
                                                 
                                                 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Czechia’s education and training system in light of 
the  EU-level 
targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

Inequalities  are  a  persistent  challenge  in 
Czechia’s  education  and  training  system. 
Educational  outcomes  continue  to  be  strongly 
influenced by socio-economic background and the 
geographical  location  of  schools  (see  ‘Islands  of 
educational failure’ (112). Students from households 
facing  housing  affordability  challenges  and 
foreclosures  (see  Annex  14)  have  a  significantly 
higher risk of grade repetition and school dropout. 
This  is  particularly  the  case  in  the  Karlovy  Vary 
and  Ústí  nad  Labem  regions (113)  (see  Annex  17). 
Czechia  scores  high  on  the  PISA  (Programme  for 
International  Student  Assessment)  isolation  index, 
measured  among  15-year-olds,  indicating  that 
disadvantaged  and  low-performing  students  tend 
to  concentrate  in  certain  schools.  Despite  the 
abolishment of special schools, pupils with a Roma 
background  still  do  not  have  equal  access  to 
quality  education:  segregation 
in 
mainstream  schools,  mainly  in  the  regions  with 
significant  population  of  Roma,  for  example 
Ostrava  and  Brno (114).  Moreover, 
frequent 
misdiagnoses  of  learning  disabilities  and  the  lack 
of  societal  consensus  on  the  benefits  of  inclusive 
education  hinder  progress.  Czechia  has  also 
launched  a  project  to  provide  comprehensive 
support to disadvantaged schools and pupils, with 
help  from  the  Recovery  and  Resilience  Facility 
(RRF). 

continues 

Czechia  aims  to  address  capacity  shortages 
in early childhood education and care (ECEC). 
In 2021, the participation rate of children in ECEC 
was  among  the  lowest  in  the  EU  at  85.8%  (EU: 
93%).  Introducing  mandatory  preschool  education 
from the age of 5 has improved access among the 
disadvantaged.  The  amendment  to  the  Children’s 
Groups Act aims to ensure stable funding and  

(112) PAQ Research (2022), Mapa vzdělávacího ne/úspěchu [Map 

of educational failure/success], 
https://www.mapavzdelavani.cz/. 

(113) PAQ research (2022), Mapa vzdělávacího ne/úspěchu [Map 

of educational failure/success], 
https://www.mapavzdelavani.cz/. 

Graph A15.1: Isolation index of disadvantaged 
students and low-achieving students, PISA 2018 

Source: OECD PISA 2018 

quality  affordable  childcare  from  6  months  to 
compulsory  schooling  age.  The  national  recovery 
and  resilience  plan  envisages  the  expansion  of 
childcare  capacities  by  40%  by  2025.  New 
facilities  are  also  financed  via  Cohesion  Policy 
funding  (see  Annex  14).  Reliable  forecasts  to 
ensure  enough  capacity  in  the  municipalities  in 
need and a well-qualified staff will be essential to 
accompany investments in infrastructure.  

Czechia has integrated over 50 000 displaced 
children  from  Ukraine  in  its  education  and 
training  system,  as  one  of  the  biggest  per 
capita  recipients (115).  The  enrolment  of  over 
7 600  Ukrainian 
kindergartens 
children 
exacerbates  existing  capacity  challenges  in  ECEC. 
The  government  supports  the 
integration  of 
displaced  children  through  the  provision  of  free 
language  courses,  the  organisation  of  adaptation 
activities and support for schools to hire Ukrainian 
teaching assistants.  

in 

Teacher salaries have increased significantly 
in recent years, with the aim to attract more 
candidates to the profession. At the same time, 
it is a challenge to maintain the attractiveness of 
the  salaries  against  growing 
inflation  and 
shortages  are 
budgetary  deficits. 
predicted  to  intensify  in  the  future,  as  44.3%  of 
teachers are older than 50 years (vs EU 38.9%). At 
present,  Czechia  lacks  a  systemic  career  support 
structure  for  teachers  and  headmasters,  leaving 
teachers, especially novices, feeling less secure in 
their  ability  to  manage  classrooms  with  diverse 
learning  needs (116).  To 
these 

respond 

Teacher 

to 

(114) European Union Agency for Fundamental Rights (2022), 

(115) Source: Ministry of Education, Youth and Sports, survey data, 

Roma survey 2021. 

31 March 2023. 

(116) OECD TALIS (2018). 

59 

0.000.050.100.150.200.250.300.350.40HRCZEUBG0.000.050.100.150.200.250.300.350.40By socio-economic statusBy performance in reading 
 
                                                 
 
   
                                                 
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework. 

Source: (1,3,4,5,7,8,9,10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data are not 
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 

challenges, Czechia has initiated a reform of initial 
teacher  training  and  it  has  piloted  a  project  to 
develop  a  comprehensive  system  of  professional 
support  for  teachers  and  headmasters (117),  with 
help from the European Social Fund Plus. 

Under  the  RRF,  Czechia  launched  a  revision 
of  the  national  curricula  in  primary  and 
secondary  education.  The  aim  is  to  improve 
computational 
thinking  and  develop  digital 
competence  across  subject  areas,  in  line  with  the 
Education  Policy  Strategy  2030+,  to  strengthen 
the acquisition of key competences and to improve 
access to quality education for all. 

Tertiary educational attainment in Czechia is 
among  the  lowest  in  the  EU.  In  2022,  tertiary 
educational  attainment  stood  at  34.5%,  lagging 
far  behind  the  EU  average  of  42%  and  the  EU-
level target of 45%. Significant gender differences 
are a concern for equal opportunities in education. 
While  many  more  women  than  men  complete 

is  partly  due 

higher  education  (42.9%  vs  26.6%),  17%  of 
women aged 15-29 are neither in employment nor 
in  education  or  training  (NEET)  versus  4.6%  of 
men in the same age cohort, which is the highest 
gap in the EU. The dropout rate is particularly high. 
Students  abandon  almost  half  of  their  studies 
to 
without  completion.  This 
inadequate information and career counselling for 
secondary  school  graduates (118).  Although  the 
employability  of  graduates  of  tertiary  education 
and  vocational  education  and  training  is  high, 
there  is  a  shortage  of  highly  skilled  professionals 
(see  Annex  14).  The  RRF  supports  Czech 
universities 
the  creation  of  new  study 
programmes  in  fast-growing,  high  value-added 
sectors,  such  as  cybersecurity  or  artificial 
intelligence. 

in 

(117) Professional development support system for teachers and 

(118) European Commission (2022), Education and Training 

headmasters (projektsypo.cz) 

Monitor. 

60 

96%84.6%91.9%85.8%202093.0%2020Reading< 15%22.0% 20.0%20.7%201822.5%2018Mathematics< 15%21.7% 22.3%20.4%201822.9%2018Science< 15%20.7% 21.1%18.8%201822.3%2018< 9 %6.2%11.0%6.2% 9.6%Men6.4%12.5%7.1%11.1%Women6.0%9.4%5.2%8.0%Cities5.2%9.6%5.3%8.6%Rural areas5.5%12.2%5.9%10.0%Native6.1%10.0%6.2%8.3%EU-born14.1%u20.7%8.9%u20.3%Non EU-born7.7%u23.4%4.2%u22.1%6Equity indicator (percentage points)::18.6201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :18.4%60.1%45%31.0%36.5%34.5%42.0%Men24.3%31.2%26.6%36.5%Women38.1%41.8%42.9%47.6%Cities43.2%46.2%49.6%52.2%Rural areas22.8%26.9%25.2%30.2%Native31.1%37.7%33.4%43.0%EU-born32.6%32.7%52.0%39.5%Non EU-born21.2%27.0%46.4%35.7%42.1% 38.3%44.6%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetCzechiaEU27CzechiaEU27 
                                                 
                                                 
 
   
 
to  (primary)  outpatient  settings.  Overall,  reforms 
have  been  focusing  on  strengthening  primary 
healthcare,  improving  the  integration  of  health 
services,  and  digitalising  the  health  system. 
Reforms  also  aimed  at  reforming  public  health 
the  country’s  main 
services  and  addressing 
preventable  risk  factors  for  ill  health,  including 
tobacco  use,  alcohol  consumption,  obesity  and 
exposure 
threats.  Public 
environmental 
expenditure  on  health  is  projected  to  increase  by 
0.9  percentage  points  (pps)  of  GDP  by  2070  (the 
same  as  for  the  EU  overall),  raising  long-term 
fiscal sustainability concerns. 

to 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

AWG reference scenario  
Source: European Commission / EPC (2021) 

The  number  of  doctors  and  nurses  (per 
1 000 population)  is  slightly  above  the  EU 
average.  Nevertheless,  there  is  an  issue  of  an 
uneven  distribution  of  health  workers,  leading  to 
concerns  about  equal  accessibility.  The  pandemic 
response  highlighted  areas  for  improvement  in 
crisis  preparedness  and  workforce  capacity, 
especially 
regions.  Retaining  and 
strengthening the health workforce is high on the 
political agenda. 

in  some 

invest  EUR  1.1  billion 

Through  its  recovery  and  resilience  plan, 
Czechia  will 
in 
healthcare (16.1% of the plan’s total value). 
Investments  mainly  focus  on  oncological  care  (in 
particular setting up a Czech oncological institute), 
e-health, 
development. 
Milestones  and  targets  are  being implemented  by 
the Ministry of Health according to the plan.  

research 

and 

and 

ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Czechia.  

Life  expectancy  in  Czechia  remains  in  the 
lower  half  of  EU  countries,  and  the  gap 
between  Czechia  and  the  EU  average 
widened  compared  to  2020.  However,  it  is 
among  the  highest  in  the  central  and  eastern  EU 
countries.  The  continued  drop  in  life  expectancy 
since 2019 contrasts with the previous continuous 
increase since 2009. It can be mainly explained by 
successive  waves  of  COVID-19  cases  and 
deaths (119),  which  have  set  the  country  back  and 
have widened the gap with the EU average. Cancer 
mortality  is  above  the  EU  average.  Other  main 
mortality  causes  are  cardiovascular  diseases, 
followed by COVID-19 in 2020. 

Health spending substantially increased over 
the  course  of  the  pandemic,  both  in  relation 
to GDP and in nominal terms. This is in line with 
the upward trend in all Member States in 2020. In 
general,  Czechia  spends  on  average  less  on 
healthcare  than  other  EU  countries,  while  the 
share  of  public  funding  is  higher  than  the  EU 
average. Out-of-pocket expenditure in the country 
remains among the lowest of all EU countries.  

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

Spending  on  preventive  care  increased  by 
53% from 2019 to 2020 (compared to a 26% 
increase for the EU overall). This is mainly due 
to  increased  spending  on  early  disease  protection 
programmes.  Spending  on  inpatient  services  is 
comparatively  high (in  relation  to  total  healthcare 
spending), showing room for shifting care delivery 

(119) Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023) 

61 

79.179.179.179.378.377.280.980.981.081.380.480.1201620172018201920202021CzechiaEU6.65.60.90.902468EUCzechia% of GDP20192070increase 
 
             
                                                 
 
             
 
Table A16.1: Key health indicators 

Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

62 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)127.2124.2120.3122.5NA91.7 (2020)Cancer mortality per 100 000 population272.9272.1272.4267.2NA242.2 (2020)Current expenditure on health, % GDP 7.47.57.69.2NA10.9 (2020)Public share of health expenditure, % of current health expenditure84.484.985.087.7NA81.2 (2020)Spending on prevention, % of current health expenditure 3.02.92.93.8NA3.4 (2020)Acute care beds per 100 000 population411408404404NA387.4 (2019)Doctors per 1 000 population *NA4.04.14.1NA3.9 (2020)Nurses per 1 000 population *8.58.58.68.7NA8.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption for CZ and CY) **NANA16.913.413.714.5 (2021) 
 
   
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

This  Annex  showcases  the  economic  and 
social regional dynamics in Czechia,  providing 
an  update  on  economic,  social  and  territorial 
cohesion 
regions 
compared  with  the  EU  as  a  whole  and  the  main 
regional economic recovery challenges. 

in  and  among 

the  Czech 

Regional disparities in Czechia are stable but 
remain  significant.  The  country  has  a  highly 
developed  capital  city  where  GDP  per  capita  was 
203% of the EU-27 average in 2020. In the rest of 
the  country,  there  are  six  moderately  developed 
regions, where the GDP per capita ranged between 
73%  and  85%  (these  are  the  NUTS  2  regions  of 
Moravskoslezko,  Střední  Morava,  Střední  Čechy 
Jihovýchod,  Severovýchod,  andJihozápad)  and  a 
poorer region (Severozápad) where GDP per capita 
was 61% of the EU average. 

Map A17.1:  Change in GDP per capita index in 
Czech NUTS 2 regions (2010-2020) 

The  Czech  regions  are  catching  up  and 
converging  on  the  EU  average,  albeit  at 
different  speeds.  However,  a  clear  exception  is 
the  Severozápad  region,  which  is  persistently 
lagging  behind.  Here  the  GDP  per  capita  in  2021 
was 61% of the EU average, compared to 63% in 
2010.  The  gap  is  reflected  also  in  the  values  of 
the  Regional  Competitiveness 
(RCI). 
Severozápad  has  a  RCI  of  86.6,  while  the  capital 
region of Prague has a RCI of 114.3. 

Index 

As a consequence of the COVID-19 pandemic 
and  the  related  containment  measures,  GDP 
per  capita  fell  in  all  Czech  regions  between 
2019  and  2020.  The  most  severe  drop  was 
recorded  not  only  in  the  less  developed  region  of 
Severozápad 
in  the  more 
(-6.4%),  but  also 
developed  regions  like  Střední  Čechy  (-7.1%)  and 

least  affected  were  the 
Praha  (-6.4%).  The 
regions  of  Jihovýchod 
moderately  developed 
(-2.5%)  and  Severovýchod 
(-2.0%).  Regional 
disparities slightly decreased within the country as 
a result. 

Investment  in  human  capital  and  R&D  is 
considerably higher in the capital region. The 
less  developed  region  of  Severozápad  lies  at  the 
other  end  of  the  spectrum.  64.7%  of  the  capital 
region's population has a high level of educational 
attainment but only 20.1% in Severozápad. 10.4% 
of  the  capital  region's  workers  were  employed  in 
high technology sectors in 2020 while only 2.1% in 
the Severozápad region.  

Graph A17.1: GDP per capita (2010) and GDP per 
capita growth (2011-2020) 

Source: EUROSTAT  

developed 

other  moderately 

The  evolution  of  labour  productivity  shows 
that  all  regions  are  catching  up  with  the  EU 
average.  Real  productivity  growth  was  highest  in 
Praha, which grew by 1.59% a year in 2011-2020. 
The 
regions 
experienced  lower  productivity  growth,  although 
most  of  them  still  grew  by  more  than  the  EU 
average  (0%)  –  ranging  from  1.67%  in  Střední 
Čechy  to  0.94%  in  Jihozápad.  Czechia's  poorest 
region  (Severozápad)  no  longer  had  the  lowest 
productivity growth in 2020 (it stabilised at 0.29% 
instead 
per  year 
registered 
real 
productivity  growth  turned  negative  (-0.02%  per 
year  in  2011-2020).  This  mixed  performance  at 
regional  level  led  to  an  average  annual  national 
productivity  growth  of  1.11%  in  2011-2020  that 
was above the EU average.  

in  2011-2020).  This  was 
in  Moravskoslezsko,  where 

In  2020,  Czechia's  labour  productivity (120)  was 
below the EU average (at 87%). It was by far the 
highest  in  the  capital  region  (132%  of  the  EU 
average)  in  2020,  compared  with  89%  in  the 

(120) Gross Value Added, GVA (Purchasing Power Standard, PPS) 

per person employed.  

63 

0.00.51.01.52.02.5507090110130150170190210Annual real GDP per head growth2011-2020 (average % change on the preceding year)GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regionsNational averageEU27 
 
 
 
 
 
  
                                                 
 
 
Table A17.1: Selected indicators at regional level in Czechia 

Source: EUROSTAT 

in  Severozápad  has  also  been 
population 
significantly affected by foreclosures and personal 
bankruptcies. In 2020, more than 15% of persons 
were  in  foreclosure  in  Severozápad  –  almost 
double the country’s average (8%). 

The  differences  in  productivity,  investment, 
education  and  poverty  are  only  partially 
labour  market  figures. 
reflected 
Czechia's  unemployment 
in  2021  was 
remarkably  low  (2.8%)  and  did  not  vary  greatly 
between regions.  

in  the 

rate 

the 

low 

level 

currently 

Despite 
of 
unemployment, there are structural problems 
in  the  Severozápad  and  (to  a  lesser  extent) 
Moravskoslezko  regions.  Those  problems  are 
both  economic  (e.g.  production  with  lower  value 
added,  old  and  declining  industries,  and  low 
incomes) and social (e.g. an ageing population, low 
education  levels  and  migration).  These  disparities 
are  likely  to  grow  in  the  coming  years  as  the 
economy continues to develop.  

this  economic 

The  COVID-19  pandemic  caused  the  biggest 
economic  recession  since  the  Second  World 
War.  However, 
fallout  was 
distributed  unequally.  For instance,  tourist  regions 
were hit the hardest. Border regions also suffered 
more  than  others  as  various  border  closures 
affected  cross-border  traffic,  commuting  and 
services. 

second most productive region (Střední Čechy) and 
only  67% 
region 
in 
(Severozápad).  

least  productive 

the 

These  disparities  are  due  to  a  number  of 
reasons.  Connectivity,  including  accessibility 
to  the  country’s  transport  network  is  still 
relatively  uneven  and  limits  the  development 
prospects of the Czechia's less developed regions. 
In Praha more than 88.7% of the population living 
within a radius of 120km could be reached in less 
than 90 minutes in 2018 on average. In Jihozápad 
and  Severovýchod,  two  transition  and  moderately 
developed  regions,  this  ratio  was  only  just  over 
50%. 

There  is  a  clear  tendency  for  the  population 
to  concentrate 
in  the  most  prosperous 
regions.  Population  grew  in  all  regions  in  2011-
2020  –  with  the  exception  of  three  regions  that 
had  the  lowest  GDP  per  capita  in  the  country. 
Population  fell  by  1.5%  in  Střední  Morava,  2%  in 
Severozápad  and  3.4% 
in  Moravskoslezsko. 
However,  the  population  of  the  Praha  and  Střední 
Čechy regions grew by 7.9% and 10% respectively 
in  the  same  period  – well  above  the  national 
average (2%) and the EU average (2%). 

The  same  pattern  of  regional  disparities 
between  the  less  developed  regions  and 
other  regions  can  also  be  seen  in  the  share 
of  population  at  risk  of  poverty  and  social 
exclusion.  However,  it  is  important  to  note  that 
this  share  is  generally  low  in  Czechia  (10.7%  in 
2021).  The  share  was  much  higher  in  the  less 
in 
developed  regions,  at  14.3%  and  17.8% 
Moravskoslezsko  and  Severozápad 
latter 
recorded the highest share in Czechia) but was still 
below  the  EU  average  even  in  those  regions.  The 

(the 

64 

NUTS region nameGDP per head (purchasing power standard/PPS)Productivity (gross value added (PPS) per person employed)R&D expenditureCO2 emissions from fossil fuels per headUnemployment ratePeople at-risk-of-poverty or social exclusionPopulation aged 30-34 with high educational attainmentEarly school leaversEU27 = 100,2021EU27 = 100, 2020% of GDP,2020tCO2 equivalent,2021% of active population,2021% of population, 2021% of population aged 30-34,2021% of population aged 18-24,2021European Union100100287224210Czechia9387211311376Praha2031323329651Střední Čechy798921137306Jihozápad777718210299Severozápad61670354142014Severovýchod757619212306Jihovýchod85813829404Střední Morava757518212376Moravskoslezsko7372112515318 
 
  
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

Czechia’s banking sector, which is reasonably 
well  developed  compared  to  other  eastern 
European  countries,  has  remained  resilient 
despite the headwinds it has faced in recent 
years.  The  total  assets  of  the  country’s  financial 
sector  were  equivalent  to  178%  of  GDP  in 
December  2021,  most  of  which  were  held  by  the 
banks  (145%  of  GDP).  85%  of  all  assets  in  the 
country’s  banking  sector  belonged  to  foreign-
controlled entities. Bank capitalisation in Q2-2022 
remained  strong,  with  a  capital-adequacy  ratio  of 
19.6%,  slightly  below  the  end-2021  level  due  to 
dividend pay-outs and total  loan growth, but with 
a  large  share  accounted  for  by  Tier  1  capital.  As 
Czech  banks  have  been  subject  to  a  minimum 
requirement  for  own  funds  and  eligible  liabilities 
(MREL) since the start of 2022, they are currently 
building  it  up.  The  countercyclical  buffer  (CCyB) 
has  reached  2.5%  as  of  1 April 2023.  Bank 
profitability  improved  significantly  in  2022,  well 
above the EU average, as return-on equity reached 
15.4%  (up  from  6.7% in 2020), mainly  due to: (i) 
the  rise  in  interest  rates  for  loans  combined  with 
slower passing on of these higher rates to deposit 
rates;  (ii)  strong  credit  growth;  and  (iii)  low 
impairment losses. The much lower cost-to-income 
ratio,  as  well  as  the  rapid  growth  in  credit,  also 
contributed to this development. 

leading 

income, 

Asset  quality  is  strong,  but  credit  risk  has 
increased,  as  loans  for  both  households 
(especially  mortgage 
loans)  and  non-
financial  corporations  have  been  growing. 
Over  the  last  5  years,  the  increase  in  real-estate 
prices  has  significantly  exceeded  growth 
in 
average  household 
to  new 
mortgages  of  a  larger  size.  Households  may  be 
exposed  to  risks  associated  with  growth  in  the 
burden  of  debt  service,  due  to  a  suppression  of 
disposable  income  driven  by  inflation  and  to  an 
increase 
through 
mortgages. As the rise of mortgage interest rates 
has also been significant, the risk of a future price 
correction  in  the  Czech  housing  market  poses  an 
additional threat. At end-2022, 67% of mortgages 
had  an  interest  rate  fixation  of  up  to  five  years, 
most  of  them  having  a  five-year  fixed  interest 
rate.  Some  of  these  fixed  terms  will  end  in  the 
next 12 months. However, in April 2022, the Czech 
National  Bank  (CNB)  set  binding  upper  limits  on 
the  loan-to-value  ratio,  the  debt-to-income  ratio, 
and  the  debt-service-to-income  ratio.  The  CNB 
took  these  measures  to  respond  to  both  the 

indebtedness  mainly 

of 

is  also  an 

growth in  systemic  risk  associated  with  consumer 
mortgage  loans  and  the  potential  for  that  risk  to 
increase  further.  The  July  2022  bank-lending 
survey  confirmed  that  there  had  recently  been  a 
tightening in lending conditions and a decrease in 
mortgage  demand.  The  survey  also  revealed  that 
the  tightening  of  monetary  policy  had  already 
resulted  in  a  decline  in  the  volume  of  new 
mortgages.  Loans  to  non-financial  corporations 
increased  in  2022,  mostly  to  pay  for  ongoing 
activity and to cover the increased expenses from 
increasing 
energy  costs.  There 
preference  for  euro-denominated  loans  (demand 
for  which  grew  by  12  percentage  points  between 
August  2021  and  August 2022).  Given that these 
loans  are  granted  only to companies  with  income 
in euro, this poses limited currency risks. The non-
performing-loan  (NPL)  ratio  reached  a  historical 
low  of  1.4%  in  June  2022.  However,  risks  have 
increased  since  the  beginning  of  2022,  as 
indicated  by  an  increase  in  the  number  of  loans 
classified as being of increased risk (Stage 2). This 
increase  would  warrant  higher  volumes  of  net 
provisioning.  However, 
total  provisions  have 
decreased in the last 2 years, which could also be 
explained  by  the  small  proportion  of  banks  that 
were  expecting  credit  losses  to  increase  in  Q3-
2022.  The  NPL  coverage  ratio  declined  slightly  to 
51.5% in Q2-2022, which is above the EU average, 
but still below Czechia’s 2021 level of 52.2%. The 
direct exposures of the domestic banking sector to 
Russia,  Ukraine  and  Belarus  are  small.  However, 
higher 
for  both  non-financial 
corporations  and  households  is  likely  due  to  the 
indirect  effects  generated  by:  (i)  the  limited 
economic  activity;  (ii)  disrupted  supply  chains  and 
(iii)  increased  inflation.  Following  the  stress  tests 
conducted  by  the  CNB,  from  a  macroprudential 
policy  perspective,  the  potential  credit  losses  and 
related  growth  in  risk  weightings  in  an  adverse 
scenario  would  require  a  balanced  approach  to 
banks’  capital  surplus  and  capital  buffers. 
However,  banks  remain  resilient,  with  high  levels 
of  liquidity  and  capital,  while  the  CNB  is  closely 
monitoring the market. 

credit 

risk 

Czechia has relatively low levels of financial-
market depth, liquidity, and diversification. It 
also has a relatively small investor base. This 
is  despite  the  country’s  relatively  well-developed: 
(i) legal framework; (ii) regulatory framework; and 
(iii) 
infrastructure.  However, 
Czechia’s financial sector is better developed than 

capital-market 

65 

 
 
 
 
Table A18.1: Financial soundness indicators 

(1) Last data: Q3 2022. 
(2) Data is annualized. 
Source: ECB, Eurostat, S&P Global Capital IQ Pro. 

that  of  other  central  and  eastern  European 
countries. The debt-capital market is mainly driven 
by sovereign issuance, accounting for 87% of total 
outstanding  bond 
(May  2022).  The 
issuance 
is  rather  small  and 
corporate  bond  market 
concentrated,  with  over  79%  of  the  outstanding 
amount  issued  by  banks  and  other  financial 
institutions.  In  2022,  market  activity  in  the  Czech 
debt-capital market was lower than in the previous 
year,  due  to  volatile  capital  markets  affected  by 
inflationary 
unstable 
geopolitical situation. 

pressures 

and 

the 

in 

the 

The Czech insurance sector is relatively small 
(in  particular 
life-insurance  sector), 
representing  4.8%  of  the  financial  sector.  At  the 
end  of  2020,  the 
insurance  sector  had  a 
penetration  rate  (the  ratio  of  total  insurance 
premiums  to  GDP)  of  2.9% 
(of  which  2.1 
percentage  points  were  accounted  for  by  non-life 
insurance) against an average EU penetration rate 
of 7.3%. Czechia also had an insurance density of 
EUR  508,  against  an  EU  average  of  EUR  2 181. 
robust,  with  a 
Insurance 
comfortable  ratio  of  eligible  own  funds  to  the 
solvency  capital  requirement  of  207.8%  in  mid-
2022.  Gross  premiums  written  continued  their 
upward  trend  last  year,  increasing  by  7.5%  year-
on-year at Q3-2022, mainly due to growth in non-
life  insurance.  The  concentration  in  the  market  is 
high  in  both  the  non-life  and  life  segments,  with 
two  insurers  accounting  for  50%  of  all  written 
premiums.  Czech  insurers  face  risks  related  to 
climate  change,  but  for  the  moment  the  sector 
remains  resilient  and  is  able  to  face  potential 

companies  are 

adverse  shocks,  as  shown  by  the  stress  tests 
conducted by the CNB.  

66 

201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)143.0135.6133.2141.8145.4133.7276.8207.9Share (total assets) of the five largest banks (%)63.764.564.865.365.4--68.7Share (total assets) of domestic credit institutions (%)18.38.68.98.213.413.8-60.2NFC credit growth (year-on-year % change)6.16.33.9-0.68.16.8-9.1HH credit growth (year-on-year % change)8.47.96.66.810.26.6-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)2.82.11.71.91.71.41.81.8- capital adequacy ratio (%)18.118.319.722.121.219.918.619.8- return on equity (%)213.013.313.96.710.615.46.16.6Cost-to-income ratio (%)147.147.047.049.648.940.960.651.8Loan-to-deposit ratio (%)194.9101.9103.9102.1100.691.988.678.0Central bank liquidity as % of liabilities0.00.00.00.00.00.0-2.9Private sector debt (% of GDP)80.383.078.681.778.8--120.7Long-term interest rate spread versus Bund (basis points)66.3158.5180.1163.8227.8319.1-93.3Market funding ratio (%)48.247.046.046.041.6-50.840.0Green bonds issued to all bonds (%)0.00.00.00.00.30.43.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
 
 
   
 
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview  of  Czechia’s  tax  system.  It  includes 
information on the tax structure (the types of tax 
that Czechia derives most of its revenue from), the 
tax  burden  on  workers,  and  the  progressivity  and 
redistributive  effect  of  the  tax  system.  It  also 
provides 
tax  collection  and 
compliance.  

information  on 

Czechia’s  tax  revenue  is  relatively  low  in 
relation  to  its  GDP.  Table  A19.1  shows  that 
Czechia’s tax revenue as a percentage of GDP was 
considerably  below  the  EU  aggregate  in  2021. 
Total  tax  revenue  has  increased  by  about  3 
percentage  points  (pps)  of  GDP  since  2010  but 
remains  below  the  EU  average  (36%  in  2021 
compared with 40.6% in the EU; see Table A19.1). 
Tax revenue in all categories remains below the EU 
aggregate,  except  for  consumption  taxes  (11.4% 
of GDP in 2021, compared with 11.2% in the EU). 
Revenue  from  labour  taxes  has  increased  since 
2010  (by  2.2  pps  of  GDP  to  19.2%  in  2021)  and 
revenue  from  consumption  taxes  increased  to  a 
lesser extent over the same period (by 0.7 pps to 
11.4  in  2021),  while  revenue  from  capital  taxes 
remained about constant (5.3% of GDP in 2021).  

Revenue from environmental taxes is close to the 
EU  average  (at  1.8%  of  GDP,  compared  with  the 
EU  average  of  2.2%),  but  revenue  from  property 
taxation  (including  recurrent  property  taxation) 
remains very low (expressed as a % of GDP and as 
a  %  in  total  tax  revenue)  (see  Graph  A19.1).  This 
indicates  that  there  would  be  room  to  increase 
property  and  environmental  taxation  in  order  to 
address fiscal sustainability challenges.  

Czechia’s  labour  tax  burden  is  slightly  less 
progressive than the EU average. Table A19.1 
shows  that  the  tax  wedge  for  single  workers 
earning  50%  of  the  average  wage  decreased 
significantly  (34.9%  in  2021  against  39.7%  in 
2020). However, it is still above the EU average of 
31.7%  (see  also  Graph  A19.2).  Similarly,  the  tax 
wedge  for  second  earners  earning  67%  of  the 
average wage was 43.3%, above the EU average. 
The  total  tax  burden  on  lower  earnings  has 
decreased as a result of a 2021 tax reform, which 
has  reduced  the  tax  base  and  made  the  tax 
schedule  slightly  more  progressive.  The  ability  of 
the  tax  and  benefit  system  to  reduce  inequality 
(measured  by  its  ability  to  reduce  the  GINI 
coefficient)  has  decreased  since  2010  and 
remains  below  the  EU  average  since  2010  (see 
Table A19.1).  

Table A19.1: Taxation indicators 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average 
For more data on tax revenue 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 of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the Data on 
Taxation webpage, https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823. 
Source: European Commission, OECD. 

67 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)32.935.935.935.937.939.940.040.6Labour taxes (as % of GDP)17.019.220.219.220.020.721.320.9Consumption taxes (as % of GDP)10.711.511.311.410.811.110.711.2Capital taxes (as % of GDP)5.15.24.45.37.18.18.08.5Total property taxes (as % of GDP)0.50.50.30.31.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.20.20.20.21.11.21.21.1Environmental taxes as % of GDP2.32.01.91.82.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)35.739.439.735.334.933.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)42.144.044.040.039.841.040.139.939.639.7Corporate income tax - effective average tax rates (1) (*)17.918.318.319.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)8.06.76.77.28.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)30.031.431.640.7VAT Gap (% of VAT total tax liability, VTTL)14.211.911.09.1CzechiaEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
 
       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph A19.1: Tax revenue from different tax types, % of total tax revenue 

Source: European Commission 

Graph A19.2: Tax wedge for single and second 
earners, % of total labour costs, 2022 

Second earner tax wedge assumes first earner at 100% of 
the average wage and no children. 
Source: European Commission 

Czechia is doing relatively well in the area of 
tax administration digitalisation, but there is 
room  for  improvement  in  compliance  and 
enforcement.  Outstanding 
tax  arrears  have 
remained  stable  at  31.4%  of  total  net  revenue  in 
2020. This is below the EU-27 average of 40.7%, 
but  that  average  has  been  inflated  by  very  large 
values  in  a  few  Member  States.  The  VAT  gap  (an 
indicator of the effectiveness of VAT enforcement

and  compliance,  where  a  low  gap  indicates  high 
effectiveness) decreased  in  Czechia by  2.3  pps  to 
11.9%,  but  this  is  still  above  the  EU-wide  gap  of 
9.1%  (see  Table  A19.1).  Czechia  has  also  been 
authorised to  apply  a derogation  that  allows it to 
exempt  from  VAT  taxable  persons  whose  annual 
turnover  is below  EUR  85  000  (the threshold  had 
been  EUR  35  000).  This  means  that  Czechia  will 
collect  less  tax  from  small  enterprises  that  are 
eligible  for  and  opt  into  this  scheme.  However, 
Czechia  estimates  that  this  will  reduce  VAT 
revenue  by  less  than  2%  and  will  therefore  not 
significantly  affect  total  tax  revenue  collected  at 
the stage of final consumption. Czechia anticipates 
that  increasing  the  threshold  will  reduce  the 
burden  on  the  tax  administration  by  lowering  the 
requirement  to  manage  and  inspect eligible  small 
enterprises  that  opt  into  this  scheme.  Finally, 
average 
corporate 
forward-looking  effective 
income  tax  rates  were  moderately  below  the  EU 
average in 2020.  

68 

34.937.439.841.843.320253035404550100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - CZSingle earner - EU averageSecond earner -  CZSecond earner -  EU average51.4327.5421.0153.5731.8014.63Tax revenue shares in 2021, Czechia (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital4.824.320.271.000.030.190.542.640.312.750123456Czechia -environmentaltaxationEU -environmentaltaxationCzechia - propertytaxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Czechia and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
 
       
 
 
 
 
       
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

69 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)5.90.23.1-5.53.62.50.22.6Potential growth (y-o-y)4.51.72.41.40.52.11.51.6Private consumption (y-o-y)3.60.62.9-7.24.1-0.9-2.23.3Public consumption (y-o-y)0.2-0.12.34.21.40.61.71.5Gross fixed capital formation (y-o-y)7.1-1.94.0-6.00.86.22.82.7Exports of goods and services (y-o-y)18.14.24.5-8.06.95.75.14.4Imports of goods and services (y-o-y) 15.52.94.7-8.213.35.74.54.2Contribution to GDP growth:Domestic demand (y-o-y)3.8-0.32.8-4.22.41.30.12.5Inventories (y-o-y)0.6-0.40.1-0.94.81.0-0.3-0.2Net exports (y-o-y)1.51.00.1-0.4-3.60.20.40.2Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.5-0.10.5-0.2-0.71.00.50.4Capital accumulation (y-o-y)1.10.80.60.60.60.70.70.7Total factor productivity (y-o-y)3.01.01.21.00.60.40.30.4Output gap3.5-0.10.3-4.3-1.4-1.1-2.3-1.3Unemployment rate7.26.44.22.62.82.22.82.6GDP deflator (y-o-y)2.10.92.04.33.38.611.35.5Harmonised index of consumer prices (HICP, y-o-y)2.32.71.43.33.314.811.93.4HICP excluding energy and unprocessed food (y-o-y)1.82.11.53.73.812.49.03.8Nominal compensation per employee (y-o-y)6.02.54.63.15.05.57.36.6Labour productivity (real, hours worked, y-o-y)4.90.32.02.40.4-1.1-1.31.1Unit labour costs (ULC, whole economy, y-o-y)1.32.12.57.31.84.87.84.4Real unit labour costs (y-o-y)-0.71.20.52.8-1.5-3.5-3.1-1.0Real effective exchange rate (ULC, y-o-y)3.62.00.7-0.14.85.56.00.9Real effective exchange rate (HICP, y-o-y)3.42.40.30.33.89.7..Net savings rate of households (net saving as percentage of net disposable income)7.27.47.214.714.8...Private credit flow, consolidated (% of GDP)7.94.33.80.62.9...Private sector debt, consolidated (% of GDP)57.677.581.281.778.8...of which household debt, consolidated (% of GDP)18.128.631.133.934.4...of which non-financial corporate debt, consolidated (% of GDP)39.548.950.147.744.4...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)..2.31.61.4...Corporations, net lending (+) or net borrowing (-) (% of GDP)-2.7-0.9-1.41.4-2.0-5.1-1.01.1Corporations, gross operating surplus (% of GDP)28.628.228.727.328.328.131.031.0Households, net lending (+) or net borrowing (-) (% of GDP)1.01.92.06.26.24.73.22.3Deflated house price index (y-o-y)4.6-0.94.65.416.40.8..Residential investment (% of GDP)4.44.44.04.64.74.8..Current account balance (% of GDP), balance of payments-3.2-2.30.62.0-2.8-6.1-3.2-1.3Trade balance (% of GDP), balance of payments1.83.56.46.72.8-0.1..Terms of trade of goods and services (y-o-y)-0.5-0.70.51.5-0.1-4.23.11.8Capital account balance (% of GDP)0.30.91.11.21.70.1..Net international investment position (% of GDP)-27.8-43.5-29.5-16.3-14.5-19.7..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)17.88.623.737.336.928.3..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)30.541.958.661.372.163.0..Export performance vs. advanced countries (% change over 5 years)75.229.72.38.73.8...Export market share, goods and services (y-o-y)10.0-0.91.22.4-4.11.72.40.6Net FDI flows (% of GDP)-4.8-1.7-1.2-2.6-0.5-2.5..General government balance (% of GDP)-2.0-3.6-0.1-5.8-5.1-3.6-3.6-3.0Structural budget balance (% of GDP)..-0.1-4.1-4.5-3.2-2.7-2.4General government gross debt (% of GDP)27.736.537.037.742.044.142.943.1forecast 
 
 
 
     
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks for Czechia over the short, medium and 
long term. It follows the same multi-dimensional 
approach  as  the  European  Commission’s  2022 
Debt Sustainability Monitor, updated based on the 
Commission’s 2023 spring forecast. 

1  -  Short-term  risks  to  fiscal  sustainability 
low  overall.  The  Commission’s  early-
are 
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  A21.2). (121)  Gross 
financing needs are expected to remain limited at 
around  8%  of  GDP  in  the  short  term  (i.e.  over 
2023-2024),  and  on  a  declining  path  compared 
with  the  recent  peak  in  2021  (Table  A21.1,  Table 
1). Financial markets’ perceptions of sovereign risk 
remain  positive,  as  confirmed  by  the  spread  and 
the ‘AA’ rating that the three major rating agencies 
assigned to Czech government debt. 

2 - Medium-term risks to fiscal sustainability 
are medium overall.  

The  DSA  for  Czechia  shows  that,  under  the 
baseline,  the  government  debt-to-GDP  ratio 
is  expected  to  increase,  but  remain  below 
60% of GDP over the medium term (at 53.5% 
of  the  GDP  in  2033)  (Graph  1) (122) (123).  The 
assumed  structural  primary  balance  (a  deficit  of 
1.1%  of  GDP)  seems 
relatively  ambitious 
compared to past fiscal performance. At the same 
time,  the  baseline  projections  up  to  2033  benefit 

(121) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(122) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary deficit, before ageing costs, of 1.1% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10; (iv) 
real GDP growth rates from the Commission 2023 spring 
forecast until 2024, followed by EPC/OGWG ‘T+10 
methodology projections between T+3 and T+10, i.e. for 
2025-2033 (on average 1.4%); (v) ageing costs in line with 
the 2021 Ageing Report (European Commission, Institutional 
Paper 142, November 2020). For information on the 
methodology, see the 2022 Debt Sustainability Monitor. 

from a favourable (although diminishing) snowball 
effect until 2030, thanks to the favourable impact 
of  NextGenerationEU,  with  real  GDP  growth  at 
1.4%  of  GDP  over  2025-2033.  Government  gross 
financing needs are expected to increase over the 
projection period, reaching around 11% of GDP in 
2033, above the level forecast for 2024. 

The  baseline  projection 
is  stress-tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph  1).  For  Czechia,  reverting  to  historical 
trajectories under the ‘historical structural primary 
balance 
(SPB)’  scenario  would  support  debt 
reduction.  If  the  SPB  gradually  converged  to  a 
deficit  of  0.9  %  of  GDP  (its  historical  15-year 
average),  the  projected  debt-to-GDP  would  be 
slightly lower (by 1.4 pps.) than in the baseline in 
2033. Reducing the SPB level permanently by half 
of  the  cumulative  forecast  change  under  the 
‘lower  structural  primary  balance  (SPB)’  scenario 
would  lead  to  a  higher  government  debt-to-GDP 
ratio by 2033 (about 5 pps of GDP) as compared 
with  the  baseline.  A  permanent  worsening  of  the 
macro-financial  conditions,  as  reflected  under  the 
‘adverse interest-growth rate differential’ scenario 
(i.e. 1 pp. higher than the baseline) would also lead 
to  higher  government  debt-to-GDP  ratio  (about  4 
pps)  by  2033,  as  compared  with  the  baseline.  A 
temporary  worsening  of  financial  conditions,  as 
reflected  in  the  ‘financial  stress  scenario’  (i.e. 
temporarily  increase  of  interest  rates  by  1  pp.), 
would  provide  a  similar,  though  slightly  higher, 
public  debt-to-GDP  ratio  by  2033  compared  with 
the baseline.  

Additionally, stochastic projections indicate a 
low  sensitivity  of  these  projections  against 
plausible  unforeseen  events  (Graph  2) (124). 
to  49% 
These  stochastic  simulations  point 
probability of the debt ratio in 2027 being greater 
than  in  2022,  entailing  low  risk  given  the  initial 
low  debt  level.  In  addition,  such  shocks  point  to 
some  uncertainty  (i.e.  the  difference  between  the 
10th  and  90th  debt  distribution  percentiles) 
surrounding 
the  government  debt  baseline 
projections.  

(123) Table 1 shows the baseline debt projections and its 

(124) The stochastic projections show the joint impact on debt of 

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.  

2000 different shocks affecting the government’s budgetary 
position, economic growth, interest rates and exchange rates. 
The cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

70 

 
 
                                                 
                                                 
 
 
diversified  and  large  investor  base),  the  currency 
denomination  of  debt,  and  to  a  lesser  extent 
Czechia’s  negative  net  international  investment 
position.  

3  -  Long-term  risks  to  fiscal  sustainability 
are medium overall. (125)  

The  S2  indicator  (at  5.8  pps.  of  GDP)  points 
to  medium  fiscal  sustainability  risks.  The 
indicator  shows  that,  relative  to  the  baseline,  the 
SPB would need to significantly improve to ensure 
debt stabilisation over the long term. This result is 
underpinned  by  the  projected  increase  in  ageing-
related costs (contribution of 4.4 pps. of GDP) and 
to  a 
initial 
lesser  extent,  the  unfavourable 
budgetary position (1.4 pps. of GDP). Ageing costs’ 
developments are primarily driven by the projected 
increase 
expenditure 
(contribution  of  1.9  pps.  of  GDP).  Health  and  in 
particular  long-term  care spending  is  projected  to 
(joint 
increase  over 
contribution  of  2.0  pps.  of  GDP)  (Table  2).  Hence, 
additional  measures  may  be  required  to  further 
improve  the  efficiency  and  fiscal  sustainability  of 
the Czech health and long-term care systems. 

the  projection  period 

pension 

public 

of 

Combined  with  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term  risks  are  assessed  as  medium.  Indeed, 
the  S1  sustainability  gap  indicator  signals  that  a 
moderate  consolidation  effort  of  4.1  pps.  of  GDP 
would be needed to reduce debt to 60% of GDP by 
2070. This result is mainly driven by the projected 
increase  of  the  ageing-related  public  expenditure 
(contribution  of  3.3  pps.  of  GDP)  and  to  a  lesser 
extent  the  unfavourable  initial  budgetary  position 
(1.2 pps. of GDP) (Table 2).  

Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  one 
hand,  risk-increasing  factors  are  related  to  the 
recent  increase  of  interest  rates.  On  the  other-
hand, 
the 
lengthening  of  debt  maturity  in  recent  years, 
(with  a 
relatively  stable 

financing  sources 

risk-mitigating 

factors 

include 

(125)The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

71 

 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A21.1: Debt sustainability analysis - Czechia 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Czechia 

Source: Commission services (for further details on the Commission's multidimensional approach, see the 2022 Debt 
Sustainability Monitor). 

72 

Table 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)37.742.044.142.943.143.043.343.844.745.947.449.151.253.5Changes in the ratio7.64.42.1-1.20.2-0.10.30.50.91.21.51.82.12.2of whichPrimary deficit5.04.32.52.31.61.51.41.41.41.51.71.81.92.0Snowball effect1.2-1.7-3.1-3.2-2.0-1.6-1.1-0.9-0.5-0.4-0.20.00.20.2Stock-flow adjustments1.41.72.7-0.30.50.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)10.810.910.17.57.67.37.57.78.18.59.09.610.310.8S1S2Overall index  (pps. of GDP)4.15.8of which Initial budgetary position1.21.4Debt requirement-0.3Ageing costs3.34.4of which    Pensions1.61.9     Health care0.60.7     Long-term care0.81.3Others0.30.4Table 2. Breakdown of the S1 and S2 sustainability gap indicators01020304050607020202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p90010203040506020202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallMEDIUMMEDIUMMEDIUMMEDIUMMEDIUMLOWDebt level (2033), % GDP53.552.058.457.553.9Debt peak year20332033203320332033Fiscal consolidation space33%32%36%33%33%Probability of debt ratio exceeding in 2027 its 2022 level49%Difference between 90th and 10th percentiles (pps. GDP)25.6(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference 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.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWMEDIUMMEDIUMMEDIUMMEDIUM 
 
 
   
 
 
   
 
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX  

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Czechia. (126)  
Czechia was selected for an in-depth review in the 
in-depth 
2023  Alert  Mechanism  Report.  This 
review  (IDR)  on  the  prevention  and  correction  of 
macroeconomic  imbalances  presents  the  main 
findings  on  the  gravity  and  evolution  of  the 
challenges  identified,  as  well  as  policy  responses 
and potential policy needs. Findings cover all areas 
of vulnerability assessed in the in-depth review.  

Czechia  is  facing  vulnerabilities  related  to 
deteriorating  price  competitiveness  and 
house  price  growth.  As  part  of  a  process  of 
convergence  to  EU  averages  and  a  tight  labour 
market,  unit  labor  costs  grew  faster  in  Czechia 
than in the EU over the last decade. The growth in 
labour costs was however consistent with inflation 
developments  and  more  pronounced  in  the  non-
tradable  sectors.  Czechia  reported  gains  in  export 
market  shares  in  2013-2020  and  the  trade 
balance  remained  strongly  positive.  In  the  same 
period,  property  price  growth 
significantly 
surpassed  both  inflation  and  disposable  income 
growth.  In  the  past  two  years,  fast  rising  energy 
prices  and  a  relaxed  monetary  stance  combined 
with fiscal stimulus provided during the COVID-19 
pandemic, drove inflation to 14.8% in 2022, higher 
than the 9.2% EU average. Due to the energy price 
shock,  the  trade balance  turned  negative  to  0.1% 
of  GDP  in  2022.  While  the  temporary  inflation 
shock  has  not  been  fully  translated  into  wage 
growth,  an  eventual  persistence  in  inflation  could 
have  negative  impacts  on  the  competitiveness  of 
Favourable  economic 
the  Czech  economy. 
developments,  very  low  real  interest  rates  and 
easily  available  liquidity  motivated  households  to 
take  mortgages  for  property  purchases,  pushing 
prices  sharply  up  in  2021  and  the  first  half  of 
2022.  The  increase  in  prices  is  also  significantly 
fuelled  by  a  structural  lack  of  supply.  The  rental 
market  in  Czechia  is  also  limited  and  does  not 
perform well as an alternative to ownership. 

While  price  pressures  seem  to  be  easing, 
risks remain high, and vulnerabilities require 
monitoring.   Facing  elevated  price  pressures  and 
price 
related 

effects,  Czechia’s 

secondary 

(126)  European Commission (2023), In-Depth Review for Czechia, 
Commission staff working document (COM(2023) 628 final), 
in accordance with Article 5 of Regulation (EU) No 
1176/2011 on the prevention and correction of 
macroeconomic imbalances.  

73 

competitiveness  is  projected  to  partially  recover 
amid  decreasing  energy  prices.  The  annual 
average HICP rate is set to decelerate from 14.8% 
in  2022  to  11.9%  in  2023  and  3.4%  in  2024  as 
commodity  prices  fall  and  consumer  demand 
weakens. ULCs are forecast to increase by 7.4% in 
2023 but to drop to 4.4% in 2024 as productivity 
and  economic growth  recovers.  The trade  balance 
is forecast to turn positive again in 2023-2024. As 
tightened  monetary  policy  and 
a 
macroprudential  measures,  house  prices  growth 
started moderating in the second half of 2022 and 
nominal  house  prices  are  expected  to  decline  in 
2023. (127)  Nevertheless,  risks  related  to  the 
identified  vulnerabilities  warrant  close  monitoring 
of both price competitiveness and house prices as 
both  the  structural  lack  of  house  supply  and  the 
tight 
remain 
labour  market  are 
constraining factors going forward. 

result  of 

likely 

to 

risk  of  de-anchored 

Czechia took significant steps to address the 
identified vulnerabilities, but efforts are still 
warranted  in  certain  areas.  Faced  with  rising 
prices  and  a 
inflation 
expectations, the central bank has started early to 
tighten  monetary  policy,  raising  the  policy  rate 
from  0.25%  to  7% between  June  2021  and  June 
2022,  but  kept 
rate  unchanged 
the  policy 
afterwards  despite  continuing  inflation  pressures. 
Macroprudential  ratios  were  tightened  in  2022  to 
contain  mortgage growth.  On  the  supply  side,  the 
new  Building  act  is  expected  to  speed  up  the 
construction  process.  Announced  initiatives  on 
social  and  affordable  housing  may  further 
increase  housing  supply.  There  is  still  scope  to 
incentivise  rental  housing  as  an  alternative  to 
ownership.  In  order  to  reduce  spillovers  of energy 
prices,  the  government  took  measures  to  cap 
energy prices. Still, to bring consumer, output, and 
asset inflation rates down, the monetary and fiscal 
stance  need  to  remain  adequately  tight  and  to 
react  to  any  persistence  in  inflation.  Additional 
aimed 
structural  measures 
promoting 
reducing  administrative 
productivity  growth, 
burdens,  or  resolving  labor  market  tightness  are 
also needed. There is a scope for recalibrating the 
tax mix making stronger use of property taxes. 

at 

Based  on  this  assessment,  the  Commission 
considered  in  its  communication  European 
Semester – 2023 Spring Package (COM(2023) 
600  final)  that  Czechia  does  not  experience 
macroeconomic imbalances. 

(127) According to the Financial Stability Report – Autumn 2022. 

 
 
                                                 
                                                 
 
 
Table A22.1: Assessment of macroeconomic imbalances matrix 

Source: European Commission 

74 

Gravity of the challengeEvolution and prospectsPolicy responseUnsustainable trends, vulnerabilities and associated risksHouse pricesHouse prices have been persistently growing over the last decade mainly due to an insufficient supply. The nominal house price growth attained 120% since 2010 and significantly surpassed the growth of disposable income. An underdeveloped rental market does not provide a sufficient alternative to house purchases. After the outbreak of the pandemic, annual house prices growth accelerated to 19.7% in 2021 and 16.9%.in 2022 due to a loose monetary and macroprudential stance and supportive government measures but also increase of construction cost. Changes in working patterns affecting housing supply cost could also have contributed. Ahead of expected interest rates hikes in 2022, the growth of mortgage credit and housing prices peaked in the first half of 2022. Overall, house prices appear overvalued by around 30% (as of Q3 2022).  With rising interest rates, lending slowed down in the second half of 2022.On the back of the significant monetary tightening and high inflation putting pressure on real disposable income, house prices declined by 2.2% in 2022 Q4. Further declines are expected in 2023, as inflation is set to remain elevated, accompanied by tight monetary policy. However, in the longer term, a substantial house price correction is unlikely in view of persisting supply constrains. A potential rebound of demand for housing could lead to further increases in prices if it again surpassed the rather inelastic supply. In response of the high price growth, the Czech National Bank has started to tighten monetary policy, raising the policy rate from 0.25% to 7% between June 2021 and June 2022. However, despite continuous inflation pressures monetary policy remained uchanged since. Macroprudential measures (primarily income and collateral-based limit ratios) were tightened in April 2022 after pandemic-related easing. The measures taken by the Central bank appear to have had a significant effect on demand for housing loans, with new mortgage provision decling by 60% in 2022 though further monitoring of the situation seems warranted.  In order to address the constraints in terms of supply, the Czech government is working on initiatives to remove administrative barriers to new housing by attempting to streamline the construction legislation (the Building Act) and accelerating the permitting process. Support is being put in place in terms of affordable housing for the vulnerable groups. Further efforts are needed to ensure that the administrative changes will have the desired outcome in terms of new housing supply in the coming years. In addition, the property taxation (currently very low) could be re-calibrated to better serve as a tool in containing demand pressure.CompetitivenessUnit labour costs grew faster than the EU average (by 13.6%) over the last decade on the back of a convergence process and a tight labour market. Despite that export market shares gains in 2013-2020. Inflationary pressures intensified in the past two years due to the increase in energy prices and their spill-over effects on other components, but also due to a loose monetary and fiscal stance. The inflationary pressure did not fully translate into ULC growth but could lead to price competitiveness losses if inflation became persistent. As energy prices are decreasing, the HICP rate is set to decelerate from 15.1% in 2022 to 11.3% in 2023 and 3.4% in 2024. ULC growth is expected at 7.4% in 2023 and to decrease to 4.4% in 2024 as the economic growth and productivity recovers. The trade balance is forecast to turn again positive in 2023-2024. As an additional mitigating factor, Czechia’s international stock position does not present a significant risk as, despite the net international investment position being negative, the net position excluding non-defaultable instruments is positive at 28.3% of GDP as of the end of 2022.  To also contain consumer price inflation, the Czech National Bank raised the policy rate from 0.25% to 7% between June 2021 and June 2022, though remaining on hold afterwards. In order anchor inflation expectations, the government took measures to cap energy prices and thus prevent a further spill over into core inflation. The monetary and fiscal stance need to remain adequately tight to ensure persistent containment of inflation. Structural measures are also needed in parallel to ensure productivity growth and maintaining competitiveness. These can include reducing administrative burden on businesses and in particular on start-ups, lowering the costs of resolving insolvencies, promoting labour participations of certain categories where participation is low, facilitating migration or strengthening the upskilling and reskilling of the population, notably in green and digital skills.