kom (2025) 0203 - Ingen titel

Europaudvalget 2025
KOM (2025) 0203
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EUROPEAN

COMMISSION

Brussels, 4.6.2025

SWD(2025) 203 final

COMMISSION STAFF WORKING DOCUMENT

2025 Country Report - Czechia

Accompanying the document

Recommendation for a COUNCIL RECOMMENDATION

on the economic, social, employment, structural and budgetary policies of Czechia

{COM(2025) 203 final}

kom (2025) 0203 - Ingen titel

kom (2025) 0203 - Ingen titel

ECONOMIC DEVELOPMENTS AND KEY POLICY

CHALLENGES

Growth has resumed, but global

uncertainty weighs on the

economy

Economic growth to be driven mainly by

internal demand.

GDP growth has been low

in the last two years, reaching 1.1% in 2024,

with internal demand and net exports being

the main drivers. Internal demand is likely to

remain the main GDP driver. The resumption

of growth in real wages, falling inflation and

the monetary easing applied by the Central

Bank are likely to cause internal demand to

grow more quickly.

Moreover, households’

consumption volumes are below 2019 levels,

one of the lowest compared to other EU

countries, while saving rates are among the

highest in the EU. These factors further

support

the

growth

households’

consumption. Public and private investments

are expected to stay strong, driven by

monetary easing(

) and increased EU funds

absorption, with the Recovery and Resilience

Facility (RRF) ending in 2026. Private

investments are among the highest in the EU

as a percentage of GDP.

Net exports are negatively affected by

trade uncertainty and increasing imports.

As industrial goods (with the automotive

sector in first place) represent 81% of exports,

the uncertainties regarding trade policy and

the outlook for the main trading partners are

likely to impede the growth of Czech exports.

Structural challenges, such as increasing costs

of energy and labour, also have a negative

impact on net exports. The forecast increase in

domestic demand is likely to drive imports

higher. Thus, net exports are forecast to

hamper GDP growth.

Inflation is set to continue declining.

The

high inflation rate from 2022 and 2023 had

an adverse effect on the Czech economy. It

impacted on real wages growth, prompted

households to increase their savings and

affected certain industrial sectors which are

energy intensive. However, inflation declined

significantly to 2.7% in 2024 and is forecast

to stay low at 2.2% in 2025.

Labour market remains tight.

Despite a

small increase in unemployment rate from

2.2% in 2022 to 2.6% in 2024, the Czech

labour market has one of the lowest

unemployment rates in the EU. The

employment rate(

) is also high at 82.3%,

above the EU average of 75.8%. The tight

labour market thus remains an important

limiting factor of economic growth.

Czechia’s public finances

still in deficit.

2024, Czechia’s government balance

(the

difference between government revenue and

expenditure) recorded a deficit of 2.2% of

GDP, down from 3.8% in 2023. The decrease

in the budget deficit was driven by the

government consolidation package and the

phase-out of measures to mitigate the impact

of high energy prices. However, the

government balance continues to be reduced

by around 2 percentage points of GDP due

mainly to the permanent cut in personal

income tax effective from 2021, and tax

evasion. The budget deficit is forecast to stay

broadly unchanged at 2.3% of GDP in 2025

and 2.2% of GDP in 2026. The planned

phasing out of windfall profits tax is set to cut

revenue in 2026. Finally, gross government

debt was 43.6% of GDP at end of 2024,

forecast to rise to 45.4% in 2026.

(

) Calculated for the age class 20-64

(

)

https://iate.europa.eu/entry/result/1125542/en

kom (2025) 0203 - Ingen titel

Net public expenditure to accelerate

growth in the 2025 election year.

In 2024,

net expenditure (

) in Czechia remained

unchanged, with 0% growth (see Annex 1).

This outcome was mainly driven by growth in

social transfers to support living standards,

public-sector pay and the provision of public

goods and services. In 2025, the year of the

parliamentary elections, net expenditure is

forecast by the Commission to grow by 4.0%,

which is below the maximum growth rate

recommended by the Council(

). The

cumulative growth rate of net expenditure in

2024 and 2025 taken together is projected at

4.0%, which is below the maximum growth

rate recommended by the Council.

of a tight labour market which is experiencing

gaps in mobility and supply.

Czechia´s energy-intensive sectors face

several

challenges

remaining

competitive in the context of volatile

energy prices.

The Czech economy has one

of the highest energy intensities (i.e. amount

of energy consumed to produce a unit of GDP)

in the EU (

). This is the cumulative result of a

higher share of the industry in GDP (Graph

1.1), an above-average energy intensity of

industry (

), higher energy transformation

losses (

) and higher energy intensity of the

building stock (

) compared to EU averages. As

Czechia is still heavily dependent on fossil

fuels, its high energy intensity leaves the

economy exposed to movements in energy

prices. While electricity and gas prices for

households and industry are only slightly

above the EU averages (5-15% as of H1

2024), the increase from 2019 has been

significant, especially for electricity. Electricity

prices more than doubled in the last five years,

arguably also because in 2019 they were at a

20-30% discount to EU averages (see Section

3). Sustained increases in energy prices risk

leading to losses as regards the economy's

price competitiveness. This translates not only

into higher input costs for industry but also

into a higher social burden for households,

which would ultimately also add pressures on

salaries. Taxation on electricity is less

favourable than on gas, which exacerbates the

gap between electricity and gas prices, thus

disincentivising electrification.

The Czech economic model faces

competitiveness challenges

The Czech economy, which is based on

industry and a middle position in the

value chain, has experienced slower

productivity growth in the last few years.

Czechia’s economy is characterised by a high

reliance on industry (25.4% of GDP, second

highest in the EU), a high percentage of

foreign ownership in the economy (45% of

gross value added produced by foreign-owned

companies, fifth highest in the EU) and a

relatively low value added compared to

economic output (40%, third lowest in the EU)

(Graph 1.1). The high increases in energy and

in nominal unit labour costs in the past few

years

have

put

pressure

the

competitiveness of the economy and led to

stagnating productivity. Labour productivity

grew by 1% in the past five years, compared

to 1.3% in the EU. This comes also on the back

(

) Net expenditure is defined in Article 2(2) of Regulation

(EU) 2024/1263 as government expenditure net of

interest expenditure, discretionary revenue measures,

expenditure on programmes of the Union.

(

) Council Recommendation of 21 January 2025

endorsing the national medium-term fiscal-structural

plan of Czechia (OJ C, C/2025/666, 10.2.2025, ELI:

http://data.europa.eu/eli/C/2025/666/oj)

(

) 101.21 KGOE per thousand euro of GDP in purchasing

power standards compared to 78.5 EU average.

(

) 61.7 toe per euro value added produced in industry and

construction segments compared to 53.7 EU average.

(

) 65% energy transformation output per transformation

input, compared to 81% EU average.

(

) 15.5 thousand kgoe per sqm compared with 11.1 EU

average.

kom (2025) 0203 - Ingen titel

Graph 1.1:

Structural economic differences

between Czechia and the EU-27

50%

45%

40%

35%

30%

25%

20%

15%

10%

Value added / Total

economic output

Value added by foreign- Value added in industry

owned companies

as percentage of total

EU 27

Czechia

Source:

Eurostat, European Commission

Lack of diversification makes Czechia

more vulnerable to external shocks and

holds back productivity growth.

With

exports representing 57% of GDP, Czechia is

one of the most trade-dependent economies in

the EU. However, Czech exports are

concentrated primarily in the automotive

industry, which leaves them vulnerable to

trade disruptions caused by changes in trade

policy, and highly dependent on the main

trading partner, Germany. While exports of

other goods and services are growing, this is

still happening slowly. Slow growth in local

businesses and low R&D performance seem to

be among the causes. Despite households

having the highest saving rates in the EU

(19.4% in 2023), these savings are

concentrated in traditional banking products or

property. The local capital market remains

underdeveloped, limiting the growth of new

businesses, and the business environment

could be further enhanced (see Annex 4). An

additional drag on growth comes from the low

performance of the R&D sector due to low

government support and low knowledge

transfer between research and businesses (see

Annex 3).

There is wide scope to improve the

quality of public finances.

Public debt is

below 60% of GDP, and Czechia faces low to

medium risks associated with fiscal

sustainability. Still, given medium- to long-

term spending pressures, such as those

coming from the ageing population and the

challenges to the growth model, further

reforms are needed to boost competitiveness,

productivity and sustainability. Czechia

announced to gradually increase defence

spending by 2030, which could add to

pressures on government spending. However,

public finances struggle to prioritise and put

expenditure to its most productive use, make

the tax and benefit systems more efficient,

and improve quality of services. For example,

the tax system fails to incentivise housing

construction, the long-term rental housing

market and R&D investment. The tax and

benefit system excessively burdens low-

income earners and does not encourage young

mothers to go back to work (see Section 4).

Finally, property taxation is still below the EU

average, and environmental taxes have been

decreasing in Czechia over the last 15 years.

This has caused the tax system to be reliant

on labour taxation and less growth friendly

(see Annex 2).

Fully implementing the recently adopted

pension reforms will be crucial for

limiting ageing-related fiscal pressures.

In 2023 and 2024, Czechia adopted legislative

reforms addressing the long-running country-

specific pension recommendation. The reform

primarily seeks to gradually raise the statutory

retirement age to 67 by 2056. In addition, the

pension formula was adjusted to slow down

the growth of newly granted pensions. Also,

the maximum duration of early retirement was

reduced from five to three years, and eligibility

conditions for early retirement were made

stricter. In combination

with Czechia’s penalty

system for early retirement, these measures

are projected to increase the effective

retirement age and limit the increase in public

pension spending in the long term by 1.9 pps.

of GDP (see Annex 1). Fully implementing the

recently adopted pension reforms would help

to mitigate ageing-related spending pressures

and the resultant risks for fiscal sustainability.

Challenges remain as regards strategic

planning,

coordination

and

implementation capacity in the public

administration.

Enhancing the ability to

attract and retain skilled professionals, build

analytical capabilities and promote evidence-

based policymaking with the strong

involvement of stakeholders would help to

make public investment and spending more

effective. Processes such as spatial planning

and construction permitting remain complex

kom (2025) 0203 - Ingen titel

and slow, becoming a key constraint on

economic development (see Annex 6).

Boosting innovation capacity and

business dynamism

Enhancing innovation and improving the

business environment and

firms’ access

to capital market financing are essential

for improving Czechia’s competitiveness.

Despite its robust industrial and research base,

Czechia’s competitiveness and productivity are

hindered by high energy costs, overly complex

administrative processes and a fragmented

innovation environment. Key impediments

include red tape, limited links between the

business and science sectors and insufficient

access to finance. Addressing these issues and

implementing reforms and investments (see

Annexes 3 to 8) could significantly bolster

Czechia’s innovation capacity, business

environment and competitiveness. The

functioning of the capital markets could be

improved by adjusting regulations and helping

retail investors to more easily exploit the

untapped potential of high household savings

(see Annex 5). This would open up new sources

of financing for Czech businesses. In turn, this

would help drive economic growth and enable

the economy to diversify away from the

traditional industrial sector.

centralised energy sources, such as nuclear

and gas, is prioritised despite higher costs and,

in the case of gas infrastructure, potential for

stranded assets. Limited social acceptance of

renewables, bottlenecks in the grid capacity

and recent changes to subsidies for

renewables run the risk of considerably

delaying future investments. Progress in

improving the energy efficiency of buildings

remains slow, despite a diverse set of

programmes supporting renovations and

decarbonisation of heating. Greenhouse gas

emissions from road transport have been

increasing, exposing households, businesses

and transport users in Czechia to the impact of

the carbon price.

Expanding tertiary education and

improving labour market mobility

are key to increasing productivity

Higher education’s potential to transform

Czechia into an innovative knowledge

economy is underused.

Tertiary educational

attainment (33.7%) is far below the EU

average (43.1%), in particular because of high

drop-out rates. This is linked to Czechia’s

shortage of general-education secondary

schools and limited permeability between

general and specialised schools, leading to

early specialisation. Furthermore, educational

performance in Czechia is strongly dependent

on socio-economic background. Finally,

Czechia faces structural challenges with

teacher shortages, particularly in science,

technology, engineering and mathematics

(STEM) subjects, which negatively influences

student performance.

Accelerating decarbonisation will

be key to lowering energy costs

and will boost competitiveness

Competitiveness is hindered by Czechia's

high energy intensity combined with the

insufficient roll-out of renewables.

Further

investments in renewable energy sources and

in energy efficiency could help to lower energy

costs for both industry and households.

Despite the regulatory reforms supported by

the recovery and resilience plan (RRP), the

deployment of renewable energy sources,

especially in wind, and flexibility of the grids

remain low. Investment in more traditional,

kom (2025) 0203 - Ingen titel

Czechia’s labour market delivers high

employment, but job transitions to more

productive jobs remain low and the

labour market participation of certain

social groups could be higher.

Specifically,

in 2024, Czechia had an 82.3% employment

rate (against an EU average of 75.8%) (see

Annex 10), while the job vacancy rate

exceeded 3.3% (against an EU average of

2.4%). Furthermore, the Czech labour market

exhibits one of the lowest job transition rates

among EU Member States, with only

approximately 1% of workers in Czechia

changing jobs in the course of a year (against

an EU average of 2.3%). A notable barrier to

labour mobility is the affordability of housing

in cities. Finally, the employment of certain

groups could be higher, for example young

Box 1:

women, with the gender employment gap for

women between 25 and 34 being 36.1 pps in

2024 (against an EU average of 25.2 pps).

Barriers to private and public investment

Czechia’s net private investment

decreased from 4.8% of GDP in 2023 to 3.8% in 2024.

Public

investment declined

as a percent of GDP from 4.9% in 2023 to 4.7% in 2024. Several

barriers contribute to this development:

•

Infrastructure deficits.

Persistent gaps in essential infrastructure

–

particularly in

housing, energy and transport (e.g. lack of high-speed trains)

–

hamper economic

growth and deter investment.

Labour and skills shortages.

Tight labour market conditions, labour regulation and

insufficient skilled labour migration from abroad deepen skills mismatches, which

prevents the expansion of businesses and is considered a significant obstacle to

investment.

High costs of doing business.

High energy costs, geopolitical uncertainty, excessive

red tape, complexity of R&D deductibles, high interest rates, and underdeveloped

venture capital constrain access to finance for businesses and undercuts their ability

to invest.

•

Czechia lacks a long-term planning document for nationally funded public

investments, ensuring prioritisation and monitoring.

Additionally, deployment of revolving

financial instruments supported from the Cohesion Funds remains low (2.36% compared to 9%

at EU level) and fragmented across sectors, exacerbating

Czechia’s ability to transition towards

making greater use of these funds as opposed to grants. In this regard, financial instruments

are better suited to increasing economic incentives and a return on investment, while mobilising

private finance. Clean technologies, energy efficiency, housing and SME support are examples of

areas where the use of financial instruments could be scaled up. Absence of a stronger financial

instruments hub also remains a challenge.

The implementation of the recovery and resilience plan of Czechia is well on its way

but faces

considerable challenges.

At present, Czechia has fulfilled 38% of the milestones and

targets in its RRP. The absorption of recovery and resilience funds is particularly constrained by

bottlenecks including limited administrative capacity at some of the implementing bodies as

well as suboptimal use of financial instruments as detailed above. This is particularly visible in

areas such as the green and digital transitions.

It remains important to accelerate the implementation of cohesion policy programmes. The mid-

term review offers opportunities to speed up progress and better address EU strategic priorities

related to competitiveness, defence, housing, water resilience and the energy transition.

Czechia has not yet taken advantage of the opportunities provided by STEP under Cohesion

Policy to reallocate resources towards this priority. However, it can still support the development

or manufacturing of critical technologies in the areas of digital and deep tech, clean and

resource efficient technologies, and biotechnologies.

kom (2025) 0203 - Ingen titel

Box 2:

UN Sustainable Development Goals (SDGs)

Czechia performs well when it comes to SDGs on macroeconomic stability (SDGs 8) and fairness

(SDGs 1 and 10) but is moving away from the targets for SDGs on quality education (SDG 4) and

health and wellbeing (SDG 3). While Czechia has made progress on environmental sustainability,

it remains below the EU average on climate action (SDGs 12 and 13) due to higher net

greenhouse gas emissions per capita and a lower share of renewable energy in gross final energy

consumption. Despite improvements, challenges also remain as regards gender equality,

particularly in employment and leadership positions (SDG 5), and access to affordable energy

(SDG 7).

kom (2025) 0203 - Ingen titel

INNOVATION, BUSINESS ENVIRONMENT AND

PRODUCTIVITY

Strengthening innovation and the

business environment

Competitiveness and productivity are

held back by a suboptimal innovation

environment and excessive red tape.

Despite having a robust industrial and

research base, complex research and

innovation (R&I) governance and fragmented

research capacities limit the effectiveness of

R&I investment and capacity to set clear

priorities and pursue R&I reforms. Czechia’s

innovation capacity and productivity are also

hindered by a shortage of skilled workers and

a complex bureaucracy. The latter is influenced

by, among other factors, the incorrect

transposition of EU directives, with Czechia

ranking second highest in the EU in that

respect in the past five years. Czechia would

benefit from reviewing the research and

innovation governance policy coordination

system for R&I with a view to clarifying the

responsibilities of the ministries and bodies

involved in the R&I sector as regards cross-

cutting priorities. Also, conditions in terms of

permit duration, family reunification and job

mobility for highly skilled workers from non-

EU countries are a limiting factor. Czechia

lacks a dedicated institution which promotes

productivity-enhancing policies and would

benefit from setting up a national productivity

board.

Despite significant improvements in

recent years, Czechia lags behind on

innovation.

Czechia is a moderate innovator,

with a performance of just under 90% of the

EU average (see Graph 2.1). The innovation

activity of Czech companies continues to lag

markedly behind. This is visible in the low

number of innovation outputs including the

number of patent applications, and the uptake

of emerging technologies. The links between

the business and science sectors remain weak.

There is room for improvement as regards

how public support for innovative companies is

organised. Efforts to improve this should be

combined with initiatives to make the R&D tax

deduction more attractive for companies and

involve less red tape (for R&D expenditure see

Graph 2.2). Only a third of companies which

are consistently engaged in R&D use indirect

public support in the form of R&D tax

incentives, while small and young firms utilise

the incentives even less frequently (see

Annexes 2 and 3). Czechia has taken some

legislative steps to improve knowledge

transfer and would benefit from swiftly

adopting

and

implementing

measures

proposed in 2024( ) as well as the expert

recommendations of the policy support facility

project on the reform of the technology

transfer offices (see Annex 3).

Graph 2.1:

Czech summary innovation

index

Note:

The line chart shows the development

of Czechia's innovation performance over time,

relative to the performance of the EU-27.

Source:

Eurostat, European Commission

(

) Referred to in the national reform programme 2024.

kom (2025) 0203 - Ingen titel

Czechia has made some progress towards

reducing administrative barriers and

digitalising public services, but further

efforts would be beneficial.

Specifically,

72% of businesses still consider the

complexity of administrative processes to be a

significant barrier to doing business (vs 66%

EU average) (

). To improve the situation, the

Czech government adopted three packages (

)

aiming to reduce bureaucracy, with a similar

package being adopted by the Czech National

Bank (

). To improve the situation further,

more systemic implementation of the ‘think

small

first’ and ‘digital first’ principles,

coupled

with regulatory impact assessments and

regular evaluations of legislation with a strong

focus on small and medium-sized enterprises,

could help. Similarly, continued digitalisation of

public services could pave the way for a more

growth-friendly and nurturing business

environment. Furthermore, despite recent

changes, the growth potential of start-ups is

hindered by a burdensome approach to

employee stock-option plans, resulting in their

limited use (

). Reforming the scheme in line

with business proposals could increase its

uptake (see Annex 4).

Spatial planning, construction permitting

processes and fragmented municipal

governance

represent

significant

administrative barriers.

These hold back

businesses by slowing down and raising the

costs of commercial development as well as

indirectly raising the costs of energy (via slow

modernisation of the energy infrastructure)

and reducing the mobility of labour (via

inadequate supply of affordable housing).

These are key contributors to Czechia having

permitted the seventh smallest construction

area in the EU in 2023 per capita. Spatial

(

) Eurobarometer,

Businesses’ attitudes towards

corruption in the EU in 2024,

July 2024.

(

)

Vláda schválila třetí antibyrokratick�½ balíček připraven�½

ministrem Michalem Šalomounem | Vláda České

republiky,

May 2024.

(

)

ČNB omezuje zbytečnou byrokracii. Do konce roku zruší

36 pravidel a v�½kazů

Česká národní banka,

February

2025

(

) 91% of start-ups in Czechia do not use a scheme of

this kind according to start-up representatives:, April

2024.

planning rules are particularly burdensome in

large cities, where updating an urban plan can

take over a decade. Reform is needed to

accelerate the process, especially by

redesigning competencies and differentiating

planning requirements between small and

large settlements. Such measures could

significantly

improve

efficiency

and

responsiveness in urban development. On

construction permitting, while progress has

been made on the legal framework and, to

some extent, on digitalisation, the positive

impacts are not yet visible on the ground.

Further improving digitalisation and the

capacity and management of construction

offices could further accelerate the process.

Unlocking funds to allow

companies to thrive

The potential to boost competitiveness

through better access to finance and the

use of EU funds via financial instruments

and in structurally affected regions

remains untapped.

Numerous instruments

funded by the Recovery and Resilience Facility

(RRF) or other EU funds support the

competitiveness of companies, such as by

providing new digital public services that

facilitate the communication of businesses

with the state (for example the entrepreneurial

portal). In addition, the Czech authorities could

make use of the incentives provided by the

strategic technologies for Europe platform

(STEP) to invest in the development or

manufacturing of critical technologies to

enhance EU’s industrial competitiveness.

In the

area of access to finance, the RRF supports the

roll-out of new financial instruments

implemented by the National Development

Bank and the European Investment Fund with

a view to supporting small and medium-sized

enterprises in the green transition or

enhancing participation of institutional

investors in venture capital. However,

implementation delays reflect the slow

progress made in mobilising the funding

necessary for decarbonising and digitalising

the Czech economy. In addition, losses in

competitiveness have been particularly visible

‘structurally

affected’ regions (Karlovarsk�½,

kom (2025) 0203 - Ingen titel

Ústeck�½ and Moravskoslezsk�½ regions). These

losses have included net out-migration among

young people, i.e. more young people leaving

than moving into the region. Effective support

for building up the administrative capacity of

these regions is missing.

Leveraging public funding is key to

mobilising private finance to support

competitiveness and decarbonisation of

businesses.

The National Development Bank

(which was assessed in 2023 and recently

became an implementing partner for InvestEU)

has limited power (compared to its EU peers)

and insufficient administrative capacity (see

Annex 6). Measures to strengthen the role of

the National Development Bank would help it

to achieve its potential in addressing market

failures and the lack of risk capital to boost

innovation, without crowding out private

financial institutions. Building on the

experience with the RRF, and as part of a

much-needed transition away from reliance on

grant support, better coordination with the

private financial sector is essential. For

example, putting in place simplified and

uniform conditions of access to financing

programmes for private operators can reduce

the unnecessary costs incurred by financial

institutions when designing products.

Czech firms do not have sufficient access

to savings from abundant households.

2024, the main sources of business funding

were internal firm financing, followed by bank

lending, while listed shares and bonds

represented only 6.6% of funding sources.

While loans to non-financial corporations

declined as a percentage of GDP (from 19.6%

in 2021 to 17.9% in Q3-2024), a timid

recovery in credit growth due to easing of

interest rates is expected in 2025.

Furthermore, Czechia’s capital market is less

developed compared to other EU countries

(with the stock market capitalisation at 9.5%

of GDP in Q3-2024 compared with the EU

average

69.3%).

Retail

investor

participation is also low, albeit gradually

growing mainly through investment funds. The

recently adopted legal framework for a long-

term investment product has yet to

demonstrate a material positive effect on

attracting new investments

–

rather than

redirecting the existing ones

–

from retail

investors. Further policy action is essential to

promote retail investment in the Czech capital

markets, including by strengthening retail

investor trust and improving financial literacy

(see Annex 5). Ensuring an appropriate

incentive structure and the availability of low-

cost, well-diversified investment products

suited for retail investors may also prove

important.

Less-developed local venture-capital and

growth-capital

markets

further

compound the lack of funding sources for

innovation, which is a key element for

competitiveness.

Private equity and venture

capital assets are significantly below EU

averages (with averages of 0.2% and 0.03%

of GDP in 2021-2023, compared to EU

averages of 0.6% and 0.08%). Domestic

institutional investors, such as insurers or

pension funds, provide little in the way of

funding for start-ups and venture-capital

investors. Lack of funding and no bespoke

legal framework tailored to the specific needs

of start-ups limit the prospects for setting up

and subsequently scaling up innovative start-

ups with no or limited profitability. However,

recent policy changes (

) may facilitate a shift

towards funds with less conservative

strategies and could prove to be a first step in

promoting start-up funding, even though it

may need to be complemented by further

policy actions in future (Annex 5).

(

) Act No 417/2024 introducing an

‘alternative

participation fund’ providing more flexibility in the

investment policies of pension funds to include riskier

investments and increased mobility of the participants

between types of pension funds. The recent

amendment of the Income Tax Act also represented a

first step towards improving the attractiveness of

Czechia’s employee stock-option

framework.

kom (2025) 0203 - Ingen titel

Graph 2.2:

R&D expenditure as % of GDP

by sector, 2023

Source:

Eurostat, European Commission

Public procurement systems need

to address deficiencies, including

limited competition and corruption

risks

More competition is key to making public

procurement systems more cost-effective

and efficient.

The implementation of the

RRF-funded public procurement strategy and

its action plan, adopted in 2024, is still in its

early stages, with limited effects on the

deficiencies identified. These include a low

number of companies submitting tenders, with

a high proportion of single bids (41% over the

last five years compared to an EU average of

26%) and insufficient expertise among

professionals involved in public procurement.

Measures to improve the expertise of

professionals involved in public procurement

and to develop central purchasing and

collaboration at the regional level in order also

to support the smaller contracting authorities

are essential for making public procurement

more efficient and cost-effective (See Annex

4). In addition, corruption-related risks

continue

undermine

competition,

discouraging potential bidders. The risk of

collusion and conflicts of interest persists in

the public procurement system and fuels a

high perception among companies of

insufficient detection and enforcement of

corruption (see Annex 6).

kom (2025) 0203 - Ingen titel

DECARBONISATION, ENERGY AFFORDABILITY AND

SUSTAINABILITY

Accelerate decarbonisation to

boost competitiveness

Czechia’s low share of renewables in its

electricity generation and its heavy

reliance on coal puts its economy at a

competitive disadvantage.

In 2024, only

15.9% of the electricity generated in Czechia

came from renewable sources, down by 0.5

percentage points compared with 2023, and

well below the EU level of 47.4%. Coal and

nuclear accounted for more than three

quarters of the total electricity generated

(35% and 40% respectively). While nuclear is

currently the predominant source of electricity

generation, coal still plays an important role in

the power mix, putting upward pressure on

electricity prices. Czechia is making progress in

its energy transition by replacing coal with

nuclear power and renewable energy sources

(RES). Czechia is also taking steps to diversify

nuclear fuels away from Russia. However, the

planned increase of nuclear capacity is not

expected to become operational until the late

2030’s. In the meantime, a rapid expansion of

renewables would help ensure security of

supply and affordable prices. Czechia is

currently discussing an amendment to the

Energy Act called Lex GAS that introduces a

mechanism for coal power plants which are

already closed to start operating in an

emergency. This could lead to legal uncertainty

and risks causing speculation on the coal

phase-out.

Czechia’s reliance

on fossil fuels makes

its energy-intensive economy highly

vulnerable to fluctuations in coal and gas

prices.

Following the energy crisis, prices in

Czechia have stabilised at levels higher than

those of pre-crisis years, mirroring the EU

average. Industrial energy prices, which were

once relatively stable, have risen substantially

due to increases in gas markets prices and

consequent impact on wholesale electricity

prices (see Graph 3.1). However, small and

medium-sized industrial consumers in Czechia

still pay gas and electricity prices in line with

the EU average, at EUR 77/MWh and

EUR 209.9/MWh

respectively(

Energy-

intensive industries in Czechia have also been

impacted by wholesale market price increases,

in particular for electricity prices, reaching a

peak EUR 237.5/MWh in 2023 (in 2024, price

went down to EUR 201.2/MWh(

)), which is

above the EU average. The energy crisis has

also affected households, with energy prices

at higher levels, although in line with the EU

average. In 2024, natural gas prices for

households in Czechia were EUR 110/MWh,

while electricity prices stood at EUR 280/MWh.

This was driven primarily by the energy

component (where coal and gas are the main

drivers) but was also caused by a higher level

of electricity taxation in comparison with gas

(Annex 8). Further expansion of renewables

and lower levels of electricity taxation would

cause electricity prices to fall, making energy

more affordable in the country. The effective

carbon rate is also lower than the EU average

(Annex 2 and 8), driven by the low fuel

taxation (gasoline, gas and petroleum

products). This disincentivises electrification,

perpetuates reliance on fossil fuels and makes

decarbonisation less cost-effective.

(

) For small and medium-sized industrial consumers, the

EU average in 2024 is EUR 73.6/MWh for gas prices

and EUR 197/MWh for electricity prices.

(

) For energy-intensive industries, the EU average is

EUR 53/MWh for gas prices

–

the same price level as

Czechia

–

and EUR 149/MWh for electricity prices.

kom (2025) 0203 - Ingen titel

Graph 3.1:

Average industrial end-user gas

(top) and electricity (bottom) prices

120

EU-27 (medium industrial consumer)

EU-27 (large industrial consumer)

Czechia (medium industrial consumer)

Czechia (large industrial consumer)

100

2017

2018

2019

2020

2021

2022

2023

2024

battery energy storage systems. These

systems can be part of utility photovoltaic

plans or be stand-alone systems which provide

ancillary services for the grid and energy

flexibility services. Following the adoption of

Lex RES III, further efforts to revise the tariff

structure, which have been pending for many

years, would encourage investment in

solutions which favour decarbonisation and

would better address dynamic pricing (see

Annex 8).

Graph 3.2:

Installed capacity of main sources

of renewables and national target for 2030

(in GW)

EUR/MWh

250

200

EU-27 (medium industrial consumer)

EU-27 (large industrial consumer)

Czechia (medium industrial consumer)

Czechia (large industrial consumer)

EUR/MWh

150

100

installed

target

2017

2018

2019

2020

2021

2022

2023

2024

(1) prices include 3 components: the cost of energy and

supply, network costs and taxes and levies excluding VAT

(2) For gas, medium industrial consumers (band I3,

10.000-100.000 GJ annual consumption) and large

industrial consumers ( (band I5, 1-4 million GJ annual

consumption)

(3) For electricity, medium industrial consumers (ID band,

annual consumption of 2 000 - 20 000 MWh) and large

industrial consumer (IF band, annual electricity

consumption between 70 000 - 150 000 MWh)

Source:

Eurostat

in GW

Wind

Solar

photovoltaic

2017

2019

Source:

IRENA and CZ NECP

Czechia has improved its legislative

framework

for

renewables(

)

but

progress on storage and flexibility

remains slow.

Lex RES I streamlined the

permitting process with a focus on smaller

installations. In 2024, the Lex RES II

amendment introduced a significant regulatory

overhaul, establishing a framework for energy

communities, enabling energy sharing among

consumers, and mandating the creation of the

Electricity Data Centre (EDC), a new market

entity responsible for managing electricity

sharing within the Czech electricity system. In

April 2025, the Lex RES III amendment brought

to the regulatory framework the last pillar of

RED II. This will enable households and

companies to better manage electricity

production and consumption, e.g. by using

(

) The legislative reforms on renewables are part of

Czechia’s

national recovery plan.

Designating

‘renewable

acceleration

areas’ is key to further investment,

especially in wind.

Czechia is currently laying

the groundwork for the designation of

renewable acceleration areas, aiming to

deploy at least 2.5GW of solar and wind

capacity (see Graph 3.2). This will require close

collaboration with local communities to ensure

their involvement and ownership. Delays in

adopting the legal framework may deter

investors by creating uncertainty and

instability in the renewable energy sector. By

contrast, swift adoption could finally unlock

the building of additional capacity for wind

energy, currently below potential. Moreover,

the establishment of a digital one-stop shop

for renewable projects, which includes the

connection process, faces delays.

Introducing long-term contracts can play

a crucial role in bringing stability and

2030

2015

2016

2018

2020

2021

2022

2023

2024

kom (2025) 0203 - Ingen titel

predictability to the market, incentivising

further investment in renewables.

The use

of power purchase agreements (PPAs) and

contracts for difference (CfDs) is currently very

limited in Czechia (see Annex 8). The

development of the PPA market, in particular,

could enable the growth of renewable energy

projects beyond traditional regulatory schemes

and period auctions. It could also allow

renewable energy to be commercialised in the

market, focusing on power self-generation and

bilateral contracting with end-consumers. This

would create opportunities for energy-

intensive

industries

decarbonise.

Furthermore, both PPAs and CfDs would

provide consumers with protection from

energy price volatility. This would ensure

certainty in energy costs, while also enabling

companies to manage their revenue streams

effectively. They would thereby be able to

optimise their energy production and

investment returns. The recent adoption of

retroactive cuts dividends from feed-in-tariffs

for solar projects built between 2009 and

2010 creates unpredictability for investors and

may delay future projects.

Delays in the implementation of the

Electricity Data Centre can hinder the

quick uptake of electricity sharing and

the benefits it offers to consumers.

The

Electricity Data Centre (EDC) (see Map 3.1)

plays a crucial role in overseeing the energy

sharing process, collecting and analysing data

on electricity usage and generation. To

facilitate this, every consumption and delivery

location participating in energy sharing must

be equipped with a smart meter, which

measures

electricity

consumption

and

production at 15-minute intervals. The EDC

collects and manages data on electricity

consumption, production and trading daily,

providing a comprehensive overview of the

energy-sharing landscape. Since its inception,

more than 13 000 sharing participants have

already signed a contract with the EDC,

sharing 105.49 MWh of electricity with each

other(

). This is equivalent to the energy

(

) Electricity Data Centre, press release

‘From

its

establishment to over 1 000 MWh of shared electricity:

The Electricity Data Centre celebrates its first year of

existence’, January 2025.

generated by a 1-2 MW wind turbine operating

at full capacity for about 6-12 months.

Czechia is currently taking steps to implement

the second phase of the EDC to allow also for

flexibility services but delays in IT public

procurement may put at risk the timely

completion of this investment. The slow roll-

out of smart meters is a key obstacle to

consumer empowerment and energy sharing.

Map 3.1:

Electricity Data Centre and its

functionalities

Source:

Electricity Data Centre

Czechia’s distribution grid network faces

significant challenges, which hold back

the pace of investments in RES.

The

increase in the supply of renewables requires

substantial investments in the distribution grid

to expand and modernise the network and

create solutions to make it more efficient. To

address the lengthy connection queues, the

Lex RES III amendment introduced a binding

maximum timeline for RES project grid

connections. Although it is too early to assess

the impact of this measure, given the size of

the challenge, further measures should be

considered to reduce the number of projects in

the queue. Such measures could, in particular,

focus on more mature projects or on removing

potentially

speculative

bids.

Financial

commitments could be introduced to reserve

allocated grid capacity and regular checks

could be conducted on waiting lists to assess

project progress towards key milestones. Such

measures would make it possible to manage

waiting lists more dynamically, allowing slow-

moving or stalled projects to be removed.

kom (2025) 0203 - Ingen titel

Insufficient support for clean tech

manufacturing hinders competitiveness

and scale-up opportunities in multiple

sectors.

Energy storage solutions, whose

deployment remains at an early stage, play a

key role in stabilising electricity grids, and

Czechia could capitalise on the opportunities

arising from this transition. The country is

emerging as a significant hub for battery and

storage technologies. However, the absence of

a regulatory framework for the battery sector

puts Czech companies in the sector at a

disadvantage (see Annex 7). A dedicated clean

tech manufacturing regulatory framework,

including incentives for R&D, manufacturing

facilities, and workforce development, could

help increase manufacturing capacity and

leverage Czechia’s potential to become a key

player in the lithium and batteries markets. As

manufacturing depends heavily on imports of

critical raw materials, Czechia is particularly

vulnerable to supply chain disruption. The

lithium and manganese deposits in Czechia

that were recently declared deposits of

strategic importance present a significant

opportunity for sustainability and resilience.

Czechia lags behind in the uptake of zero-

emission vehicles and would benefit from

accelerating clean mobility measures to

curb rising transport emissions.

Despite

the importance of the Czech automotive

industry to Czechia’s economy, the sector is

expected to face competitiveness issues and

low demand in the domestic market for zero-

emission vehicles. As the sector would benefit

from speeding up its transformation (see

Annex 7), the uptake of zero-emission vehicles

lags far behind the EU average. According to

Eurostat, newly registered zero-emission

passenger cars represented only 3.1% of all

new passenger cars registered in Czechia in

2023, whereas the EU average is 14.5% of all

cars registered. Moreover, according to the

European Environment Agency, transport

emissions in Czechia have risen by nearly 72%

since 1990 and represent nearly 20% of all

Czech emissions. Czechia has been making

strides in reducing its transport emissions and

increasing zero-emission vehicles deployment

through measures in the Czech recovery and

resilience plan (RRP). In particular, Czechia has

adopted the clean mobility action plan and is

boosting deployment of zero-emission vehicles

through RRP investments in the public sector,

public transport and private companies.

However, it would be beneficial if the financial,

fiscal, regulatory measures and funding

schemes outlined in the action plan were to be

implemented more quickly. These measures

should include strengthening incentives for

zero-emission vehicles, expanding charging

and hydrogen refuelling infrastructure, and

carefully designing subsidies and taxation to

avoid regressive effects and inefficient

outcomes. Furthermore, Czechia has a well-

developed rail network and both the RRP and

cohesion funds, and the Modernisation Fund

are also supporting substantial investments in

sustainable mobility. However, additional

investments in low-emission transport

infrastructure

–

especially in rail and public

transport to reduce Czechia’s car dependency

–

are needed.

Progress in improving the energy

efficiency of buildings remains slow,

despite a diverse set of programmes

supporting

renovations

and

decarbonisation of heating.

Programmes

like the new green savings (Nová

Zelená

Úsporám)

programme have helped thousands

of households to invest in energy-savings

measures, such as renovations, replacement of

heating

sources

and

installation

photovoltaics. Despite these measures, the

climate-corrected final energy consumption of

households fell by only 1.26% between 2018

and 2022. This is in part due to the high

electricity-to-gas

price

ratio (

)

which

encourages households to continue to use gas

for heating and disincentivises them from

switching to heat pumps and electrification.

Intensifying efforts to decarbonise heating and

provide support to renewable heating and

cooling would positively impact the national

economy. Czechia is currently home to at least

12 factories specialised in the manufacturing

of heat pumps and there is an increasing

(

) The electricity-to-gas ratio is a product of a fiscal

burden disproportionately skewed towards electricity.

Excluding taxes and levies, electricity costs 2.9 times

more per unit than gas

–

after taxes and levies, this

ratio increases to 3.3 (considerably higher than the EU

average of 2.6).

kom (2025) 0203 - Ingen titel

potential in this area. These efforts will also

help Czechia achieve its 2030 target of

reducing building energy consumption by 8%

compared to 2020, as outlined in its long-term

renovation strategy.

The renovation of public buildings

remains a challenge.

Especially in cities like

Prague, historical buildings are more expensive

to renovate and require longer permitting

procedures. Introducing innovative financial

instruments, such as energy performance

contracts, would help to speed up renovation

of public buildings and activate and leverage

private capital for energy savings investments.

A recently proposed amendment to budgetary

rules, if adopted, would allow central

government bodies to make use of supplier

finance to fund EPC renovations.

implementation of the current adaptation

framework is fragmented, with isolated

policies tackling separate environmental areas

rather than there being a coherent set of

mutually reinforcing measures. Particularly

problematic is the lack of a clear governance

framework and governmental responsibilities

are poorly defined. To address these issues,

Czechia should (i) clarify responsibilities within

and between relevant ministries, (ii) finalise

the climate risk assessment and use it to

update the national adaptation strategy and

action plan, (iii) increase coordination among

actors at national, regional and local levels

and (iv) utilise synergies between policies

tackling separate environmental aspects to

comprehensively build climate resilience.

Water resilience is a significant challenge

for Czechia, with its water resources

highly

dependent

atmospheric

precipitation and with ecological and

chemical status of surface water and

groundwater bodies deteriorating (even

though it is partially due to improved

monitoring, the downward trend is clear).

Water stress causes economic harm and

hampers the competitiveness of not only

exposed sectors, such as agriculture, forestry

or industry, but also the economy as a whole.

For instance, it can threaten the stability of the

energy supply due to the reliance on water in

operating nuclear and coal power plants.

Tackling the main sources of pressure, like

industrialised agriculture, industrial emissions,

and

untreated

wastewater

(ensuring

compliance with the Urban Wastewater

Treatment Directive), would improve water

resilience. Strengthening sustainable water

management,

prioritising

nature-based

solutions, and restoring rivers will improve

flood resilience, bringing associated benefits

for climate adaptation and nature protection.

The conservation of biodiversity and

ecosystems plays an important role in

climate

resilience

and

long-term

economic stability.

With 44% of Czech gross

value added dependent on ecosystem services,

equal to the EU average, nature degradation

poses

serious

risks

Czechia’s

competitiveness and economic security (based

on EU-level data, for sectors like agriculture or

Improve climate adaptation to

protect long-term competitiveness

and ensure economic prosperity

Czechia

faces

significant

climate

adaptation challenges, with substantial

economic impacts from extreme weather

events like floods, droughts, and

heatwaves, which are expected to

worsen.

Insufficient climate resilience

threatens the competitiveness of the Czech

economy. There is the prospect of increased

economic harm due to, among other things,

stranded assets, health-care costs, losses to

labour productivity, decreased agricultural

productivity, water shortages and supply chain

disruptions. Estimates show that between

1980 and 2023 climate-related losses

amounted to EUR 18.5 billion, with low

insurance coverage. The costs of inaction

exceed the costs of action, and especially in

the medium to long term, climate adaptation

will generate economic benefits (

Developing

and

implementing

comprehensive

climate

change

adaptation strategy is crucial.

The

(

)

Národní akční plán adaptace na změnu klimatu

kom (2025) 0203 - Ingen titel

forestry the level of dependence reaches

100%, see Annex 9). But ecosystems in

Czechia remain under pressure: a few habitats

have a good conservation status, and the

coverage of protected areas is below the EU

average. Updating the national biodiversity

strategy, increasing investment in biodiversity

conservation, and promoting sustainable land-

use practices to reduce habitat fragmentation

and enhance species and habitat conservation

would help address this challenge.

Czechia faces challenges in achieving its

land use, land-use change and forestry

(LULUCF) 2030 targets and promoting

sustainable agriculture.

These are relevant

for reducing greenhouse gas emissions and

mitigating negative effects on air, water and

soils. Contrary to EU-level trends, LULUCF

sector carbon removals have been declining

over the last decades and even turned into

emissions between 2017 and 2019. Enhancing

sustainable agriculture practices, such as

reducing nutrient loss from mineral fertilisers

and manure, and continuing the successful

uptake of organic farming, which has been

steadily increasing since 2005, would help

address these issues. Additionally, ensuring

the successful implementation of

Czechia’s

common agricultural policy strategic plan

–

which Czechia envisages environmental

measures to improve agricultural adaptation

to climate change, such as whole-farm eco-

schemes and agroforestry

–

would help to

make the agricultural sector more competitive.

kom (2025) 0203 - Ingen titel

SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS

Graph

4.1:

attainment

Tertiary

educational

Increasing tertiary educational

attainment and reducing

inequalities

The potential of higher education to

transform Czechia into an innovative

knowledge economy is underused.

Tertiary

educational attainment (33.5%) for Czechs

aged 25-34 is far below the EU average

(44.2%) (see Graph 4.1), despite rising demand

for skilled professionals in fields like

information and communications technology

and engineering (see Annex 12). High dropout

rates, particularly in science, technology,

engineering, and mathematics (STEM) fields,

and declining enrolment in STEM programmes

since 2017 illustrate systemic challenges. In

2022, only 11.9 women out of a thousand

people aged 20-29 graduated in STEM fields,

below the EU average of 15.1.(

) Insufficient

career guidance and lack of financial support

to students are among the drivers of high

dropout rates at Czech higher education

institutions. This is despite the fact that the

returns on employment and earnings are high

compared to those who have completed

secondary education. Supported by the

Recovery and Resilience Facility (RRF), Czechia

is launching new study programmes in high-

demand fields relevant to the green transition.

Further improvements could include increasing

financial support for students, improving

access to higher education for people from

disadvantaged backgrounds and for those

whose parents have a low level of educational

attainment, improving career guidance and

encouraging

participation

STEM

programmes through financial and non-

financial incentives.

Source:

Eurostat, European Commission

Czechia has a shortage of general

secondary

schools

and

limited

permeability between

general

and

specialised education pathways, limiting

possibilities for students to successfully

pursue tertiary education.

While interest in

tertiary educational attainment has strongly

increased over the last 30 years, the number

of general secondary schools has not kept

pace with this. The shortage of general

secondary schools pushes students to enrol in

less competitive vocational schools, leading to

early specialisation. Although two thirds of

people who complete vocational education and

training (VET) enrol in tertiary education, their

success rates fall behind those of people who

complete general tracks, which contributes to

consistently

low

tertiary

educational

attainment. To address these challenges,

Czechia has recently announced steps towards

establishing new pathways that combine

general and professional subjects and is

seeking to modernise VET programmes to

bring them into line with the needs of the

labour market. To better prepare those who

have completed secondary education for the

labour market and support their transition to

tertiary education, further improvements could

focus on (i) expanding work-based learning

opportunities, (ii) easing school-to-work

transitions, (iii) strengthening the permeability

between general and vocational secondary

(

)Eurostat, data code: educ_uoe_grad04

kom (2025) 0203 - Ingen titel

education and (iv) increasing the capacity of

general secondary schools.

Educational performance in Czechia is

strongly dependent on socio-economic

background.

Pupils in Czechia perform better

than the EU average in literacy, mathematics,

science and digital skills, but the performance

gap between socio-economically advantaged

and disadvantaged pupils is large and growing

compared to other EU Member States.

Specifically, under the Programme for

International Student Assessment (PISA 2022),

the results gap in mathematics between the

top 25% and bottom 25% in terms of socio-

economic status was the fifth highest in the

EU. Early tracking, whereby pupils are divided

into different educational pathways, and

differences in pupil performance between

school types contribute to these results, as

does the educational segregation of Roma

children. To address these challenges, strong

support for teachers and school leaders would

be beneficial in order to implement the

recently revised curricula and to reduce

administrative burden on smaller schools. The

planned RRF-supported reform of the school

financing system aims to increase support for

disadvantaged schools. Czechia is also

establishing a support programme for

disadvantaged schools funded by the RRF and

focusing on training teachers to work with

disadvantaged pupils.

Czechia faces challenges with teacher

shortages, particularly in STEM subjects,

which has an adverse impact on pupil

performance.

Despite efforts to make the

teaching profession more attractive, including

a strengthened practical component in initial

teacher training and the introduction of a new

teacher skills framework, shortages remain.

Slow salary progression, particularly for less

experienced teachers, contributes to 13% of

primary education teachers intending to leave

the profession. To address these challenges,

measures should focus on making the

teaching profession more attractive by

improving salary progression and reducing

administrative burden, for example by

consolidating operational functions across

schools.

Maintaining high employment,

increasing job transitions and the

employment of specific population

groups

Czechia’s labour market delivers high

employment, but job transitions to more

productive jobs remain low, and the

employment of certain population groups

could be higher.

Specifically, in 2024,

Czechia had an 82.3% employment rate

(against an EU average of 75.8%) and an

unemployment rate of 2.6% (against an EU

average of 5.9%).

Despite Czechia’s high

employment rate, the job transition rate is one

of the lowest in the EU. Furthermore, the job

vacancy rate exceeded 3.3% (against an EU

average of 2.4%). Besides investment in

automation, higher labour market participation

of certain groups, notably mothers, low-

income people, Ukrainians that fled Russian

military aggression and Roma people, could

help fill these vacancies and thus boost

Czechia’s competitiveness.

Easing the transition to more

productive jobs, including by

making housing more affordable

The Czech labour market exhibits one of

the lowest job transition rates among EU

Member States.

In 2024, only approximately

1% of workers in Czechia changed jobs

(against an EU average of 2.3% and 3% in

Germany, an economically close high-vacancy

high-employment economy) despite Czechia

having one of the highest vacancy rates in the

EU. The rate at which people change jobs and

have a period of unemployment in between

jobs is likely also very low, as only 0.8% of

workers experienced unemployment after

leaving their jobs in 2024 (against an EU

average of 1.9% and 1.5% in Germany). This

means labour is not being efficiently allocated

to high-productivity sectors, contributing to

Czechia’s low real wages and household

consumption, which remain below 2019, the

kom (2025) 0203 - Ingen titel

steepest decline in the EU compared to pre-

pandemic levels. Overall, only 33% of Czech

GDP goes into wages and salaries, the fifth

lowest share in the EU(

). The low rate of

transitions is caused by factors such as the

affordability of housing in cities, low short-

term unemployment support (somewhat

improved by the recent labour code

amendments), a high proportion of specialised

education and high barriers to obtaining

professional certification. Adult participation in

life-long learning

–

another important

contributor to labour mobility

–

also remains

low. In 2022, only 21.2% of adults aged 25-64

participated in formal or non-formal learning

in the previous 12 months, compared to the

EU average of 39.5%.

A notable barrier to labour mobility is the

affordability of housing in cities.

At the

end of 2023, the standardised house price-to-

income ratio stood 15% above its long-term

average, the fourth highest in the EU(

Similarly, in cities, more than 14.1% of people

spend more than 40% of their income on

housing (compared to an EU average of 9.8%

in cities) (see Graph 4.2). This is driven by

many factors. First, as discussed above,

Czechia suffers from slow spatial planning and

construction permitting processes and a

fragmented public administration. This

contributes to Czechia having permitted the

seventh smallest housing area in the EU in

2023 per capita. Second, there is a wide array

of other causes: insufficient municipal

incentives to build affordable housing, a lack

of social housing and sub-optimally designed

tax incentives. These include recurrent

property taxes largely not based on property

value (which fail to incentivise land use),

mortgage interest deductibles (two thirds of

which subsidise purchases, not construction)

and lower taxation for short-term rents (often

used for tourism) compared to long-term

rents. While new legislation on affordable

housing and construction permitting has been

adopted in recent years and RRF-funded

(

) Eurostat, nama_10_gdp.

(

) Eurostat, data code: tipsho60,

https://ec.europa.eu/eurostat/databrowser/view/tipsho60

financial instruments supporting affordable

housing are being rolled out, other key areas,

such as spatial planning reform, have not been

addressed.

Graph 4.2:

Housing cost overburden rate

by degree of urbanisation, 2024

Note:

The housing cost overburden rate is

defined as the percentage of the population

living in households where the total housing

costs ('net' of housing allowances) represent

more than 40% of disposable income ('net' of

housing allowances).

Source:

Eurostat, European Commission

Incentivising higher labour market

participation of certain groups

Female participation in the labour market

is constrained by a lack of early

childhood education and care and long-

term care capacities.

Parents of children

under four years of age, typically mothers,

have problems finding childcare and are

disincentivised from joining the labour market

(for long-term care challenges see the last

paragraph of this Section). The gender

employment gap for women between 25 and

34 was 36.1 pps in 2024 (against an EU

average of 25.2 pps)(

), corresponding to

almost 67 thousand fewer women working

than if Czechia had a gender employment gap

corresponding to the EU average.

(

) Eurostat, data code: lfst_r_lfe2emprt

kom (2025) 0203 - Ingen titel

People are disincentivised from finding

low-income or part-time work by the fact

that

Czechia’s labour taxation system

not progressive enough.

For example, low-

income earners often face little or no financial

benefit from working due not only to high tax

rates (esp. through health and social

contributions to which deductibles do not

apply) but also to benefits that decrease as

income rises. This is part of the reason why

Czechia’s taxation of people entering the

labour

market

(the

inactivity

and

unemployment traps) is higher than the EU

average. As benefit eligibility is calculated

based on income before wage garnishment

(mandatory

deduction from a person’s wages

for payment of a debt), this is especially the

case for the more than 600 000 people in

enforcement or insolvency proceedings. A

recent study suggests that taxing low-income

workers less could incentivise up to 50 000

employees to transition from informal or

precarious work arrangements to standard

employment (as well as lifting 29 000 people

above the poverty line). Adjusting labour taxes

to reduce the burden for low-income

households would bring more people from

these households into the labour market.

Combining this with greater use of

underutilised environmental and property

taxation instruments (see Annex 2) would

make the tax system more growth friendly.

Ukrainians seeking shelter in Czechia are

integrating into the labour market, as

shown by their

high

levels

employment, but their qualifications

could be put to better use.

Almost 400 000

people have recently arrived in Czechia from

Ukraine(

) . While approximately 80% of the

economically active are employed, 50%

reported that their work did not correspond to

their qualifications. This could be improved by

reducing

Czechia’s high number of regulated

professions and slow qualification and skill

recognition processes. This would also enhance

the integration of other foreign nationals.

The Roma minority, around 250 000

people, has untapped potential.

Currently,

only an estimated 45% of working-age Roma

are employed, whereas the percentage of

people in employment in the general

population is 82.3% in 2024. Bringing them

into the formal labour market could expand

the workforce, broaden the tax base and

reduce dependency on social security benefits.

Empowering and upskilling the Roma

community through education and training

initiatives and measures promoting equal

access to employment opportunities would

help to integrate them more effectively into

the labour market. For example, better ethnic

data collection mechanisms could improve the

targeting of labour market integration

measures and assess their impact.

Other population groups who could be

employed at a higher rate include

informal carers and workers who are

beyond pension age.

More than 100 000

informal carers (of parents and other family

members), typically women, report not being

able to work full-time because of their caring

duties. Increasing long-term care capacity (in

particular home and community-based care)

could enable them to join the labour market.

The supply of workers could also be increased

by further promoting working beyond pension

age even though the employment rate for

people over 65 is above the EU average. This

is also linked to the health of the Czech

population, whose life expectancy in good

health is below the EU average and which has

the fifth highest absenteeism rate in the EU.

More emphasis on prevention could help, as

Czechia does less than other EU countries in

this area.

(

) UNHCR, Ukraine Refugee Situation,

https://data.unhcr.org/en/situations/ukraine.

kom (2025) 0203 - Ingen titel

KEY FINDINGS

To boost competitiveness, sustainability and

social fairness, Czechia would benefit from:

•

accelerating the implementation of the

RRP,

including the REPowerEU chapter;

swiftly implementing cohesion policy,

taking advantage of the opportunities

under the mid-term review; and

making

optimal use of EU instruments,

including InvestEU and STEP, to improve

competitiveness;

•

limiting

ageing-related

fiscal

pressures

by fully implementing the

recently adopted pension reforms;

•

stimulating innovation

by improving

research

and

investment

policy

coordination, reducing fragmentation of the

research

environment,

implementing

knowledge transfer reforms, strengthening

business-science

linkages,

simplifying

employee stock-ownership plans and better

exploiting the potential of R&D tax benefits;

•

simplifying the business environment

by reducing regulatory barriers, particularly

for start-ups and SMEs, continuing

digitalisation of public services, and

increasing efficiency and competition in

public procurement;

•

increasing firms’ access to non-bank

finance

promoting

institutional

investors’ participation in the venture

capital market as well as equity markets

more widely, increasing retail participation

in capital markets, improving the uptake

and additionality of long-term investment

products, scaling up the use of financial

instruments and strengthening the role of

the National Development Bank;

•

support the affordability of housing

and construction

by streamlining spatial

planning and construction permitting

procedures, and by putting the existing land

and housing stock to its most productive

use, including by increasing the efficiency

of property taxation;

•

accelerating

decarbonisation

improve competitiveness

by creating

more favourable conditions for investments

in renewable energy sources, grid

modernisation and energy efficiency,

developing a regulatory framework for

clean tech manufacturing, incentivising

energy intensive industries to switch to

cleaner energy sources, improving the

energy efficiency of the building stock,

increasing the uptake of zero-emission

vehicles, and completing high-speed rail

infrastructure;

•

strengthening climate and water

resilience

by improving the governance

and implementation of Czechia’s climate

adaptation

and

sustainable

water

management frameworks, and prioritising

nature-based solutions;

•

boosting educational outcomes

increasing tertiary educational attainment,

expanding access to general secondary

education, improving permeability between

general

and

vocational

education,

promoting science, technology, engineering,

and mathematics skills, enhancing support

for disadvantaged schools and Roma

pupils, and stepping up efforts to make the

teaching profession more attractive;

•

tapping into the labour market’s full

potential

by, first, increasing labour

mobility by, for example, supporting the

affordability of housing; and second,

boosting the participation of certain

population groups, for example women, by

increasing the capacity of early childhood

education and care and the capacity of

home and community-based long-term

kom (2025) 0203 - Ingen titel

care, improving tax-benefit incentives to

work, reducing the tax burden on low-

income workers and simplifying the

recognition of foreign qualifications.

kom (2025) 0203 - Ingen titel kom (2025) 0203 - Ingen titel

ANNEXES

kom (2025) 0203 - Ingen titel kom (2025) 0203 - Ingen titel

LIST OF ANNEXES

Fiscal

A1.

A2.

Fiscal surveillance and debt sustainability

Taxation

Productivity

A3.

A4.

A5.

A6.

Innovation to business

Making business easier

Capital markets, financial stability and access to finance

Effective institutional framework

Sustainability

A7.

A8.

A9.

Clean industry and climate mitigation

Affordable energy transition

Climate adaptation, preparedness and environment

Fairness

A10. Labour market

A11. Social policies

A12. Education and skills

A13. Social Scoreboard

A14. Health and health systems

Cross-cutting indicators

A15. Sustainable Development Goals

A16. CSR progress and EU funds implementation

A17. Competitive regions

105

LIST OF TABLES

A1.1.

A1.2.

A1.3.

A1.4.

A1.5.

A1.6.

A1.7.

A1.8.

A1.9.

General government balance and debt

Net expenditure growth

Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the recommendation

Defence expenditure

Macroeconomic developments and forecasts

General government budgetary position

Debt developments

RRF

–

Grants

RRF - Loans

kom (2025) 0203 - Ingen titel

A1.10.

A1.11.

A2.1.

A3.1.

A4.1.

A5.1.

A6.1.

A6.2.

A7.1.

A8.1.

A9.1.

A13.1.

A14.1.

A16.1.

A16.2.

A17.1.

Projected change in age-related expenditure in 2024-2040 and 2024-2070

Fiscal Governance Database Indicators

Taxation indicators

Key innovation indicators

Making Business Easier: indicators.

Financial indicators

Selected indicators on administrative burden reduction and simplification

Key Digital Decade targets monitored through the Digital Economy and Society Index

Key clean industry and climate mitigation indicators: Czechia

Key Energy Indicators

Key indicators tracking progress on climate adaptation, resilience and environment

Social Scoreboard for Czechia

Key health indicators

Selected EU funds with adopted allocations - summary data (million EUR)

Summary table on 2019-2024 CSRs

Selection of indicators at regional level in Czechia

101

102

106

LIST OF GRAPHS

A2.1.

A2.2.

A3.1.

A4.1.

A5.1.

A5.2.

A5.3.

A5.4.

A5.5.

A6.1.

A6.2.

A7.1.

A7.2.

A7.3.

A7.4.

A8.1.

A8.2.

A8.3.

A9.1.

A9.2.

A10.1.

A10.2.

A11.1.

A12.1.

A12.2.

A14.1.

A14.2.

A15.1.

A16.1.

A16.2.

A17.1.

Tax revenue shares in 2023

Tax wedge for single and second earners, % of total labour costs, 2024

Top 10% most cited publications in relation to public R&D expenditure

Making Business Easier: selected indicators.

Net savings-investment balance

International investment position

Capital markets and financial intermediaries

Composition of NFC funding as a % of GDP

Composition of household financial assets per capita and as a % of GDP

Trust in justice, regional / local authorities and in government

Indicators of Regulatory Policy and Governance (iREG)

GHG emission intensity of manu-facturing and energy-intensive sectors, 2022

Manufacturing industry production: total and selected sectors, index (2021 = 100), 2017-2023

Greenhouse gas emissions in the effort sharing sectors, 2005 and 2023

Municipal waste treatment

Retail energy price components for household and non-household consumers, 2024

Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF)

Czechia's installed renewable capacity (left) and electricity generation mix (right)

Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022

Investment needs and gaps in EUR million, in 2022 constant prices

Employment rate by sex

Quarterly job vacancy rates, seasonally adjusted

Persons at risk of poverty or social exclusion by age

Isolation of high-achieving students (top 25%) in mathematics from all students (PISA 2022)

Key skills indicators

Life expectancy at birth, years

Treatable mortality

Progress towards the SDGs in Czechia

Distribution of RRF funding in Czechia by policy field

Distribution of cohesion policy funding across policy objectives in Czechia

Labour productivity per hour

106

LIST OF MAPS

A17.1.

Greenhouse gas emissions per capita, 2023

107

kom (2025) 0203 - Ingen titel

FISCAL

ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY

This Annex contains a series of tables relevant for the assessment of the fiscal situation in Czechia,

including how Czechia is responding to Council recommendations issued under the reformed Economic

Governance Framework.

The reformed framework, which entered into force on 30 April 2024(

), aims to strengthen debt

sustainability and promote sustainable and inclusive growth through growth-enhancing reforms and

priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the

cornerstone of the framework, setting the budgetary commitment of Member States over the medium

term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for

fiscal surveillance.

Czechia submitted its plan on 16 October 2024. The plan covers the period until 2028, presenting a fiscal

adjustment over four years. On 21 January 2025, the Council adopted the Recommendation endorsing

Czechia’s plan.(

)

The assessment of the implementation of the Council Recommendation endorsing the Czechia’s plan is

carried out on the basis of the outturn data from Eurostat and the Commission Spring 2025 Forecast, and

taking into account the Annual Progress Report (APR), that Czechia submitted on 30 April 2025.

Furthermore, given Czechia’s request to activate the National Escape Clause(

) following the Commission

Communication of 19 March 2025(

), the assessment also considers, as appropriate, the projected

increase in defence expenditure based on the Commission Spring 2025 Forecast.

The Annex is organised as follows. First, developments in

government deficit and debt

are presented

based on the figures reported in table A1.1. Then, the assessment of the

implementation of the

Council Recommendation endorsing the plan

follows, based on the relevant figures presented in

Tables A1.2 to A1.9, including data on defence expenditure.

The Annex also provides information on the

cost of ageing

and the

national fiscal framework.

Fiscal

sustainability risks are discussed in the Debt Sustainability Monitor 2024.(

)

Developments in government deficit and debt

Czechia’s government deficit amounted to 2.2% of GDP in 2024. Based on the Commission’s Spring 2025

Forecast, it is projected to increase to 2.3% of GDP in 2025. The government debt-to-GDP ratio amounted

to 43.6% at the end of 2024 and, according to the Commission, is projected to increase to 44.5% end-

2025.

(

) Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies

and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the

excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the

core elements of the reformed EU economic governance framework.

(

) OJ C, C/2025/666, 10.2.2025, ELI:

http://data.europa.eu/eli/C/2025/666/oj.

(

) On 21 May 2025, Czechia requested to the Commission and to the Council the activation of the National Escape Clause. On this

basis, the Commission adopted a Recommendation for a Council Recommendation allowing Czechia to deviate from, and exceed,

the net expenditure path set by the Council COM(2025)602.

(

) Communication from the Commission accommodating increased defence expenditure within the Stability and Growth Pact of 19

March 2025, C(2025) 2000 final.

(

)

European Commission (2025) ‘Debt Sustainability Monitor 2024,’

European Economy-Institutional Papers

306.

kom (2025) 0203 - Ingen titel

Table A1.1:

General government balance and debt

Variables

2024

Outturn

% GDP

-2.2

43.6

APR

-2.2

44.5

2025

COM

-2.3

44.5

APR

n.a.

2026

COM

-2.2

45.4

General government balance

General government gross debt

Source:

Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)

Developments in net expenditure

The net expenditure(

) growth of Czechia in 2025 is forecast by the Commission(

) to be below the

recommended maximum. Considering 2024 and 2025 together, the cumulative growth rate of net

expenditure is also projected below the recommended maximum cumulative growth rate.

Table A1.2:

Net expenditure growth

Annual

REC

2024

2025

2026

Cumulative*

COM

REC

Growth rates

0.0%

n.a.

4.0%

10.1%

4.8%

12.9%

APR

n.a.

6.1%

n.a.

COM

n.a.

4.0%

9.0%

APR

2.8%

3.3%

n.a.

4.5%

2.5%

* The cumulative growth rates are calculated by reference to the base year of 2023.

Source:

Council Recommendation endorsing the national medium-term fiscal-structural plan of Czechia (REC), Annual Progress

Report (APR) and Commission's calculation based on Commission Spring 2025 Forecast (COM).

Source:

General government defence expenditure in Czechia amounted to 0.9% of GDP in 2021, 1.0% of GDP in

2022 and 1.2% of GDP in 2023(

). According to the Commission 2025 Spring Forecast, expenditure on

defence is projected at 1.3% of GDP in 2024 and 2025.

(

) Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure,

(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds, (iv)

national expenditure on co-financing of programmes funded by the Union, (v) cyclical elements of unemployment benefit

expenditure, and (vi) one-off and other temporary measures.

(

) European Commission Spring 2025 Forecast

European Economy-Institutional paper 318,

May 2025.

(

) Eurostat, government expenditure by classification of functions of government (COFOG).

kom (2025) 0203 - Ingen titel

Table A1.3:

Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the

recommendation

Variables

Total expenditure

Interest expenditure

Cyclical unemployment expenditure

Expenditure funded by transfers from the EU

National co-financing of EU programmes

One-off expenditure (levels, excl. EU funded)

Net nationally financed primary expenditure (before

7=1-2-3-4-5-6

discretionary revenue measures, DRM)

Change in net nationally financed primary expenditure (before DRM)

DRM (excl. one-off revenue, incremental impact)

Change in net nationally financed primary expenditure

10=8-9

(after DRM)

Outturn / forecast net expenditure growth

Recommended net expenditure growth*

13=(11-12) x 7

Annual deviation

14 (cumulated from 13)

Cumulated deviation

15=13/17

Annual balance

16=14/17

Cumulated balance

p.m. Nominal GDP

bn NAC

% change

bn NAC

% GDP

bn NAC

2023

Outturn

3346.4

98.5

0.3

81.4

40.7

0.0

3125.5

2024

Outturn

3444.5

108.0

0.4

79.1

38.0

0.0

3219.0

93.5

0.0

0.00%

5.3%

-165.7

-2.1

8010.7

2025

COM

3618.1

112.4

0.2

94.5

31.5

10.0

3369.5

150.5

21.4

129.1

4.0%

4.5%

-15.7

-181.4

-0.2

-2.2

8402.2

2026

COM

3748.9

117.6

0.1

95.0

30.0

0.0

3506.3

136.8

-25.8

162.6

4.8%

2.5%

78.4

-103.0

0.9

-1.2

8816.0

7618.5

* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when

setting the net expenditure path is year 2023.

Source:

Commission Spring 2025 Forecast and Commission's calculation.

Table A1.4:

Defence expenditure

Total defence expenditure

of which: gross fixed capital formation

Flexibility from increases in defence expenditure

Cumulated balance after flexibility

% GDP

2021

0.9

0.2

2022

1.0

0.2

2023

1.2

0.4

2024

1.3

0.4

2025

1.3

0.3

0.4

-2.5

2026

1.3

0.3

0.4

-1.6

Source:

Eurostat (COFOG), Commission Spring 2025 Forecast.

Table A1.5:

Macroeconomic developments and forecasts

Variables

1=7+8+9

2024

Outturn

% change

pps

% pot GDP

% change

% GDP

1.1

2.2

3.3

-1.2

1.8

0.9

1.3

-0.9

0.7

-1.7

0.3

2.6

0.8

2.7

4.0

5.9

2.9

APR

2.0

3.6

2.0

0.7

1.6

3.4

2.3

0.7

-1.0

-1.2

0.2

2.6

1.8

2.3

2.7

6.6

n.a.

2025

COM

1.9

3.3

2.4

0.6

1.1

2.5

2.2

0.6

-0.8

-1.1

0.4

2.6

1.5

2.2

2.9

6.5

2.5

APR

n.a.

2026

COM

2.1

3.0

2.2

3.2

2.4

3.6

2.7

0.0

-0.6

-0.5

0.2

2.6

1.8

2.0

2.8

5.3

2.0

Real GDP

Private consumption

Government consumption expenditure

Gross fixed capital formation

Exports of goods and services

Imports of goods and services

Contributions to real GDP growth

- Final domestic demand

- Change in inventories

- Net exports

Output gap

Employment

Unemployment rate

Labour productivity

HICP

GDP deflator

Compensation of employees per head

Net lending/borrowing vis-à-vis the rest of the

world

Source:

Commission Spring 2025 Forecast (COM), Annual Progress Report (APR).

kom (2025) 0203 - Ingen titel

Table A1.6:

General government budgetary position

Variables (% GDP)

1=2+3+4+5

8=9+16

2024

Outturn

40.8

10.7

8.3

15.8

5.9

43.0

41.7

9.7

5.8

17.1

1.9

4.7

2.4

1.3

-2.2

-0.9

-1.6

0.0

-1.6

-0.2

APR

40.9

10.6

8.3

16.0

6.0

43.1

41.7

9.8

5.8

16.9

2.1

4.8

2.3

1.4

-2.2

-0.9

n.a.

0.0

-1.9

-0.5

2025

COM

40.8

10.7

8.2

16.1

5.8

43.1

41.7

9.9

5.8

16.8

2.0

4.9

2.3

1.3

-2.3

-1.0

-1.9

-0.1

-1.7

-0.4

APR

n.a.

2026

COM

40.3

10.6

7.9

16.1

5.6

42.5

41.2

10.0

5.8

16.5

2.0

4.6

2.2

1.3

-2.2

-0.9

-2.0

0.0

-2.0

-0.7

Revenue

of which:

- Taxes on production and imports

- Current taxes on income, wealth, etc.

- Social contributions

- Other (residual)

Expenditure

of which:

- Primary expenditure

of which:

- Compensation of employees

- Intermediate consumption

- Social payments

- Subsidies

- Gross fixed capital formation

- Other

- Interest expenditure

General government balance

Primary balance

Cyclically adjusted balance

One-offs

Structural balance

Structural primary balance

18=1-8

19=1-9

22=20-21

23=22+16

Source:

Commission Spring 2025 Forecast (COM), Annual Progress Report (APR).

Table A1.7:

Debt developments

Variables

2=3+4+8

4≈5+6+7

Gross debt ratio* (% of GDP)

Change in the ratio (pps. of GDP)

Contributions**

Primary balance

'Snow-ball' effect

of which:

- Interest expenditure

- Real growth effect

- Inflation effect

'Stock-flow' adjustment

2024

Outturn

43.6

1.1

0.9

-0.7

1.3

-0.5

-1.6

1.0

2025

APR

44.5

1.0

0.9

-0.6

1.4

-0.8

-1.1

0.7

COM

44.5

1.0

-0.7

1.3

-0.8

-1.2

0.7

APR

n.a.

2026

COM

45.4

0.8

0.9

-0.8

1.3

-0.9

-1.2

0.7

* End of period.

** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the

impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow

adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant

disbursements), accumulation of financial assets, and valuation and other residual effects.

Source:

Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR).

kom (2025) 0203 - Ingen titel

Table A1.8:

RRF

–

Grants

Revenue from RRF grants (% of GDP)

RRF grants as included in the revenue projections

Cash disbursements of RRF grants from EU

2020

n.a.

2021

0.1

0.4

2022

0.3

0.0

2023

0.4

0.3

2024

0.4

0.7

2025

0.6

0.5

2026

0.6

0.7

Expenditure financed by RRF grants (% of GDP)

6=4+5

Total current expenditure

Gross fixed capital formation

Capital transfers

Total capital expenditure

2020

0.0

0.1

0.0

0.1

2021

0.0

0.1

0.0

0.1

2022

0.1

0.2

2023

0.1

0.2

2024

0.1

0.2

0.1

0.2

2025

0.1

0.4

0.0

0.5

2026

0.2

0.4

0.0

0.4

Other costs financed by RRF grants (% of GDP)

Reduction in tax revenue

Other costs with impact on revenue

Financial transactions

2020

0.0

2021

0.0

2022

0.0

2023

0.0

2024

0.0

2025

0.0

2026

0.0

Source:

Annual Progress Report

Table A1.9:

RRF - Loans

Cash flow from RRF loans projected in the Plan (% of GDP)

Disbursements of RRF loans from EU

Repayments of RRF loans to EU

2020

n.a.

2021

0.0

2022

0.0

2023

0.0

2024

0.1

0.0

2025

0.1

0.0

2026

0.1

0.0

Expenditure financed by RRF loans (% of GDP)

6=4+5

Total current expenditure

Gross fixed capital formation

Capital transfers

Total capital expenditure

2020

0.0

2021

0.0

2022

0.0

2023

0.0

2024

0.0

2025

0.0

2026

0.0

Other costs financed by RRF loans (% of GDP)

Reduction in tax revenue

Other costs with impact on revenue

Financial transactions

2020

0.0

2021

0.0

2022

0.0

2023

0.0

2024

0.0

2025

0.0

2026

0.0

Source:

Annual Progress Report

Cost of ageing

Total age-related spending in Czechia is projected to rise from about 20% of GDP in 2024 to

around 21% in 2040 and 22.5% in 2070, staying below the EU average (see Table

A1.10). The

overall dynamic results from the projected increase in long-term care and healthcare spending. Following

the 2024 reform, pension expenditure is expected to decline initially, from 8.7% of GDP in 2024 to 8.4%

in 2040, followed by an increase, reaching a maximum of 9.2% in 2059 (

Public healthcare expenditure is projected at 5.9% of GDP in 2024 (below the EU average of

6.6%) and is expected to increase by 0.4 pps by 2040 and by a further 0.3 pps by 2070.

While

(

) See

2024 Ageing report - country fiche Czechia (2025 update).

kom (2025) 0203 - Ingen titel

the overall increase is driven by an ageing population, it also reflects recent improvements in access to

preventive and mental healthcare (

Public expenditure on long-term care is projected at 1.5% of GDP in 2024, slightly below the

EU average of 1.7%) and is expected to increase by 0.5 pps of GDP by 2040 and by a further

0.8 pps of GDP by 2070 (

Table A1.10:Projected

change in age-related expenditure in 2024-2040 and 2024-2070

age-related

expenditure

2024 (% GDP)

20.4

24.3

age-related

expenditure

2024 (% GDP)

20.4

24.3

change in 2024-2040 (pps GDP) due to:

pensions

-0.3

0.5

healthcare

0.4

0.3

long-term care

0.5

0.4

education

-0.1

-0.3

total

0.6

0.9

age-related

expenditure

2040 (%GDP)

21.0

25.2

age-related

expenditure

2070 (%GDP)

2.1

1.3

22.5

25.6

change in 2024-2070 (pps GDP) due to:

pensions

0.0

0.2

healthcare

0.7

0.6

long-term care

1.3

0.8

education

0.1

-0.4

total

Source:

2024 Ageing Report

–

2025 update Czechia (EC/EPC).

National fiscal framework

The Czech Fiscal Council (CFC) is a well-funded Independent Fiscal Institution (IFI) with an

active outreach activity, but its role in assessing the macroeconomic forecast of the

government could be enhanced and access to information could be improved.

The Chamber of

Deputies elects the Chairperson on a proposal of the government and the other two members on a

proposal of the Senate and the Czech National Bank, respectively. As access to information is not

regulated via memoranda of understanding with key providers, there is currently no uniform format and

structure of even basic data from the general government sector and time series of sufficient length and

granularity are often not available. There have not yet been any external reviews of the CFC. The

macroeconomic and budgetary forecasts are evaluated by the Committee on Budgetary Forecasts (CBF),

which is not an IFI.

Table A1.11:Fiscal

Governance Database Indicators

2023

Country Fiscal Rule Strength Index (C-FRSI)

Medium-Term Budgetary Framework Index (MTBFI)

Czechia

12.35

0.57

EU Average

14.52

0.73

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based

on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The

Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the

targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the

annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal

institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength.

Source:

Fiscal Governance Database

(

) Key performance characteristics, recent reforms and investments of the Czech healthcare system are discussed in Annex 14

‘Health

and health systems’.

(

) The adequacy and quality of the Czech long-term care system are covered in Annex 11

‘Social policies’.

kom (2025) 0203 - Ingen titel

kom (2025) 0203 - Ingen titel

ANNEX 2: TAXATION

This annex provides an indicator-based

overview of Czechia’s tax system.

It includes

information on: (i) the tax mix; (ii) competitiveness

and fairness aspects of the tax system; and (iii)

tax collection and compliance.

Czechia’s tax revenue is relatively low in

relation to its GDP.

Table A2.1 shows that

Czechia’s tax revenue as a percentage of GDP was

considerably below the EU average in 2023. Total

tax revenue has increased by about 2.5

percentage points (pps) of GDP since 2010, but

remains below the EU average (34% in Czechia in

2023 compared with 39% in the EU; see Table

A2.1). Tax revenue in all categories remains below

the EU average except for revenue raised by

corporate income tax (which was equivalent to

4.2% of Czechia’s GDP in 2023, compared with an

EU average of 3.2%. Revenue from labour taxes

has increased since 2010 (by 2 pps of GDP to

17.1% in 2023), while revenue from consumption

taxes fell in 2022 and 2023, dropping below the

2010 level (by 0.3 pps to 10.3% of GDP in 2023).

Revenue from capital taxes increased to 6.5% of

GDP in 2023. Revenue from environmental taxes is

below the EU average (at 1.6% of GDP, compared

with an EU average of 2.0%) and revenue from

property taxation (including recurrent property

taxation) remains very low, both expressed as a

percentage of GDP and expressed as a percentage

of total tax revenue (see Table A2.1 and

Graph A2.1). These low taxes on property will

slightly increase in the coming years as laid down

in the Act on the Consolidation of Public Budget(

)

(Consolidation Package) explained in Annex 19 of

the 2024 Country Report. Real estate tax in

Czechia is payable annually by the owner of land

or buildings. The amount of the real estate tax is

dependent on area, location, and usage of the land

or buildings. Effective from 2025, the calculation

of property tax will be affected by an inflation

coefficient. In addition, a mortgage tax credit

allows taxpayers to deduct interest paid for their

housing needs from their income-tax base.

However, concerns arise in relation to both the

distributional effect of this tax-deductibility regime

and the effective support it gives to construction. A

significant share of this tax-deductibility scheme

has been found to be directed towards high-

income households. In relation to the shares of

(

) Act No.349/2023 Coll. Of 8 November 2023, entered into

force on 1rst January 2024.

revenue from different taxes in 2023, the

structure remains unchanged from 2022 with a

similar weight of taxes on labour in Czechia and in

the EU (50.4% as a share of total tax revenues vs

an EU average of 51.2%) but with continued lower

taxes on capital and taxes on consumption in

Czechia than the EU average (19.2% in taxes on

capital and 26.9% in taxes on consumption in

Czechia in comparison with 21.9% and 30.4%

respectively in the EU).

Graph A2.1:

Tax revenue shares in 2023

Tax revenue shares in 2023, Czechia (outer ring)

and EU (inner ring)

19.2

21.9

51.2

26.9

30.4

50.4

Taxes on labour

Taxes on consumption

Taxes on capital

Source:

Taxation Trends Data, DG TAXUD

Low rates of business taxation seem to

contribute to the competitiveness of the

Czech economy, but the complexity of the tax

system could still be reduced.

The statutory

(19%) and effective (18.34%) corporate tax rates

are close, suggesting a limited use of tax

incentives in Czechia and a preference for direct

public financing of business R&D expenditure.

Moreover, 110% of R&D expenses can be

deducted from taxable income if R&D expenses

were higher than the previous year. This regime

has been found to be complex and

administratively burdensome (see Annex 3

Innovation to Business). In some cases, green

investments in Czechia can benefit from a

favourable depreciation regime. As an example,

emission-free vehicles for corporate fleets

acquired and put in use between 1 January 2024

and 31 December 2028 can benefit from

accelerated depreciation over two years. However,

Czechia faces some challenges in relation to the

labour market and the country’s high dependency

on fossil fuels as explained in other sections.

kom (2025) 0203 - Ingen titel

Table A2.1:

Taxation indicators

Median (EU-27)

Tax structure

2010

Total taxes (including compulsory actual social contributions) (% of

GDP)

Taxes on labour (% of GDP)

of which, social security contributions (SSC, % of GDP)

Taxes on consumption (% of GDP)

of which, value added taxes (VAT, % of GDP)

Taxes on capital (% of GDP)

Personal income taxes (PIT, % of GDP)

Corporate income taxes (CIT, % of GDP)

Total property taxes (% of GDP)

Recurrent taxes on immovable property (% of GDP)

Environmental taxes (% of GDP)

Effective carbon rate in EUR per tonne of CO

equivalents

Tax wedge at 50% of average wage (single person) (*)

Tax wedge at 100% of average wage (single person) (*)

Corporate income tax - effective average tax rates (1) (*)

Difference in Gini coefficient before and after taxes and cash social

transfers (pensions excluded from social transfers) (2) (*)

Outstanding tax arrears: total year-end tax debt (including debt

VAT gap (% of VAT total tax liability, VTTL) (**)

32.5

16.9

14.3

10.6

6.5

5.0

3.7

3.2

0.5

0.2

2.2

35.7

42.1

18.5

8.0

Czechia

2021 2022

34.8

18.4

16.0

11.1

7.3

5.3

3.6

0.3

0.2

1.8

66.1

35.4

40.0

17.8

7.2

28.8

6.7

34.0

17.2

15.3

10.8

7.6

6.0

3.5

4.0

0.3

0.2

1.4

35.1

39.9

18.1

6.1

20.4

4.2

2023

34.0

17.1

15.3

10.3

7.5

6.5

3.7

4.2

0.3

0.2

1.6

65.0

35.8

40.2

18.3

6.2

2024

2010

37.8

19.8

12.9

10.9

6.8

7.1

8.6

2.2

1.9

1.1

2.5

33.9

40.9

21.3

8.6

2021

40.2

20.5

13.0

11.2

7.3

8.5

9.6

2.9

2.2

1.1

2.4

86.0

31.8

39.9

19.3

8.2

35.5

EU-27

2022 2023

39.7

20.1

12.7

10.9

7.4

8.7

9.4

3.2

2.1

1.0

2.1

31.5

39.9

19.1

7.9

32.6

7.0

39.0

20.0

12.7

10.5

7.1

8.5

9.3

3.2

1.9

0.9

2.0

84.8

31.5

40.2

18.9

7.7

2024

By tax base

Some tax types

Progressivity &

fairness

36.8

40.9

31.8

40.3

Tax administration &

considered not collectable) / total revenue (in %) (*)

compliance

3.2

6.6

(1) Forward-looking effective tax rate (KPMG).

(2) A higher value indicates a stronger redistributive impact of taxation.

(*) EU-27 simple average.

(**) Forecast value for 2023. For more details on the VAT gap, see European Commission, Directorate-General for Taxation and

Customs Union, VAT gap in the EU - 2024 report,

https://data.europa.eu/doi/10.2778/2476549.

For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage,

https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en.

Source:

European Commission, OECD

Czechia has a high tax burden on labour at

low earnings levels.

Czechia’s labour

tax burden

is less progressive than the EU average. The tax

wedge (

) for single workers earning 50% of the

average wage (36.8% in 2024) was high as

compared to the EU average (31.8%), while it was

below the EU average at high earnings levels (see

Graph A2.2). The tax wedge at high earnings is

lowered also by the fact that social contributions

are capped above a certain earnings level. The

ability of Czechia’s tax-and-benefit

system to

reduce income inequality (measured by its ability

to reduce the Gini coefficient) has decreased since

2010 and has remained below the EU average in

recent years (see Table A2.1).

The latest measures approved in the

country’s ‘consolidation package’ may

increase the progressivity of the tax ad

benefit system.

A higher personal income tax

rate of 23% now applies to income above a

specific threshold (the threshold is equal to three

(

) The tax wedge is defined as the sum of personal income

taxes and employee and employer social-security

contributions net of family allowances, expressed as a

percentage of total labour costs (the sum of the gross wage

and social-security contributions paid by the employer).

times the average monthly wage or an annual tax

base up to 1 450 000 CZK (

). The taxation rate

applying to earners in the first income bracket

remains at 15%.

In addition, taxation for self-employed

people is significantly lower in Czechia than

taxation of traditional employment.

Taxation

of self-employed people is unequal and regressive

given that it is possible to deduct between 40%

and 80% of gross annual income as business

expenses, with only the remaining share of income

being subject to personal income tax. Alternatively,

self-employed people earning up to 2 million

CZK(

) a year may also opt to pay a lump sum

grouping their income tax, pension and health

insurance liabilities. This lump sum can in some

cases be significantly lower than the tax that a

conventional employee earning a similar amount

would pay.

(

) Equivalent to 57 927 euros as of the exchange rate in effect

on 21rst March 2025.

(

) Equivalent to

79 820 euros as of the exchange rate in

effect on 21rst March 2025

kom (2025) 0203 - Ingen titel

The tax system’s effect on work incentives

for second earners has improved.

The tax

wedge for second earners earning 67% of the

average wage was 38.9% was equal to that of

single earners and close to the EU average. A tax

credit is granted to dependent spouses whose

household partner earns an annual gross income

not exceeding a certain threshold. As of

1 January 2024, the conditions for benefiting from

this tax credit have been tightened, and the tax

credit is now only granted to households caring for

a child under the age of three. However, this

measure is to some extent counterbalanced by the

removal of the tax credit helping parents to pay

for pre-school facilities.

Graph A2.2:

Tax wedge for single and second

earners, % of total labour costs, 2024

Tax wedge, % of total labour costs

42.6

100

150

36.8

38.9

40.9

E-commerce sales in Czechia declined

between 2019 and 2022, although VAT

revenue grew by 15.8%, and the VAT

compliance gap continued to shrink, reaching

4.2% in 2022. The VAT compliance gap is

expected to fall further in 2023.

The VAT

compliance gap has continued its downward trend,

falling by a further 2.5 percentage points to 4.2%

in 2022 compared with 6.7% 2021. Since 2019,

the VAT compliance gap

–

expressed as a

percentage of GDP

–

has fallen each year and is

expected to fall by a further percentage point in

2023 to 3.2%(

). The stability of this trend

suggests that there were no major issues with VAT

compliance. E-commerce growth in Czechia

declined between 2019 and 2022, with online

sales falling from 31.7% to 29.9% of business

turnover, and the share of businesses engaging in

e-sales dropping from 29.8% to 24.7%. Moreover,

online retail sales decreased from 8.8% to 8.5%

over the same period. The decline in e-sales has

the potential to increase VAT non-compliance risks.

VAT revenue in Czechia grew by 15.8% in 2022.

Meanwhile, the VAT compliance gap fell sharply

between 2019 and 2022.

Finally, as part of its budgetary and public

health strategy, the Czech government is

progressively increasing excise duties on

alcoholic beverages.

A 10% increase is planned

in 2024 and 2025, and a further 5% increase is

planned in 2026.

Earnings as % of the average wage

Single earner - CZ

Second earner - CZ

Single earner - EU average

Second earner - EU average

The tax wedge for second earners assumes a first earner at

100% of the average wage and no children. For the full

methodology, see OECD, 2016, Taxing Wages 2014-2015.

Source:

European Commission

Increasing

tax

compliance

through

digitalisation

and

improved

tax

administration could help to increase

revenue without changing tax rates.

Technologies like advanced data analytics can help

to reduce tax avoidance and tax evasion, ensuring

a fairer distribution of the tax burden. It can also

reduce Czechia’s cost of tax collection, which is

currently one of the highest in the EU. Although

there has been significant progress in

implementing e-filing for corporate-income tax

and VAT (more than 90% of returns for these two

tax categories are now filed electronically), there is

still room to increase the e-filling rate for

personal-income-tax returns: in 2021, this rate

was just above 30%, one of the lowest rates in the

EU. In addition, about 17% of tax arrears are

collectable but remain uncollected in Czechia,

although this is on the lower end when compared

with the average for the EU’s 27

Member States.

(

) European Commission: VAT Gap in the EU

–

2024 Report;

Figure 42

kom (2025) 0203 - Ingen titel

PRODUCTIVITY

ANNEX 3: INNOVATION TO BUSINESS

In 2024, Czechia continued to be deemed a

‘moderate innovator’, with performance

below the EU average.

According to the 2024

European Innovation Scoreboard (

), its innovation

performance remains below the EU average

(89.7%), but has grown faster than the EU average

since 2017. In 2023, R&D intensity (

) stood at

1.83% and experienced a third year of decline

after enjoying annual growth since 2016, peaking

at almost 2% of GDP in 2021. This is below the EU

average of 2.24% and might not be sufficient to

achieve the national target of 3% (

) by 2030.

Czechia’s fragmented research and innovation

(R&I) system lacks strong coordination, requiring

more defined and determined governance. Direct

and indirect support for innovative companies

could be better targeted and effectively

implemented to boost the ability of domestic firms

to pursue advanced innovations and support the

creation of start-ups and spin-offs. Czechia also

has significant scope to improve its performance

in the digitalisation of businesses and its

contribution to the EU’s Digital Decade targets.(

potential in the R&D ecosystem.

Even though it

has been decreasing over the past three years,

public R&D expenditure as a percentage of GDP is

not far from the EU average (0.63% vs EU average

of 0.72% in 2023) and has been relatively high

compared to peer countries. Nevertheless, the

quality of research outputs, as measured by the

share of scientific publications within the top 10%

most cited publications worldwide as a percentage

of total publications, is significantly below the EU

average (5.4% vs 9.6%). This could point to

lagging efficiency and impact of public R&D

expenditure (see also Graph A3.1).

Graph A3.1:

Top 10% most cited publications in

relation to public R&D expenditure

Top 10% highly-cited publications, 2021-2023

ES FR

Science and innovative ecosystems

Despite continuous improvements, more

attention to quality and performance is

needed for public research to reach its full

(

) 2024 European Innovation Scoreboard, Czechia. The

scoreboard provides a comparative analysis of innovation

performance in EU countries, including the relative strengths

and weaknesses of their national systems.

European

innovation scoreboard 2024 - European Commission.

(

) Defined as gross domestic expenditure on R&D as a

percentage of GDP.

(

)

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).

(

) The EU's Digital Decade policy programme sets ambitious

targets for 2030 to drive Europe's digital transformation. In

the realm of business digitalisation, the programme aims for

75% of EU companies to utilize advanced digital

technologies such as cloud computing, artificial intelligence,

or big data. Additionally, it targets more than 90% of small

and medium-sized enterprises (SMEs) to reach at least a

basic level of digital intensity. These objectives are designed

to enhance the competitiveness and innovation capacity of

European businesses in the global digital economy -

Europe’s

digital decade: 2030 targets | European Commission

0.2

0.4

0.6

0.8

Public expenditure on R&D (as % of GDP), 2023

1.2

Source:

Eurostat / Science-Metrix

The governance of R&I in Czechia is quite

complex and the system fragmented.

Over the

last few years, Czechia has invested heavily in its

research infrastructure. It was supported by both

the cohesion policy and the recovery and resilience

plan, which has helped modernise facilities. While

this has strengthened Czechia’s research

capacities, more effort such as better cooperation

among research teams is needed to achieve

critical mass. A total of 180 research organisations

receive institutional support for research, including

26 public universities, 2 state universities, 54

institutes of the Czech Academy of Sciences and

22 sectoral public research institutes (

). As

(

) Background report, Policy Support Facility

Support Czechia.

Czechia on the reform of the Technology Transfer Offices

sector - Publications Office of the EU

(see p. 9) and

Czech

research cooperation in the EU is growing only slightly, AVUni

is doing well | RMU

–

Asociace v�½zkumn�½ch univerzit.

kom (2025) 0203 - Ingen titel

previously observed (

), stronger institutional

governance of R&I policy and collaboration

between ministries, funding agencies and

stakeholders is necessary. The National Research

and Development Policy holds a prominent

position, as it is explicitly referenced in the Act on

the Support of Research and Development.

However, the concurrent existence of other

strategies that also address research and

innovation, combined with the often ambiguous

relationships among them and their outcomes,

lead to a lack of clarity regarding the strategic

vision for policymakers and the research,

development, and innovation (RDI) community (

) .

The potential of female scientists remains

untapped.

The total number of people employed

in R&D almost doubled between 2005 and

2022 (

). However, the proportion of women fell

slightly over the same period (32.6% (full-time

equivalents/FTEs in 2005 versus 28.7% FTEs in

2022), the least in the EU. A recent study (

)

monitoring the representation of female scientists

between 2002 and 2022 concludes that Czechia is

not making enough use of the potential of skilled,

highly educated women in science (

) in the long

term. While the recovery and resilience plan entails

among others the creation of a national excellence

programme

better

support

excellent

researchers, specific actions to

strengthen’

the

position of female scientists are also needed to

ensure that Czechia continues to build a strong

foundation for research. Looking ahead, a

potential way to address this issue could be

(

) Country report Czechia, 2020, see pp. 34-35:

eur-

lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:52020SC0

502.

( ) Panel of experts, 2025,

From fragmentation to synergy and

impact: A review of the knowledge transfer system in

Czechia

(Final report, Policy Support Facility), see p.12:

Support to Czechia on its reforms of the Technology Transfer

Offices sector | Research and Innovation

through targeted initiatives such as newly

introduced ‘return grants’. These enable scientists

who have taken a career break, for example due to

parental leave, to plan their return to science.

Business innovation

The number of Czech companies that are able

to implement advanced innovations remains

low, while the integration and contribution of

multinationals into the R&I ecosystem could

be improved.

Czechia has a large share of

industrial production (

) of GDP within the EU, but

the industrial sector’s level of innovation and role

in value chains lags behind. In 2023, domestic

applicants filed 465 inventions or new technical

solutions for patent protection with the national

Industrial Property Office (

), which is the lowest

number since 1995. Compared with other Member

States, patent applications filed under the Patent

Cooperation Treaty also remain well below the EU

average (0.7 per billion euro of GDP in 2022

versus EU average of 2.8). Czechia could benefit

from participation in the unitary patent system (

Business enterprise expenditure on R&D as a

percentage of GDP was below the EU average in

2023 (1.19% vs 1.49%) but has experienced a

consistent rise for over 10 years. These increases

have been driven to a large extent by foreign

affiliates (

). These account for around 65% of

total R&D business expenditure, highly correlated

with the structure of knowledge-intensive

industries (

) in Czechia (

). This has opened a

(

)

www.eurostat.eu

datasets on GDP and industrial production

by country.

(

) Data source: Czech Statistical Office,

V Česku bylo nejméně

patentov�½ch přihlášek od roku 1995

Vědav�½zkum.cz.

(

) The country is expected to join by ratifying the Unified Patent

Court Agreement, which it has already signed.

(

) The amount of R&D spending in foreign controlled

companies has increased more than threefold in nominal

terms since 2010.

(

) The majority of business expenditure on R&D is spent in the

manufacturing sector (54%), with a visible pattern of growth

also in the ICT sector (20%) (source: Policy Support Facility

background report).

(

) Pazour Michal, 2024,

Support to Czechia on the reform of

the Technology Transfer Offices sector (Background report,

Policy Support Facility).

Web page:

Support to Czechia on the

reform of the Technology Transfer Offices sector -

Publications Office of the EU.

(

) The 2022 Monitoring Report on the position of women in

Czech science provides an overview of current statistical

indicators between 2005 and 2022 based on data from the

Czech Statistical Office (CSO), the Ministry of Education and

Culture (MEYS), and data from individual institutions.

(

)

Třísková, Hana. 2024.

The Position of Women in Czech

Science 2022. Monitoring Report,

web page:

The Position of

Women in Czech Science 2022. Monitoring Report - Institute

of Sociology of the Czech Academy of Sciences.

( ) Czechia ranks bottom in the EU in terms of the

representation of women in research positions (source:

Analysis of the state of RDI in the Czech Republic and their

international comparison

in 2022).

kom (2025) 0203 - Ingen titel

gap between the knowledge intensity of the

domestic business enterprise sector and that of

foreign-owned companies. Czech companies often

have limited ability to integrate cutting-edge

research into their business activities (

). This can

hinder the effective transfer of knowledge from

public research to the business sector. On the

other hand, the size of the ICT sector in Czechia is

slightly above the EU average, contributing 5.1%

to gross value added in 2021. Business

expenditure on R&D in the ICT sector accounts for

26.37% of total R&D expenditure, indicating a

relatively strong focus on innovation in this

sector (

). Furthermore, the Czech start-up

ecosystem is developing dynamically as

highlighted by a 2024 study (

), despite ongoing

challenges (

) such as difficulties in securing

initial financing, a shortage of skilled workers and

complex bureaucracy, particularly on employee

stock option plans.

The adoption of digital technologies by firms

in Czechia remains below the EU average,

despite the implementation of several

supporting measures.

In 2023, AI adoption in

Czech firms stood at 11.26% (vs EU average of

13.48%), cloud uptake stood at 35.23% (vs

38.86%) and data analytics adoption at 19.49%

(vs 33.17%). While the adoption of AI has

increased significantly (+14.5% from 2022 to

2023), cloud uptake declined between 2021 and

2024, in contrast to an overall increasing trend at

EU level.

Czechia has allocated significant

funding, notably EUR 575 million under the

Recovery and Resilience Facility, to support

business digitalisation, as well as additional

cohesion funding. Moreover, the National Artificial

Intelligence Strategy has been updated through a

detailed Action Plan, focusing specifically on AI

development and deployment. Its implementation

is guided by a series of KPIs and encompasses 69

targeted projects, including subsidy programmes,

business manuals, retraining courses, and the

rollout of innovative AI solutions, fostering

(

)

INKA 3: V�½sledky 3. kola mapování inovačních kapacit

Technologická agentura ČR.

(

) Eurostat,

ICT sector size

and

R&D in ICT sector,

all data from

2021.

(

) StartupJobs, J&T Bank, Vodafone, 2024.

Smart Market

Report 2024:

sj-smart-market-report-en.pdf.

(

) Deloitte, 2022,

Start-up Survey by Deloitte:

Jak se v Česku

daří startupům | Deloitte Česká republika

and source under ft

120 (see p. 59).

collaboration between the public and private

sectors.

Direct and indirect public support for

innovative companies could be better

implemented.

According to a recent report (

public funding for innovation in Czechia primarily

benefits large, established industrial firms, but

lags behind other countries in supporting small

innovative firms. In 2023, indirect support in the

form of R&D tax incentives accounted for 0.04%

of GDP, well below the EU average of 0.10%. Less

than a third of companies (

) consistently

engaged in R&D use this kind of support, with

small and young firms using these incentives even

less frequently (

). The scheme is criticised by

companies as being complex and bureaucratic. The

innovation support programmes could be

examined and possibly redesigned to be more

inclusive of young innovative companies. This

effort should be combined with initiatives to make

the R&D tax deduction more attractive for

companies and less burdensome.

Business-science

linkages

are

still

underdeveloped,

and

research

commercialisation

remains

subdued.

Collaboration between private businesses and

academia remains limited, as underlined by the

level of contractual research, illustrated by public

R&D expenditure financed by the business

enterprise sector (national) as a percentage of

GDP being significantly lower than the EU average

(0.024 vs 0.050 in 2023). Additionally, there is not

much diffusion from research to entrepreneurship,

with the number of spin-offs in the country still

low (

). This could be caused among other things

by the inconsistent support and variable quality of

technology transfer offices as well as bureaucratic

(

)

Martin Srholec, Národohospodářsk�½ ústav AV ČR,2024

IDEA_Studie_06_2024_Nedotovani_inovatori_tisk_0926.pdf

Which Innovative Firms Do/Do Not Receive Public Support for

Innovation?,

Jaké inovativní firmy (ne)čerpají

veřejnou

podporu na inovace?).

(

) A number that has been gradually decreasing (by more than

40%) since 2015. Background report 2024, Policy Support

Facility (see p. 33).

(

)

IDEA_Studie_06_2024_Nedotovani_inovatori_tisk_0926.pdf

Which Innovative Firms Do/Do Not Receive Public Support for

Innovation? (IDEA, 2024).

(

) Background report 2024, Policy Support Facility (see page

61)

Support to Czechia.: Czechia on the reform of the

Technology Transfer Offices sector - Publications Office of

the EU.

kom (2025) 0203 - Ingen titel

obstacles that complicate the transfer of

intellectual property rights for researchers and

entrepreneurs or low motivation among

universities to support activities other than core

education and research. As a result, researchers

are mainly encouraged to produce publication

outputs without trying to commercialise their

research results. Czechia is currently engaged with

the Horizon Europe Policy Support Facility and

received expert recommendations on how to

improve support for science-business linkages, and

more specifically on the reform of the technology

transfer offices (

). Moreover, the government

approved a new draft Act on Research,

Development, Innovation and Knowledge Transfer,

which is now part of a legislative procedure. The

draft act aims to improve the commercialisation of

research results, boost cooperation between

different bodies and provide better legal certainty.

Innovative talent

The shortage of skilled workers affects

Czechia’s innovation capacity.

The demand for

tertiary education graduates has outpaced the

available supply (

) and at the same time, the

number of tertiary education graduates in science

and engineering continue to decrease (14.2 per

thousand population aged 25-35 in 2012 versus

10.3 in 2022), on this topic read more in Annex 12:

Education and skills. Labour shortages have

prompted Czech employers to look for workers

from abroad, but the current labour migration

policy does not seem to be sufficiently geared to

attracting skilled foreign workers. While

immigration has been rising steadily, close to 90%

of foreign workers from non-EU countries work in

low- to medium-skilled jobs. Conditions in terms of

permit duration, family reunion and labour market

mobility in Czechia for highly skilled workers are

less favourable than in peer countries (

). For

bottlenecks in domestic workers, see also Annex

10.

The

development

entrepreneurship

education in Czechia is in its early stages,

calling

for

strategic

planning

and

monitoring.

Entrepreneurship education is

anchored in the school curricula as one of the

eight key competences that should be developed

in compulsory education. While some new

initiatives have been launched, including

supporting entrepreneurial skills of students and

new entrepreneurs via the CzechInvest Agency

under the national recovery and resilience plan,

entrepreneurship is not among the priorities for

educational policy. Czechia lacks a dedicated

strategy for its development and data on students’

participation and on the quality and outcomes of

the existing entrepreneurship education.

Financing innovation

Venture capital levels have improved but

remain small compared with other countries

worldwide.

The average value of venture capital

investment as percentage of GDP went up from

0.004% in 2012 to 0.029% in 2023 but is still

much lower than the equivalent EU average

(0.078% in 2023) moreover, the participation of

domestic institutional investors in providing

funding for start-ups and venture capital investors

is low, further contributing to an underdeveloped

local risk capital market. There is a financing gap

for early-stage innovative firms in need of capital

with high-risk tolerance throughout their lifecycle.

Some policies have been put in place to promote

start-up funding, also via the Czech recovery and

resilience plan. These include a recent amendment

of Czechia’s employee stock option framework,

applied since 1 January 2024. However, it may

need further adjustments to improve its usability

and attractiveness compared to EU and

international peers. For further details on these

topics, see Annex 5.

(

) OECD (2025),

OECD Economic Surveys: Czechia 2025,

OECD

Publishing, Paris,

https://doi.org/10.1787/7a70af5c-en.

(

) OECD (2023),

OECD Economic Surveys: Czech Republic

2023,

OECD Publishing:

https://doi.org/10.1787/e392e937-

en.

(

)

PSF Country | Research and Innovation.

kom (2025) 0203 - Ingen titel

Table A3.1:

Key innovation indicators

Czechia

Headline indicator

R&D intensity (gross domestic expenditure on R&D as % of GDP)

Science and innovative ecosystems

Public expenditure on R&D as % of GDP

Scientific publications of the country within the top 10% most cited

publications worldwide as % of total publications of the country

Researchers (FTE) employed by public sector (Gov+HEI) per thousand

active population

International co-publications as % of total number of publications

R&D investment & researchers employed in businesses

Business enterprise expenditure on R&D (BERD) as % of GDP

Business enterprise expenditure on R&D (BERD) performed by SMEs as %

of GDP

Researchers employed by business per thousand active population

Innovation outputs

Patent applications filed under the Patent Cooperation Treaty per billion

GDP (in PPS €)

Employment share of high-growth enterprises measured in employment

(%)

Digitalisation of businesses

SMEs with at least a basic level of digital intensity

% SMEs (EU Digital Decade target by 2030: 90%)

Data analytics adoption

% enterprises (EU Digital Decade target by 2030: 75%)

Cloud adoption

% enterprises (EU Digital Decade target by 2030: 75%)

Artificial intelligence adoption

% enterprises (EU Digital Decade target by 2030: 75%)

Academia-business collaboration

Public-private scientific co-publications as % of total number of

publications

Public expenditure on R&D financed by business enterprises (national) as

% of GDP

Public support for business innovation

Total public sector support for BERD as % of GDP

R&D tax incentives: foregone revenues as % of GDP

BERD financed by the public sector (national and abroad) as % of GDP

Financing innovation

Venture capital (market statistics) as % of GDP (calculated as a 3-year

moving average)

Seed funding (market statistics) as % of GDP

Start-up and early-stage funding (market statistics) as % of GDP

Later stage and scale-up funding (market statistics) as % of GDP

Innovative talent

New graduates in science and engineering per thousand population aged

25-34

Graduates in the field of computing per thousand population aged 25-34

2012

2017

2020

2021

2022

2023

2024 EU average (1)

USA

1.76

0.82

4.6

3.5

36.2

0.93

0.4

2.9

1.1

1.75

0.64

4.6

3.6

42.4

1.1

0.32

3.9

0.8

16.86

1.95

0.75

5.1

4.1

51.1

1.19

0.32

4.3

0.9

10.86

1.93

0.71

5.4

4.3

52.8

1.21

0.34

4.9

1.89

0.67

4.4

53.7

1.21

0.35

5.2

0.7

1.83

0.63

4.4

1.19

0.35

5.3

2.24

0.72

9.6

4.1

55.9

1.49

0.4

5.8

2.8

12.51

3.45

0.64

12.3

39.3

2.70

0.3

40.0

4.5

68.0

19.5

35.2

5.9

70.8

11.3

72.9

33.2

38.9

13.5

5.9

0.019

0.227

0.048

0.179

6.6

0.028

0.153

0.049

0.104

0.024

0.15

0.036

0.114

7.5

0.023

0.153

0.390

0.114

7.9

0.022

0.144

0.044

0.100

0.024

0.126

0.036

0.090

7.7

0.05

0.204

0.102

0.100

8.9

0.02

0.251

0.141

0.110

0.004

73.2

26.8

14.8

2.9

0.003

28.8

70.9

0.4

11.9

2.8

0.009

17.1

53.4

29.5

10.6

2.6

0.023

8.9

69.3

21.8

10.5

2.9

0.027

9.3

60.1

30.6

10.3

2.9

0.029

8.6

48.8

42.6

0.078

7.3

44.0

48.7

17.6

3.6

(1) EU average for the last available year with the highest number of country data.

Source:

Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard

kom (2025) 0203 - Ingen titel

ANNEX 4: MAKING BUSINESS EASIER

Czechia’s business environment is challenged

by high energy prices, administrative and

regulatory burdens and labour market

shortages that all require faster progress in

addressing barriers so that Czechia remains

competitive in the long term.

High energy

prices are the crucial factor affecting the general

condition of the Czech industrial sector. Low

demand in key trading partners (especially

Germany) is weighing on industrial production and

exports. Urban planning and the procedure for the

granting of construction permits is one of the main

obstacles to economic growth. Progress has been

made in enhancing the business environment and

reducing administrative and regulatory burden, but

additional efforts are still required in order to

improve competitiveness and investment. Labour

shortages persist across most industries, with the

construction sector being particularly affected.

only the remaining 41% (EUR 238 million) was

invested in the rest of the market

–

resulting in

only a slight increase of 11.1% in total investment

in Czech start-ups. Government net investment

declined in 2024 after strong growth in 2023. The

main reason for this (apart from

last year’s high

base) was the government’s budget consolidation

efforts. Accelerating investment in transport

infrastructure is one of the pro-growth measures

outlined in the government’s strategic document,

based on the proposals of the government’s

National Economic Council.

Energy costs remain the main investment

obstacle for businesses.

Czechia ranks last in

the EIB Investment Survey (

) regarding high

energy prices. Czech businesses’ difficulties with

energy prices have further worsened compared

with 2023 and this has affected 95% of firms

–

the highest share of firms since 2022 (vs 77% in

the EU as a whole).

Czechia continues to experience difficulties

with urban planning and construction-

permitting processes, despite some steps

that it has taken in the right direction.

The

new Building Act, which gradually came into effect

in 2023-2024, reduces the deadlines for building

permit procedures and changes to their

enforceability. It also established a specialised

Transport and Energy Construction Authority.

However, urban planning processes remain

unreformed and are holding back development in

large cities, where they take over a decade to

complete. A new digital system for issuing building

permits that was initially planned for launching in

July 2023 was launched in July 2024. Its purpose

is to simplify applications, expedite processes and

improve transparency. However, the system’s

introduction was not successful, and its

malfunction caused the government to postpone

many digitalisation elements until 2027. This

setback affects not only the construction and

energy sectors but also the whole economy.

Investing in automation and robotisation

could be a key element in resolving labour

shortages, enhancing productivity, and GDP

and wages growth.

Czechia faces persistent

challenges linked to labour and skills shortages.

Availability of skilled staff is the third most

(

) European Investment Bank,

EIB investment survey 2024,

based on interviews carried out between April and July 2024.

Economic framework conditions

Czechia’s business

environment remains one

of the least favourable in the EU.

According to

the Prosperity and Financial Health Index (

Czechia has the sixth worst conditions for doing

business in the EU. Businesses have been

burdened by a significant increase in electricity

prices, which have more than doubled in the last

three years. Underperforming capital market is

limiting financing for companies and start-ups and

hindering company growth (see the Annexes on

Innovation to Business and on Capital markets,

financial stability and access to finance). The

corporate income tax rate increased from 19% to

21% as part of the consolidation package in 2024,

weighing on business activity and investments.

Private net investment remained unchanged,

but public net investment declined in 2024.

Private net investment (expressed as a percentage

of GDP) stayed at the same level as in 2023 and

above the EU average (4.43% in Czechia vs 3.44%

in the EU). According to Czech Founders, the total

amount of investment in Czech start-ups grew by

174% to EUR 588.6 million in 2024. A closer look

nevertheless suggests that 59% of this (EUR

350.6 million) was raised by two unicorns, while

(

)

Česká spořitelna,

the Europe in Data portal and the Institute

of Sociology of the Czech Academy of Sciences,

The

Prosperity and Financial Health Index,

December 2024.

kom (2025) 0203 - Ingen titel

significant barrier to investment. Labour shortages

are still reported in most sectors, but especially in

manufacturing and construction (see the Labour

market Annex). Based on the structure of

employment in Czechia and forecasts of

technological advancements, it has been

estimated that 51% of jobs could be

automated (

). Business could therefore overcome

these labour shortages by increasing investment in

automation and robotisation in order to fill

workforce gaps, maintain operational efficiency

and drive economic growth. Reducing skills

shortages and mismatches requires reform of the

VET and broadening of access to general

education (in order to reduce over-specialisation)

and promotion of work-based learning as well as

expanding opportunities for reskilling and

upskilling.

Graph A4.1:

Making Business Easier: selected

indicators.

(1) Regulatory

burden

slightly below the EU average. By contrast, the

business-to-business gap has widened and is now

above the EU average (

). Czechia has the third

highest share of SMEs in the EU experiencing late

payments from private entities in the current and

previous quarters (62% - compared with the EU

average of 47%) (

). This increases SMEs’ risk of

disrupted cash flows. Some of the life events of

companies, such as those surrounding insolvency,

have received less attention, and could be

streamlined and digitalised (

Czechia has made progress in mobile

connectivity, but challenges remain in fixed

infrastructure deployment.

5G coverage

accelerated from 83% in 2022 to nearly 95% in

2023 (above the EU average of 89.3%). The

national target for 5G coverage is 100%, which is

close to the EU’s target. 50.5% of households are

currently covered by very high capacity networks

(VHCN), so Czechia has significant scope to

improve its contribution to the EU’s Digital Decade

target. The prompt implementation of investments

supported by the Recovery and Resilience Facility

and the Connecting Europe Facility is crucial in this

regard. Fibre-to-the-premises (FTTP) coverage is

36.1% (well below the EU average of 64%) and

the roll-out is not progressing fast enough to meet

the 2030 target. Contributing factors include

lengthy building-permit procedures; coordination

difficulties between local and regional authorities;

and the high cost of deployment in smaller towns.

In the area of cybersecurity, Czech

enterprises report a higher incidence of ICT

security-related incidents than the EU

average.

The percentage of Czech enterprises

affected by cyber incidents decreased slightly

from 4.67% in 2022 to 4.49% in 2024 but

remains well above the EU average of 3.43% (

Security measures and staff awareness are

gradually improving, but further efforts are

needed in order to strengthen resilience against

cyber threats (

Regulation as a major

obstacle to investment

24.5

1.8

(2) Single

Market

41.6

EU Trade Integration

46.1

(3) Shortages

Material shortages as a

factor limiting production

24.6

16.6

(4) Late payments

from public entities

13.8

47.9

from private entities

62.4

Share (%)

EU27

Share of (1) enterprises, (2) average intra-EU exports and

imports in GDP, (3) firms, (4) SMEs.

Source:

(1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE

survey.

Further efforts are needed on late payments

and insolvencies in order to increase

SMEs’

resilience.

The

public sector’s

payment delays

decreased in 2024 compared with 2023 and are

(

)

Deloitte, Automatizace práce v ČR, 2018.

(

) Intrum,

European Payment Report 2024.

(

)

2024 Survey on the Access to Finance of Enterprises

(SAFE),

January 2025.

(

) The mid-term evaluation is undertaken by the OECD in

collaboration with Czechia’s

Ministry of Industry and Trade

and with financial support from DG REFORM, within the

framework of the 2024 Technical Support Instrument (TSI)

cycle (project code: 24CZ02), June 2024

–

June 2025.

(

) Eurostat,

isoc_cisce_ic.

(

) Eurostat,

isoc_cisce_ra.

kom (2025) 0203 - Ingen titel

Regulatory and administrative

barriers

The Czech business environment faces

significant

obstacles

(including

the

complexity and uncertainty of policy

decisions,

and

the

burdensome

administrative and regulatory requirements

that accompany them).

Business regulations are

only a major obstacle to investment for a small

share of companies (see Graph A2.1), but the

complexity of administrative procedures and fast-

changing legislation remain the most important

challenges when doing business in Czechia (

72% of companies identified the complexity of

administrative procedures as a problem when

doing business

–

above the EU average (66%).

There is a heavy administrative burden on all

sectors of the economy. According to estimates

from the Chambers of Commerce, businesses

spend thousands of hours annually on

administrative tasks

–

equivalent to an estimated

loss of CZK 72 billion (EUR 2.9 billion).

Efforts to improve the business environment

are underway, several initiatives are being

implemented

and

improvements

are

beginning to appear.

Following the introduction

of the first two

‘anti-bureaucratic

packages’ in

2022 and 2023, the Czech government approved

a third package (

) of 29 measures in May 2024

to alleviate the excessive administrative burden on

businesses. Under the oversight of the Expert

Group for Reducing Bureaucracy (

), another set of

22 measures was prepared in August 2024 to help

businesses reduce costs and save time. The

Licenced Trade Portal (

) already makes it possible

to set up a business fully online. The

Entrepreneurial Portal (a measure of the recovery

and resilience plan) that is currently under

development will provide a single digital place for

electronic communication with institutions. The

perception of business regulations as a barrier to

investment improved among the Czech businesses,

(

) Eurobaromoeter,

Businesses’ attitudes towards corruption in

the EU in 2024,

July 2024.

( )

Vláda schválila třetí antibyrokratick�½ balíček připraven�½

ministrem Michalem Šalomounem | Vláda České

republiky,

May 2024.

( )

Expert Group for Reducing Bureacracy

within the Ministry of

Industry and Trade of Czechia.

( )

Licensed Trades Portal.

with the share decreasing from 63% in 2023 to

57% in 2024(

). This trend was also echoed in

labour regulations, which fewer businesses (46%)

saw as an obstacle to investment in 2024 (52% in

2023).

Further enhancements to the business

environment and SME policies are needed in

order to foster competitiveness and attract

investment.

The

‘think

small first’,

‘once

only’ and

‘digital

first’ principles could feature more

prominently in future regulations in order to create

a more favourable business environment for SME

development. Implementation of measures such

as better regulatory impact assessments, regular

and ad hoc

ex post

evaluations (see the Effective

institutional framework Annex) offers significant

potential for improvement. Czechia does not

systematically request insights and feedback from

stakeholders during the consultation process. Also,

introducing tacit agreement to streamline

administrative procedures to obtain licences and

permits could enhance the business environment.

Several regulatory measures have been

implemented in order to improve access to

finance. These include new legislation on the

employee stock option plan (ESOP) that was

adopted in 2023 and should help to attract talent

and motivate employees. However, start-up

representatives (

) state that 91% of start-ups in

Czechia do not use this ESOP regime because it

does not reflect the real needs of tech start-ups.

Amendments to the ESOP (e.g. more flexible

conditions, simplified corporate governance and a

review of the tax framework according to the

principle of

‘no

tax before cash’) would strengthen

the start-up ecosystem.

Single market

Czech businesses are well integrated into

both the single market and global value

chains.

Czechia has one the highest integration

rates in the EU for goods: the trade volume of

goods represented 38% of its GDP in 2024

(compared to the EU average of 27%). The share

of Czech businesses reporting that they are facing

material supply constraints in building activity is

(

)

EIB investment survey 2024, EIB Investment Survey 2023.

(

)

Za lepší ESOP

- Czech Founders,

April 2024,

Předali jsme

návrh na lepší ESOP Ministerstvu financí

- Czech Founders.

kom (2025) 0203 - Ingen titel

the highest in the EU (24.5% in Czechia vs 10% in

the EU) (

), making Czechia vulnerable to supply

chain disruptions. The 2024 rate was slightly lower

than that of 2023 (26.9%) but was still more than

double the pre-COVID level. This may be due to

Czechia’s significant trade dependence on the

German economy, and the concentration of its

industrial sector in a few key industries

(e.g. automotive and machinery).

Market

regulations

are

barriers

competition and market entry in some

sectors.

With around 360 professions, Czechia

has the second highest reported number of

regulated professions in the EU(

). This presents

challenges for individuals seeking to provide

services in Czechia. The European Commission’s

data(

) and the OECD’s PMR figures(

) suggest

that restrictions on regulated professions in

Czechia are higher than the EU average for

lawyers, civil engineers, architects and real estate

agents.

Recognition of qualifications is a significant

barrier for some groups wishing to enter

Czechia’s labour market.

Approximately 60% of

Ukrainian refugees in Czechia (about 180 000

people) are working below their level of

qualification(

). Disproportionately high formal

requirements are creating additional burdens for

individuals seeking to provide services in Czechia.

It is crucial to have a clear and common

assessment

framework

before

regulating

professions in order to avoid unjustified barriers in

the single market and to facilitate access to

regulated professions(

). Czechia would benefit

from an audit and revision of the certification

requirements, followed up by the establishment of

a system of departmental supervision(

Czechia could benefit more from the single

market.

Czechia had the second highest

proportion of incorrectly transposed single market

directives in the EU over the last five years,

although its performance has improved in the last

year (1.7% in 2023 vs 1.1% in 2024 and above

the EU average of 0.9% in 2024). Czechia has also

made some progress in addressing its

transposition deficit. The percentage of single

market directives not transposed decreased from

0.9% in 2023 to 0.7% in 2024 (so slightly below

the EU average of 0.8% in 2024). In 2024, Czechia

resolved 88.9% of the SOLVIT cases it handled as

the lead centre (the EU average was 84.9%). The

number of its pending single market infringement

cases decreased to 26 in 2024 from 29 in 2023

but was still above the EU average of 24.

Public procurement

Competition in the public procurement

system could be improved.

Czechia’s overall

performance on public procurement is below the

EU average, because it attracts too few bidders,

and the procedures can be lengthy and costly

(particularly for the public procurement review

system). The new Public Procurement National

Strategy (PPNS) and its action plan, which was

adopted in 2024, have started to be implemented,

but it is still too early to see the impact on

competition in the public procurement markets.

The data indicate that public procurement is still

suffering from the low number of companies

submitting tenders. The proportion of single bids

has been high for several years (40% in 2024 and

41% over the last five years, compared with 27%

and 26% in the EU accordingly). Improving the

expertise of professionals involved in public

procurement is crucial in order to make the public

procurement system more efficient and cost-

effective. Developing central purchasing and

collaboration at regional level could provide more

targeted support to smaller contracting authorities

in order to optimise the efficiency of regionally

centralised purchases. The PPNS includes this

measure, but its implementation seems to trigger

practical problems that undermine it.

(

)

ECFIN BCS.

(

)

European Commission, Regulated professions database,

December 2024.

(

) European Commission, 2021,

Communication

on updating

the reform recommendations for regulation in professional

services, COM(2021)385, 9/7/2021.

(

)

OECD Product Market Regulation,

July 2024.

(

)

https://www.paqresearch.cz/post/dva-roky-pote/.

(

) The Commission decided to refer Czechia to the Court of

Justice of the EU for failing to correctly transpose EU rules on

proportionality of professional regulations (Directive (EU)

2018/958) in April 2024.

(

)

National Economic Council (NERV).

kom (2025) 0203 - Ingen titel

Table A4.1:

Making Business Easier: indicators.

Czechia

POLICY AREA

INDICATOR NAME

2020

Investment climate

Material shortage, firms facing constraints, %

Shortages

Labour shortage, firms facing constraints, %

Vacancy rate, vacant posts as a % of all

available ones (vacant + occupied)

Transport infrastructure as an obstacle to

investment, % of firms reporting it as a major

obstacle

Infrastructure

VHCN coverage, %

FTTP coverage, %

5G coverage, %

11.4

18.9

6.8

35.6

22.7

6.4

46.7

23.6

6.0

26.9

19.7

4.7

24.6

14.3

4.1

10.0

20.2

2.3

2021

2022

2023

2024

EU-27

average

5.8

5.4

52.5

35.8

49.4

6.2

53.2

37.4

82.6

1.2

50.5

36.0

94.6

1.9

13.4

78.8

64.0

89.3

Reduction of regulatory and administrative barriers

Impact of regulation on long-term investment,

10.7

14.6

21.7

Regulatory environment

% firms reporting business regulation as a

major obstacle

Payment gap - corporates B2B, difference in

days between offered and actual payment

Payment gap - public sector, difference in days

between offered and actual payment

from public or private

entities in the last 6

months

3.6

1.8

24.5

3.4

-1.0

55.8

11.5

9.8

62.3

9.4

9.2

61.1

14.8

17.4

64.5

16.0

14.8

15.6

15.1

Late payments

Share of SMEs

experiencing late

payments, %*

from private entities

in the previous or

current quarter

from public entities in

the previous or

current quarter

62.4

47.9

13.8

16.6

Single Market

EU trade integration, % (Average intra-EU

imports + average intra EU exports)/GDP

EEA Services Trade Restrictiveness Index

Transposition deficit, % of all directives not

transposed

Conformity deficit, % of all directives

transposed incorrectly

SOLVIT, % resolution rate per country

Number of pending infringement proceedings

45.7

0.044

1.5

2.0

92.0

31.0

48.3

0.044

2.4

2.3

82.4

33.0

50.2

0.044

1.4

2.1

94.9

30.0

47.1

0.044

0.9

1.7

76.0

29.0

46.1

0.050

0.7

1.1

88.9

26.0

41.6

0.050

0.8

0.9

84.9

24.4

Integration

Compliance

Public procurement

Single bids, % of total contractors**

Competition and

transparency in public

procurement

Direct awards, %**

7.0

*Change in methodology in 2024: reporting late payments from public and private entities separately.

**Data on single bids for 2024 is provisional and subject to revision. Due to missing data, the EU average of direct awards data is

calculated without Romania.

Sources:

(1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports; target = 100%, (5) Intrum Payment Report, (6)

SAFE survey, (7) OECD, (8) (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space

(PPDS).

kom (2025) 0203 - Ingen titel

ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE

Until recently, the domestic private and

public sectors have been absorbing the

above-average and growing net private

savings in Czechia. However, capital markets

remain at a very early stage of development

and do not contribute sufficiently to the

financing of Czech companies.

Banks, which

dominate the financial sector, are robust, both in

terms of capital and liquidity, and are well

prepared to tackle future risks. Direct retail

participation in capital markets remains low, while

indirect participation through investment funds is

growing. At the same time, the investment policies

of domestic institutional investors are also quite

conservative. This leaves internal financing as the

main alternative to bank funding for Czech firms,

which is a limiting factor for the setting up and

subsequent scale-up of innovative start-ups with

no or limited profitability. Moreover, Czechia’s less-

developed capital markets reduce the exit options

for private-equity and venture-capital investors.

The less-developed capital markets also contribute

to a less-developed local venture-capital and

growth-capital market, compounding the lack of

funding sources for innovation, which is a key

factor of competitiveness.

future growth could result in the Czech economy

becoming a more pronounced lender to foreigners.

Graph A5.1:

Net savings-investment balance

35 % of GDP

-5

-10

2017

2018

2019

2020

2021

2022

2023

Private investment, net

Private saving, net

Borrowing from the rest of the world

Lending to the government

Private saving, gross

Source:

AMECO.

Availability and use of domestic

savings

The growing net private savings of the Czech

economy have been supporting domestic

private investment and public finances.

As of

end-2023, the private savings ratio, net of fixed

capital consumption, which has been on a

persistently rising trend, reached 11.9% of GDP,

i.e. almost double its ten-year average of 6.2% of

GDP (see Graph A5.1). The net private investment

ratio, which measures the net contribution of the

private sector to capital accumulation in the

country, did not exhibit such a growing trend and

averaged 4% of GDP, with a maximum of 7.6% in

2022. At the same time, since 2020 the

government budget has no longer been balanced,

which resulted in an average ten-year deficit

equivalent to 1.7% of GDP. As a result of these

trends and structural changes, the Czech economy

turned out to be a creditor to the rest of the world

for about 0.5% of its annual GDP during 2014-

2023. Thus, while the net private savings have

been absorbed domestically until recently, their

Consistent with its regular position as a

small annual net creditor to the rest of the

world, the Czech economy managed to

improve its (negative) net international

investment position.

As of Q3 2024, total assets

on foreigners reached 115% of GDP, down from

127% in 2017, while liabilities to foreigners stood

at 123% of GDP, down from 152% in 2017. As a

result, the negative net international investment

position (NIIP) came down from -25% of GDP in

2017 to -8% of GDP as of Q3 2024, showing that

the Czech economy remains nevertheless a net

borrower from the rest of the world in terms of

outstanding net foreign assets (see Graph A5.2).

The increase in the NIIP is structural and concerns

all forms of investment. During 2017-2024, the

net stock of foreign direct investment grew by

circa 12 percentage points of GDP, the net stock of

portfolio investment increased by 11 percentage

points of GDP, and the net stock of other

investments expanded by 14 percentage points of

GDP. However, the overall impact in NIIP was more

limited, with an increase of only 17 percentage

points of GDP, because the stock of official foreign

reserves declined by 19 percentage points down to

43% of GDP as of Q3 2024. Thus, lately, the Czech

economy, which appears to be comparatively well

integrated in international capital flows, has been

accumulating more private assets on foreigners,

improving its still negative NIIP position.

kom (2025) 0203 - Ingen titel

Graph A5.2:

International investment position

150

% of GDP

100

-50

-100

-150

-200

Graph A5.3:

Capital markets and financial

intermediaries

140

120

% of GDP

100

Non-financial corporations

Insurance and pension funds

Non-financial corporations

2017

2018

2019

2020

2021

2022

2023

2024-Q3

Foreign Direct Investment, Assets

Other investment, Assets

Foreign Direct Investment, Liabilities

Other investment, Liabilities

Portfolio Investment, Assets

Official reserve assets

Portfolio Investment, Liabilities

NIIP

Government

MFIs

Insurance corporations

Financial corporations

Source:

ECB.

Listed equity

Bonds

Other financials

MFIs

Assets by sector

Structure of the capital markets and

size of the financial sector

Capital markets are at an early stage of

development

Czechia.

The

market

capitalisation of listed equity reached 9.8% of GDP

at end-2023, which is much below the EU average

of 67% (see Graph A5.3). Non-financial

corporations accounted for three quarters of that

capitalisation. The outstanding volume of debt

securities reached 54.7% of GDP at end-2023,

which is almost three times lower than the EU

average. General government bonds accounted for

two thirds of the outstanding amounts. The

remainder was distributed between banks (23%),

non-financial corporations (7%) and other financial

intermediaries (4%). Thus, the contribution of

capital markets in Czechia to the financing of the

domestic economy appears to be rather limited.

While the financial sector in Czechia remains

dominated by banks, investment funds have

gained in importance lately.

After peaking at

141% of GDP in 2021, the size of the banking

sector declined to 127% of GDP in 2023, which is

significantly below the EU average of 253%.

Foreign banks control 83% of the sector’s assets.

Banking concentration appears to be higher than

the EU average of 54%, with the top five MFIs

controlling more than 65% of the sector. The

insurance sector, with total assets that declined

from 8% of GDP at end-2020 to less than 6% of

GDP at end-2023, stays much behind the EU

average of 55%. From all non-bank financial

intermediaries, only investment funds have been

growing lately, reaching the equivalent of 16.7%

of GDP at end-2023, up from 11.7% at end-2020,

based on ECB data.

Source:

ECB, EIOPA, AMECO.

Resilience of the banking sector

The Czech banking sector exhibits good

resilience to risks despite declining but still

robust levels of capital.

Historically, the

aggregate capital adequacy ratio in Czechia has

been comparatively higher than elsewhere in

Europe. However, the overall capital ratio has been

declining since 2020, when it reached 22.1%, and

stood at 20.5% in Q3 2024, slightly above the EU

average of 20.1% (see Table A5.1). During the

same period the CET1 ratio declined from 20.3%

to 18.5%, remaining however significantly above

the EU average of 16.5% as of Q3 2024. The

2023 latest supervisory solvency stress tests, that

the Czech National Bank is conducting every two

years, and which cover 91% of the sector’s assets,

showed no capital shortfall even under the

adverse scenario. Czech banks’ aggregate

Minimum Requirement for Own Funds and Eligible

Liabilities (MREL) rate stood at 28.7% of risk-

weighted assets at the end-2023, which was 2.9

percentage points above the required level.

In addition to showing improved asset

quality, banks’ balance sheets are well

prepared for future risks.

With an aggregate

non-performing loan (NPL) ratio of 1.2% as of Q3

2024, which is below the EU average of 1.9%,

credit quality remains robust. At the same time,

the corporate NPL ratio declined to 2.8% in 2023,

below the 3.5% EU average. So far, the tightening

cycle of interest rates has not deteriorated asset

quality. Moreover, banks’ aggregate coverage ratio

Investment funds

kom (2025) 0203 - Ingen titel

of NPLs by existing provisions reached 50.5% as

of Q3 2024, well above the EU average of 42.1%.

This suggests that Czech banks have applied an

extra degree of caution when accounting for non-

performing loans, which puts them in a

comparatively better position, should asset quality

deteriorate in the future. In acknowledgment of

banks’ preparedness for cyclical risks, the CNB

progressively decreased the counter-cyclical

capital buffer from 2.5% in October 2023 to

1.25% as of July 2024. However, to strengthen

banks’ resilience amid deglobalization and rising

geopolitical tensions, the CNB introduced a

systemic risk buffer of 0.5% for local banks as of

January 2025.

Czech banks maintain strong liquidity

positions.

Banks in Czechia are exposed to a low

liquidity funding risk and show a satisfactory term

adequacy between assets and liabilities. As of Q3

2024, the liquidity coverage ratio stood at 162%,

in line with the EU average. As of end-2023, the

net stable funding ratio reached 159%, i.e. 23

percentage points above the EU average. Czech

banks’ structural position has been further

strengthened by a declining loan-to-deposit ratio,

which fell from 103.9% in 2019 to 91.4% at end-

2023, below the EU average of 94.7%. Considering

the importance of euro-denominated loans and

their high share in Czech banks’ assets, and to

tackle the related specific foreign exchange risk,

the banking sector improved its average euro

liquidity coverage ratio, which reached 125% as of

Q1 2024, up from 72% a quarter earlier.

and non-life insurance segments are highly

profitable, with the combined cost ratio for non-

life insurers standing at 89%, well below the

European Economic Area average of 96%. Based

on an assessment by the European Insurance and

Occupational Pension Authority (EIOPA), while

floods and wildfires are relevant risks for Czech

insurers, there are no significant protection gaps.

Going forward, the risk of asset repricing of

domestic government bonds, which are the main

investment class for insurance companies, remains

relevant. However, it is less pressing in the current

environment of declining interest rates.

Voluntary pension funds are well prepared

for potential liquidity risks related to

ongoing reforms in the sector.

Pillar 3 pension

funds have been growing since their introduction

in 1994 and reached 8.4% of GDP as of end-2023.

The legacy so-called

“transformed” funds, which

are closed to new entrants since the 2013 reform,

are bound to guarantee the invested amounts,

which results in very conservative and often

economically inefficient allocation strategies. As a

result of that, the number of participants in these

legacy funds has been declining and it further

dropped by 12% in 2023. These divestments may

give rise to additional liquidity needs. The CNB,

which is monitoring this risk closely, assesses that

i) legacy funds’ aggregate liquidity is sufficient to

cover any outflow of participants, and that ii)

pension management companies in general have

improved their liquidity resilience in 2023, in

preparation for a potential outflow of clients.

Resilience of the non-bank financial

intermediaries

The Czech insurance sector, which remains

small and highly concentrated, appears

resilient to risks.

The sector is very

concentrated, with two insurers accounting for

about half of all premiums written in both the life

and non-life segments. Its overall solvency is

adequate although it has slightly deteriorated in

recent months, with the average solvency ratio at

solo level falling from 229% at end-2023 to

208% in September 2024 (

). Both life (circa 30%

of the market in terms of gross premiums written)

(

) Source:

EIOPA Insurance Statistics

Sources of business funding and the

role of banks

Firms in Czechia rely less than the EU

average on funding from banks or capital

markets.

More specifically, at the end of 2023

loans constituted only 22.9% of all funding

sources for Czech non-financial corporations

(NFCs), while listed shares and bonds represented

only 6.6% of funding sources. The equivalent

figures for the EU average are 27.2% and 23.8%.

EU firms also have overall funding levels that are

substantially higher as a share of GDP than Czech

firms, as the overall level of NFC funding was

167.4% in Czechia but 230.3% of GDP in the EU

on average (see Graph A5.4).

kom (2025) 0203 - Ingen titel

Graph A5.4:

Composition of NFC funding as a % of

GDP

250

200

% of GDP

150

100

more volatile pattern for NFCs. However, as policy

rates gradually decline, there are some signs of a

recovery in credit growth, which is expected to

continue in 2025. For households, the annual

credit-growth rate for adjusted loans gradually

edged up from 4.1% in April 2024 to 5.1% in

September 2024. For NFCs, following a temporary

rise at the end of 2023 and a subsequent steep

fall from December 2023 to July 2024 (from 8.1%

to 3.2%), annual credit growth has started to

recover, reaching 4.2% in September 2024.

Credit demand from firms is also rebounding,

further supporting credit-growth prospects.

The latest bank lending survey by the central bank

of Czechia showed that demand for loans, by large

companies and for longer-term loans, rose in Q3

2024 in comparison to the previous quarter. Q3

2024 also saw the first increase in demand for

investment-financing loans since early 2022. This

was due to the gradual fall in lending costs from

previous highs, as the average interest rate on the

stock of company loans in Czech koruna fell from

7.42% in September 2023 to 5.73% in September

2024, with a much less pronounced fall in the

average interest rate on company loans in euro.

Loans

Bonds

Unlisted shares

Trade credit and advances

Listed shares

Other equity

(1) Reference period is end-2023.

Source:

Eurostat.

As a result, Czech businesses depend more on

internal financing than their European peers.

75% of Czech firms’ investment needs are covered

by internal funding, compared with an EU average

of 66% (

). At the same time, 88% of surveyed

Czech firms believed that their investment

activities over the last three years, i.e. in 2021-

2023, were at about the right amount, a level of

confidence that was higher than the EU average

(80%), suggesting that there is no material

financing gap relative to investment demand.

However, this high level of overall satisfaction with

their funding situation may not be the case for

Czech firms with no or limited capacity for internal

funding, such as innovative start-up firms (see

below).

Despite its relative small size by EU

standards,

Czechia’s

banking sector plays an

important role in financing the economy.

Most

banks are foreign controlled, and the sector is

relatively concentrated (

). Given the resilience of

the sector (see above), businesses are unlikely to

face challenges in accessing stable and affordable

bank loans in the near term.

As interest rates gradually ease, some timid

signs of recovery in credit demand and

therefore credit growth are appearing in

Czechia.

Credit growth has been on a general

downward path since August 2022, albeit with a

(

) See p.29 of the

2024 EIB Investment Survey.

(

) Based on the share of the total assets of the five largest

credit institutions, see

EU structural financial indicators | ECB

Data Portal.

Retail investment in capital markets

The Czech capital markets remain under-

developed.

The main stock exchange in Czechia is

the Prague Stock Exchange (PSE). Both

capitalisation and trading volumes are very low.

The use of equity by SMEs is also very limited, as

only 3.6% of Czech SMEs indicated in the 2023

SAFE survey that equity is relevant for them,

compared with an EU average of 10.1% (

Although Czechia’s

SME-focused START market

has expanded listing opportunities, initial public

offerings (IPOs) remain rather limited and small in

the proportion to the economy.

Czechia had a national strategy in place for

the development of its capital markets for

2019–2023.

Certain key measures in this

strategy have now been adopted, such as the

introduction of a long-term investment product

and a new type of alternative participation pension

(

) Data and surveys - SAFE - European Commission, 2023,

Results by country, T27.

kom (2025) 0203 - Ingen titel

fund (see below). However, these measures have

only been recently implemented and need time to

reach their full potential. Since 2024, there has not

been an updated strategy to develop Czechia’s

capital markets.

Czech households’ above-average

savings

are invested conservatively, despite a

gradual change in investment behaviour over

the past 15 years.

The degree of direct retail

investment (i.e. investment by non-professional

investors) in the Czech capital markets is low.

Nevertheless, the assets of the investment-fund

industry continue to grow, and now account for

almost 10% of total financial-sector assets, with

72% of assets under management belonging to

retail clients (

). Household financial assets held in

pension, insurance and investment funds (or

directly in financial investment instruments) as a

percentage of total household financial assets

rose from 17.8% in 2008 to 24.1% in 2023, but

this is still substantially below the EU average for

2023 of 45.4% (see Graph A5.5).

Graph A5.5:

Composition of household financial

assets per capita and as a % of GDP

250

200

150

100

Recent policy initiatives in Czechia aim to

promote retail participation

in the country’s

capital markets.

To boost household investment

via the capital markets, a long-term investment

savings account has been made available since

2024. It offers an alternative to other

government-supported

long-term

savings

products, e.g. pension funds and life insurance

products. The new account, which is very flexible in

terms of asset allocation and investment strategy,

shares the same tax-relief features as these other

long-term products, subject to a cumulative cap on

tax advantages that applies to all of them.

However, further policy action may be

needed to promote retail investment in Czech

capital markets.

More work may be needed to

raise public awareness of the new long-term

investment product. Its take-up has shown

encouraging early signs, with CZK 2.4 bn (EUR 96

mn) invested by 116 544 investors in its first year

of operation (

). But this take-up needs to be

monitored closely to assess the product’s

attractiveness for new savers and its ‘additionality’

compared to other long-term savings products (i.e.

the extent to which it is attracting new investment

from retail investors rather than diverting existing

investment that would otherwise have gone into

other government-supported long-term savings

products). Other aspects of the product may also

need to be assessed, such as: (i) the

competitiveness of the fee structures associated

with this product; or (ii) the extent to which its

design sufficiently supports the withdrawal of

savings in the form of an annuity rather than a

lump-sum. The Czech government could also

consider both: (i) a wider review of the incentives

in place to promote retail participation in financial

markets; and (ii) possible steps to increase the

availability of low-cost, well-diversified investment

products suited for retail investors. It will also be

crucial for the government to further strengthen

retail investor trust, in part through: (i) maintaining

an effective framework of corporate governance

and protection of shareholder rights; and (ii)

reducing cases of fraud and malpractice (

per capita (000 EUR) (lhs)

Currency and deposits

Investment funds

Listed shares

Other equity

% of GDP GDP (rhs)

Insurance and pension funds

Bonds

Unlisted shares

HH Debt (liability)

(1) Reference period is end-2023.

Source:

Eurostat.

There is still significant scope to increase the

level of direct and indirect retail investment

in Czechia.

This is evidenced by: (i) the stronger-

than-average savings rate of Czech households in

recent years, with positive median saving rates for

all quintiles of the household income distribution;

and (ii) the fact that cash and deposits account for

a higher share of household assets than the EU

average (42.7% vs 32.3%).

( ) See Table A.8 in

EFAMA Asset Management in Europe, facts

and figures December 2024.

(

) See relevant

Press release AKAT.

(

) For examples of past cases of malpractice, see p. 7 in this

private

survey

(in Czech) on the Czech market for unlisted

corporate bonds.

kom (2025) 0203 - Ingen titel

The role of domestic institutional

investors

The country’s growing fund-management

industry tends to invest more in the domestic

capital markets than EU peers invest in their

own domestic capital markets.

Czech

investment-fund industry assets grew by circa

34% in 2023 compared with 2022 and continued

to grow by another 26% in 2024. As of end-2024,

the assets invested in domestic and foreign

investment funds offered in Czechia amounted to

CZK 1 653 bn (i.e. equivalent to circa 21.7% of

2023 GDP or EUR 66 bn) allocated as follows: (i)

11.5% in equity funds; (ii) 26.4% in bond funds;

(iii) 12.1% in mixed funds; (iv) 18% in real estate

funds; and (v) 31.9% in other funds (

). According

to the Czech Capital Market Association,

approximately 69% of the country’s investment-

fund assets are invested in domestic assets and

31% in foreign-domiciled assets (

). In 2023,

Czech asset managers allocated about 50% of

their equity and bond holdings to domestic bonds

and equities, a substantially greater home bias

than the EU average (

The investment portfolio of Czech insurers is

mostly composed of bond holdings.

The Czech

insurance sector mainly invests in government

bonds, mostly domestic. Government bonds

account for 44.2% of total assets held by Czech

insurers (compared with 19.5% for the EU as a

whole) (

100

), with another 6.6% held in cash and

deposits. Equities accounted for 7.7% of total

insurance fund assets, and corporate bonds for

11.2%. Investment funds accounted for another

21% of Czech

insurers’ investment portfolio, of

which 45.5% was in equity funds but only 0.5% in

private-equity funds.

The domestic pension-fund industry has an

even more conservative investment profile

than the insurance industry, with a greater

focus on Czech government bonds.

As of end-

of 2023, 67.3% of the assets of the voluntary

(

) Source:

ČNB ARAD.

(

) Source: Czech Capital Market Association (AKAT

ČR).

(

) See Exhibits 4.4 and 4.5 in

EFAMA Asset Management in

Europe, facts and figures December 2024.

(

100

) Source: EIOPA Insurance Statistics.

pillar 3 pension funds were invested in

government bonds. Bank deposits are the second

largest investment asset held by pension funds, at

16.9%. Equities account for only 4.6% of pension-

fund assets, investment funds for 4.2% and

corporate bonds for another 6.8%. This

conservative investment policy is due to the

investment guarantee provided by the legacy

funds (see above). The new, so-called

“participation,”

funds are growing rapidly and are

more dynamic in terms of their investment

strategies, with only 31% of their assets in

government bonds, as of end-2023. However, the

new funds accounted for only about 27% of the

overall sector as of end-2023.

Domestic institutional investors provide little

in the way of funding for start-ups and

venture-capital investors.

A recent paper by the

Centre for European Policy Studies showed that

pension funds in Czechia accounted on average for

only 1% of private-equity and venture-capital

funds raised annually in the country over 2007-

2023, a figure that falls substantially short of the

19% for the Baltic states or +20% shares for

Nordic Member States (

101

Recent policy changes may facilitate a shift

towards the new pension funds and less

conservative investment strategies.

This shift

could include pension funds taking direct or

indirect positions in unlisted equity. The recent

policy changes included:

the abolition of the state contribution for

persons receiving a retirement pension and

an overall increase in the lower and upper

limits to obtain the state contribution

when investing in pension funds;

ii) improved mobility allowing people to

switch their pension investments more

easily between legacy and new pension

funds;

iii) the creation of an alternative participation

fund, the fee policy and investment

strategy of which can be set more freely

than the existing funds, making it easier to

invest in private-equity funds, among

others.

(

101

) Source:

Closing the gaping hole in the capital market for EU

start-ups

–

the role of pension funds

–

CEPS.

kom (2025) 0203 - Ingen titel

The depth of venture and growth

capital

The local venture-capital and growth-capital

markets are not developed enough to meet

the financing needs of innovative firms.

large part of the innovation in Czechia is driven by

foreign-owned companies and relies on funding

from abroad (

102

). The average value of annual

private-equity investment in Czechia relative to

nominal GDP went up to 0.2% in 2021-2023 from

0.1% in 2015-2020, but this is still much lower

than the equivalent EU average of 0.6%. The

average value of annual venture-capital

investment relative to nominal GDP also went up,

rising to 0.03% in 2021-2023 from 0.01% in

2015-2020, but this too is still much lower than

the equivalent EU average of 0.08%. Given the

limited venture-capital and private-equity activity

in Czechia, there is a financing gap for early-stage

innovative firms in need of capital with high risk

tolerance, throughout their life-cycle.

Czechia has put in place some policies to

promote start-up funding.

To address this

issue, Czechia formulated an innovation strategy

for 2019-2030 and a strategy to support SMEs for

the period 2021–2027. The Czech recovery and

resilience plan (RRP) also includes measures to

support the financing of start-ups (

103

), while start-

up support is also provided by CzechInvest, an

entity under the Ministry of Industry and Trade.

The recent amendment of the Income Tax Act (

104

which postpones the moment of taxation of

employee stock options, is a first effort to improve

the attractiveness of Czechia’s

employee stock-

option framework relative to EU and international

peers (

105

However, further policy action may be

needed in the future.

Additional measures may

be needed to ensure the employee stock-option

framework is flexible enough to be used by most

Czech start-ups (see Annex 3 and 4). Moreover,

there is still no comprehensive legal framework in

Czechia to facilitate the creation and growth of

start-ups as in other Member States, on the basis

of a clear definition of what is an eligible start-up.

Further measures to promote and facilitate IPO

activity could also improve the ability of successful

start-ups to scale-up, while offering an attractive

exit option to venture-capital and private-equity

investors. Moreover, the limited venture-capital

financing in the country is partly driven by the

already-low participation of institutional investors,

including pension funds (see previous section).

Financing the green transition

The financing needs for

Czechia’s green

transition pose a challenge, especially when

it comes to mobilizing private capital to

close the financing gap.

The Czech economy

has above-average emissions intensity and the

necessary investment costs for decarbonisation by

2050 are estimated at about CZK 3.5 tn (EUR 140

bn), of which only about CZK 1–1.2 tn (EUR 40-48

bn) are identified from public sources including EU

funds (

106

). Between now and 2030, Czechia aims

to help promote green finance to bridge this gap.

Despite this goal, Czechia’s issuance of bonds with

environmental, social, and governance objectives

as a share of total bond issuance was lower in H1

2024 than its three-year average of circa 10%

and is low compared to most EU peers (

107

Therefore, it will be crucial to mobilise private

investment through stable regulatory frameworks

and appropriate risk-sharing instruments. Public

resources need to be deployed in a targeted and

cost-effective manner, with a clear focus on

maximising leverage and ensuring value for

money.

(

102

) Source:

Supporting FinTech Innovation in the Czech Republic,

OECD (2023).

(

103

) Namely: (i) three pilot co-investment funds to develop pre-

seed investments, strategic technologies and university spin-

offs; and (ii) the new quasi-equity instruments by the Czech

National Development Bank.

(

104

) Section 6(14) of the Income Tax Act initially applicable as of

1 January 2024 and later further amended as of

1 July 2024.

(

105

) According to rankings provided by the

Not Optional

campaign, Czechia’s framework for employee stock options

scores much lower than countries such as France, the Baltic

states or the UK.

(

106

) See p. 31 of

Czech Republic IMF 2023 Article IV Consultation.

(

107

) Source: AFME CMU Key Performance Indicators, Seventh

Edition, November 2024.

kom (2025) 0203 - Ingen titel

Table A5.1:

Financial indicators

Total assets of MFIs (% of GDP)

Common Equity Tier 1 ratio

Total capital adequacy ratio

Overall NPL ratio (% of all loans)

NPL (% loans to NFC-Non financial corporations)

NPL (% loans to HH-Households)

NPL-Non performing loans coverage ratio

Return on equity

2017

141.1

16.8

18.1

2.8

7.5

2.9

45.3

13.0

20.6

30.6

6.1

8.4

0.00

48.3

0.03

0.00

2.5

2.3

6.7

11.2

2018

134.0

17.1

18.3

2.1

5.4

2.3

53.1

13.3

20.0

30.1

6.3

7.9

0.01

47.2

0.36

0.01

1.9

3.0

6.6

10.6

2019

131.0

18.2

19.7

1.7

4.3

1.9

55.4

13.9

19.4

30.0

3.9

6.6

0.00

46.1

0.11

0.01

1.9

2.9

7.1

10.4

2020

138.9

20.3

22.1

1.9

4.8

2.0

50.6

6.7

19.6

32.3

-0.6

6.8

9.8

0.00

46.1

0.13

0.01

1.9

2.8

6.9

9.8

2021

140.8

19.8

21.2

1.7

4.3

1.7

52.2

10.6

19.6

33.5

8.1

10.2

13.3

0.04

41.8

0.32

0.05

1.7

2.9

8.1

9.5

2022

129.4

18.7

20.3

1.4

3.6

1.4

52.8

14.4

18.0

31.0

6.8

6.6

9.3

0.01

41.0

0.20

0.03

2.6

2.3

8.5

8.9

2023

126.7

18.8

20.6

1.2

2.7

1.4

52.5

13.7

17.4

28.6

8.1

4.8

9.8

0.00

39.8

0.15

0.02

44.5

2.7

2.5

10.7

8.2

5.9

2024-Q3

135.7

18.5

20.5

1.2

2.8

1.5

50.5

15.4

17.9

29.2

4.2

5.1

9.5

6.2

248.4

16.6

20.1

1.9

3.5

2.2

42.1

10.0

30.0

44.5

0.8

0.7

69.3

0.05

49.6

0.41

0.05

45.5

2.7

4.8

10.0

27.8

54.8

Banking sector

Non-banks sector

Loans to NFCs (% of GDP)

Loans to HHs (% of GDP)

NFC credit annual % growth

HH credit annual % growth

Stock market capitalisation (% of GDP)

Initial public offerings (% of GDP)

Market funding ratio

Private equity (% of GDP)

Venture capital (% of GDP)

Financial literacy (composite)

Bonds (as % of HH financial assets)

Listed shares (as % of HH financial assets)

Investment funds (as % of HH financial assets)

Insurance/pension funds (as % of HH financial assets)

Total assets of all insurers (% of GDP)

11-17

18-24

1-3

4-10

25-27

9.4

8.6

7.8

8.0

7.8

6.2

Colours indicate performance ranking among 27 EU Member States.

(1) Annualised data

Credit growth and pension funds EU data refer to the EA average.

Source:

ECB, ESTAT, EIOPA,

DG FISMA CMU dashboard,

AMECO.

Financial literacy

Financial literacy in Czechia is still slightly

below the EU average, despite initiatives to

promote financial education.

Financial literacy

is crucial for both encouraging retail investors to

participate in capital markets and familiarising

SMEs with alternatives to bank financing. Financial

education has been included in educational

programmes in Czech elementary schools since

2008, but the level of financial literacy in the

country remains slightly lower than the EU

average. A 2023 Eurobarometer survey (

108

)

showed that only 17% of Czech citizens displayed

a high level of financial literacy, 66% a medium

level, and the remaining 16% a low level,

compared with the EU average of 18% for a high

level of literacy, 64% for a medium level, and 18%

for a low level. This leads to an overall financial-

literacy indicator for Czechia of 44.5 vs an EU

average score of 45.5. The 2024 edition of the

Czech Banking Association’s

financial-literacy

index showed that the weakest scores are

(

108

) Source:

Monitoring the level of financial literacy in the EU -

July 2023 - Eurobarometer survey, Section 1.4, Graph F3

achieved by the 18-34 age group and people with

only a primary education or an apprenticeship-

level education. A national strategy for financial

education has been implemented since 2010 and

was updated (version 2.0) in 2021. The Czech

Ministry of Finance also manages an informational

website about financial literacy for consumers and

a national registry of ongoing financial education

projects.

kom (2025) 0203 - Ingen titel

ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK

Czechia’s institutional framework influences

its competitiveness.

Trust in central government

remains below the EU average. Despite efforts to

reduce

administrative

burden,

regulatory

governance

challenges

remain.

Structural

weakness of local government, coordination, and

implementation are key hurdles for Czechia’s

public administration. The country lags in provision

of digital public services, though the share of users

has increased. A civil service reform is undergoing,

but challenges in attracting and retaining skilled

professionals persist.

want the administration to engage in more

communication with the citizens (EU: 31%) (

109

The perceived quality of government at

regional level remains below the EU

average

(

110

). Czechia has the most fragmented

municipal structure in the EU, with the highest

number of municipalities per capita. Strong

coordination is needed, particularly in areas where

municipalities have greater competences, e.g.

building permits, non-tertiary education and care,

and social services. A new model for municipal

collaboration (community of municipalities) was

introduced in 2024. (

111

). It allows municipalities to

share staff and perform jointly tasks. However, the

interest remains limited (

112

Public perceptions

Graph A6.1:

Trust in justice, regional / local

authorities and in government

0.7

0.6

0.5

Quality of legislation and regulatory

simplification

Performance in developing and evaluating

legislation is below the EU average.

Regulatory impact assessments are well

embedded in the legislative process. Recent

updates to law-making rules have incorporated

assessments related to sustainability and gender

balance. However, there are many exceptions to

the overall application of the rules for impact

assessment and quality is often low. The use of

tools like stakeholder engagement and ex post

evaluation of legislation shows a visible gap with

respect to the EU average due to weaker

methodology, transparency, and quality controls

(Graph A6.2). To address the outstanding gap,

Czechia is intending to introduce new uniform

requirements for ex post evaluations in 2025 to

ensure policy impacts are reviewed more

comprehensively (

113

0.4

0.3

0.2

0.1

Spring

Autumn

Summer

Autumn

Summer

Autumn

Spring

Winter

2014 2015

2016

2017

2018

2019 2020 2022

2023

2024

Justice, legal system EU27

Justice, legal system CZ

Regional or local public authorities EU27

Regional or local public authorities CZ

Government EU27

Government CZ

(1) EU27 from 2019; EU28 before

Source:

Standard Eurobarometer surveys

Trust in public institutions remains near the

EU average but varies significantly

(Graph

A6.1). Trust in local and regional authorities, as

well as in the justice system is relatively strong.

However, trust in the central government is much

lower at 0.24, below the EU average of 0.33. 58%

of citizens believe that reducing bureaucracy

would boost trust in public administration,

compared to 52% across the EU. Additionally, 43%

Autumn

(

109

)

Understanding Europeans’ views on reform needs

- April

2023 - Eurobarometer survey.

(

110

)

Inforegio - European Quality of Government Index

(

111

)

https://spolecenstviobci.gov.cz/

(

112

)

Community overview | spolecenstviobci.gov.cz

(

113

)

Review of regulatory effectiveness from 2025 | ria.vlada.cz

kom (2025) 0203 - Ingen titel

Table A6.1:

Selected indicators on administrative burden reduction and simplification

Ex ante impact assessment of legislation

When developing new legislation, regulators are

r qu r d to …

Ex post evaluation of legislation

Is required to consider the consistency of regulations

and address areas of duplication.

Is required to contain an assessment of administrative

burdens.

Is required to contain an assessment of substantive

compliance costs.

Compares the impact of the existing regulation to

alternative options.

Periodic ex post evaluation of existing regulations is

mandatory.

Government uses stock-flow linkage rules when

introducing new regulations (e.g., one-in one-out).

A standing body has published an in-depth review of

specific regulatory areas in the last 3 years.

In the last 5 years, public stocktakes have invited

businesses and citizens to assess the effectiveness,

efficiency, and burdens of legislation.

Identify and assess the impacts of the baseline or

‘do nothing’ option.

Identify and assess the impacts of alternative non-

regulatory options.

Quantify administrative burdens of new

regulations.

Quantify substantial costs of compliance of new

regulations.

Assess macroeconomic costs of new regulations.

Assess the level of compliance.

Identify and assess potential enforcement

mechanisms.

Yes / For all primary laws

For major primary laws

For some primary laws

No / Never

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation.

Source:

OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the

European Union 2025 (forthcoming).

Graph A6.2:

Indicators of Regulatory Policy and

Governance (iREG)

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Primary laws Subordinate Primary laws Subordinate Primary laws Subordinate

regulations

CZ_Stakeholder

engagement

CZ_Regulatory Impact

Assessment

CZ_Ex-post evaluation of

legislation

a backlog of 200 proposals were transferred from

the previous to the new mandate (

114

Simplification efforts have focused on

reducing

administrative

burdens

and

enhancing transparency.

The government has

adopted its third (

115

)

‘anti-bureaucratic’ package

to reduce regulatory burden and is currently

preparing a fourth package (see Annex 4). The

introduction of tools for real-time data-sharing

across ministries and the launch of the ‘e-Sbírka’

digital legislative collection in 2024 were other

positive steps. However, there remains room for

Czechia to further strengthen its mechanisms for

simplifying regulations. To illustrate, when

evaluating primary legislation, there is no

requirement to consider the consistency of

regulations and address areas of duplication,

quantify or assess administrative burdens and

substantive costs of compliance of such

legislation. Moreover, periodic ex post evaluation

Methodology

Transparency

Systematic adoption

Oversight and quality control

2021

EU-27

Source:

OECD (2025), Regulatory Policy Outlook 2025 and

Better Regulation across the European Union 2025

(forthcoming).

Parliamentary rules of procedure can be

improved to ensure higher legislative quality.

Laws initiated by parliament

–

which account for

some 22% of new laws

–

are not bound by

mandatory impact assessments or broad

stakeholder involvement. The right to extended

debate on legislative proposals has affected

negatively the work of the Chamber of Deputies

–

(

114

)

https://www.irozhlas.cz/zpravy-domov/vetsine-cechu-

snemovni-obstrukce-vadi-nejvice-volicum-piratu-vladnich-

stran-ale_2501220500_jgr

(

115

)

https://vlada.gov.cz/cz/clenove-vlady/pri-uradu-

vlady/michal_salomoun/aktualne/dalsi-uleva-od-byrokracie--

vlada-schvalila-treti-antibyrokraticky-balicek-pripraveny-

ministrem-michalem-salomounem-213338/

kom (2025) 0203 - Ingen titel

Table A6.2:

Key Digital Decade targets monitored through the Digital Economy and Society Index

Czechia

2022

Digitalisation of public services

Digital public services for citizens

Score (0 to 100)

EU-27

2024

2023

2022

2024

2023

Digital Decade

target by 2030

EU-27

100

2030

100

2030

100

2030

2021

Digital public services for businesses

Score (0 to 100)

2021

2022

2023

Access to e-health records

Score (0 to 100)

2021

2022

2023

Source:

State of the Digital Decade report 2024

of existing regulations is not mandatory (table

A6.1).

The OECD product market regulation

indicators show that Czechia’s licensing

system is aligned with some, but not all, best

practices.

For example, although the government

keeps an up-to-date online inventory of all permits

and licences required/issued to businesses by

public bodies, there is no requirement for the

government to regularly assess whether such

licences and permits are still required or should be

withdrawn (see also Annex 4). Unlike 19 other EU

Member States, Czechia does not have a dedicated

institution for promoting pro-productivity policies.

In 2024, social partners opposed their

classification as lobbyists and pushed for

greater involvement in investment planning,

criticising policy transparency.

Despite active

participation that followed in some policy areas,

disagreements over the consultation processes

persisted.

The

Operational

Programme

Employment has launched two calls for proposals

worth EUR 28 million to support employer-

employee collaboration on labour relations,

workplace safety, and collective bargaining.

Digital public services

Czechia has made slight progress with

provision of digital public services yet stays

below the EU average

(Table A6.2) Performance

for digital services to citizens is 76.3% (EU 79%)

and for businesses 83.8% (EU 85%). Access to e-

health records remains a significant challenge,

with Czechia scoring just 51.1 out of 100, the

second lowest in the EU, compared to the EU

average of 79.1.

The share of e-Government users stands

around the EU average

(76.7% vs. 75%), while

that of e-ID users lags behind (28.5% vs. 41.1%)

(

117

). The country successfully rolled out a national

eID system under the eIDAS regulation. However,

Czechia has not yet set up and notified eID

systems for legal persons under the eIDAS

regulation. This means that Czech businesses

cannot authenticate themselves to access public

(

117

)

Digital Decade 2024: Country reports | Shaping Europe’s

digital future

Social dialogue

Social dialogue in Czechia has an

institutional basis in the form of the

Tripartite Council.

The Council of Economic and

Social Agreement of the Czech Republic (RHSD ČR)

is a voluntary negotiation body uniting the

government, trade unions, and employers to reach

consensus on key economic and social issues.

While employers’ association membership remains

stable or growing, trade union membership is

declining.(

116

)

(

116

) For an analysis of the involvement of

Czechia’s

social

partners at national level in the European Semester and the

Recovery and Resilience Facility, see Eurofound (2025),

National-level social governance of the European Semester

and the Recovery and Resilience Facility.

kom (2025) 0203 - Ingen titel

services provided by other Member States,

including those enabled by the Once-Only

Technical System (

118

Czechia is advancing towards seamless,

automated exchange of authentic documents

and data across the EU.

It has developed the

necessary infrastructure and is beginning the

process of connecting the first authorities to the

Once-Only Technical System, part of the EU Single

Digital Gateway (

119

Civil service

The civil service is undergoing significant

reform to enhance professionalism and

capacity.

Amendments to the State Civil Service

Act have introduced limits on career tenure and

streamlined hiring processes for senior civil

servants. These amendments have made the

recruitment of new civil servants more flexible by

extending the validity period of shortlists and

opening up recruitment for specific profiles (e.g. in

IT) to persons with only a secondary education

(

120

). An entrance examination was introduced

under an amendment to the Act on Officials of

Territorial Self-Governing Units (regional and

municipal) (

121

). Both laws (national and regional)

are intended to adjust HR management practices

to the needs of individual authorities. As

responsibility for state officials and self-

government officials (regional and municipal) is

divided between different government entities,

stronger coordination is needed to streamline

attractiveness and resource efficiency. Although

the potential of these reforms is promising,

Czechia has not established adequate monitoring

to evaluate its effects.

Despite these advancements, challenges

remain in attracting and retaining skilled

(

118

) European Commission,

Once-Only Technical System

Acceleratormeter,

Ec.europa.eu.

(

119

) European Commission,

Once-Only Technical System

Acceleratormeter,

Ec.europa.eu.

(

120

) Ministry of the Interior of the Czech Republic.

Legislation -

Civil service

(

121

)

Education in territorial units - amendment to the Act on Civil

Servants and Implementing Regulations as of 1 January

2025 - Ministry of the Interior of the Czech Republic

professionals, particularly for specialised

positions.

While the Czech civil service is younger

than the average of the EU, the share of staff

under the age of 50 is declining. Moreover, the

proportion of civil servants with higher education

qualifications fluctuates below the EU average (CZ

45.8%, EU 54% in 2024(

122

). The participation rate

of civil servants in adult learning has increased to

the EU average (CZ 18.6%; EU 18.9%). At the

same time, in 2024, no specific steps were taken

to further develop the skills of civil servants. the

human resources policy is still fragmented and

lacks

the

necessary

data

achieve

comprehensive reform. In 2024, an initial survey

of 21 243 state-level civil servants, representing

some 30% of all civil servants, provided useful

input for a forthcoming HR action plan, financed

under the recovery and resilience plan (

123

While women account for a significant proportion

of the public sector workforce, they continue to be

underrepresented in senior management positions

(only 28.1%), placing Czechia among the bottom

four EU Member States for gender parity(

124

Implementing comprehensive strategies to attract

and retain a diverse talent pool will be crucial for

enhancing the effectiveness and responsiveness of

Czechia's public administration.

Integrity

Companies consider corruption to be a

problem when doing business, while there are

concerns regarding high-level cases.

Czechia, 67% of companies consider that

corruption is widespread (EU average 64%), while

43% consider that corruption is a problem when

doing business (EU average 36%) (

125

). Moreover,

only 26% of companies believe that people and

businesses caught bribing a senior official are

appropriately punished (EU average 31%) (

126

High-level corruption cases remain a point of

attention due to delays in some proceedings.

(

122

) Eurostat, 2025,

EU Labour Force Survey.

(

123

)

Survey Official's View - Civil Service

(

124

) European Institute for Gender Equality, 2024.

link

(

125

) Flash Eurobarometer 543 on businesses’

attitudes towards

corruption in the EU (2024).

(

126

) Ibid.

kom (2025) 0203 - Ingen titel

Nevertheless, a number of investigations involving

both former and current high-level officials are

ongoing, and additional cases have been detected

(

127

). Enforcement in foreign bribery cases remains

limited despite the legal framework being in

place (

128

). Furthermore, public procurement is

seen as an area at high risk of corruption in

Czechia (

129

). 29% of companies (EU average 27%)

think that corruption has prevented them from

winning a public tender or a public procurement

contract in practice in the last three years (

130

). A

methodology for measuring corruption risks has

been developed, under which the key risk areas for

corruption were identified as foreclosures and, to

some extent, sport, construction and health (

131

Czechia is about to adopt legislation for a

public register for lobbyists, it being one of

the few Member States not to have already

done so.

In March 2024, the government

approved a draft law on lobbying

–

now entered

into the legislative procedure

–

which would

introduce lobbying rules, including a transparency

lobbied persons to register their contacts.

administrative cases, are already available.

However, the introduction of an e-file system in

courts faces delays. As regards judicial

independence, no systemic deficiencies have been

reported (

132

Justice

The justice system is performing efficiently.

The disposition time in civil and commercial cases

at first instance decreased from 134 in 2022 to

126 days in 2023 and is one of the lowest in the

EU. While the clearance rate of administrative

cases at first instance dropped from 126% in

2022 to 111% in 2023, the estimated time

needed to resolve such cases decreased from 225

days in 2022 to 212 days in 2023. The quality of

the justice system is considered to be good overall,

with an advanced level of digitalisation. Procedural

rules enabling digital tools in courts are in place

and some digital solutions to initiate and follow

proceedings, especially in civil, commercial and

(

127

) See the 2024 country-specific chapter for Czechia of the

Rule of Law Report, p. 11.

(

128

) Ibid, pp. 11-12

(

129

) Ibid., p. 17.

(

130

) Flash Eurobarometer 543 on businesses’

attitudes towards

corruption in the EU (2024).

( ) See the 2024 country-specific chapter for Czechia of the

Rule of Law Report, p 17.

131

(

132

) For more detailed analysis of the performance of the justice

system in Czechia, see the upcoming 2025 EU Justice

Scoreboard (forthcoming) and the 2024 Rule of Law Report.

kom (2025) 0203 - Ingen titel

SUSTAINABILITY

ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION

Czechia’s faces challenges regarding its

clean industry transition and climate

mitigation:

Czechia has not yet capitalised on its

opportunities

for

supporting

net

zero

manufacturing, in particular on batteries. Its

automotive sector is in a profound transformation,

and energy-intensive industries have been facing

challenges linked to high energy prices and global

competition, while its manufacturing industry is

relatively greenhouse gas emissions intensive.

Czech manufacturing is heavily reliant on

importing critical raw materials. Its resource

productivity remains well below the EU average,

and its circular economy framework is still to be

fully implemented. Much of Czechia’s reusable and

recyclable waste is still being incinerated, and its

industry continues to release large amounts of air

and water pollutants. This annex reviews the areas

in need

of urgent attention in Czechia’s clean

industry transition and climate mitigation, looking

at different dimensions.

Europe, both in the field of batteries and in heat

pumps. Alongside Poland and Slovakia, Czechia is

emerging as a key actor in heat pump

manufacturing and is home to 12 specialised

factories.

Czechia has committed to supporting net

zero manufacturing through some proposals

and policy measures, but these do not

sufficiently and coherently leverage all

opportunities.

The new overarching economic

strategy(

134

) considers clean and sustainable

technologies as one of the most important sectors

of the future. The Czech hydrogen strategy(

135

)

was revised in July 2024 to support the

development of a renewable hydrogen-based

ecosystem in Czechia. The Czech Battery Cluster

founded in 2022 has facilitated the cooperation

between public and private stakeholders to

support the development of a battery economy. In

terms of financial incentives, a new programme

supporting strategic investments was endorsed in

December 2024. It promotes key investments in

clean technologies such as batteries, solar panels,

wind turbines, heat pumps and electrolysers.

However, while the national public procurement

strategy

for

2024-2028

highlights

environmentally responsible public procurement as

a priority, no further incentives or structures have

been put in place to foster the scale-up of net zero

manufacturing capacity, either by streamlining

permitting processes or by fostering resilience

criteria in auctions for instance. The lack of a

relevantly skilled workforce represents also an

important bottleneck. The policy framework

remains scattered and thus does not provide a

comprehensive support.

Transforming the car industry

Czechia’s automotive industry –

its largest

industry sector - is facing strong competition

and significant challenges in the transition to

electric vehicles.

The sector, representing around

9% of Czech GDP, 26% of the Czech industrial

production, and 23% of Czech exports, is

undergoing a profound transformation, driven by

(

134

)

Hospodarska-strategie_shrnuti-priorit-a-klicovych-oblasti.pdf,

October 2024.

(

135

) Czech Ministry of Industry and Trade,

Vodíková strategie ČR

aktualizace,

July 2024.

Strategic autonomy and technology

for the green transition

Czechia’s manufacturing capacity across all

net zero technologies remains limited, even

though the batteries sector holds substantial

potential.

Czechia’s manufacturing capacity

currently amounts to between 1 000 and

1 100 MW/y for battery and storage technologies

(a negligible share of total EU capacity)(

133

). As

home to one of the largest hard rock lithium

deposits in Europe, Czechia has potential to

become a key player in the lithium market. Mining

and production of lithium hydroxide is expected to

commence in 2026. Opportunities arise also from

Czechia’s strong automotive

sector in the

transition to electric vehicles. Czechia’s coal-

transitioning regions present an opportunity for

net zero manufacturing investment and skill

transfers. These regions have available brownfield

sites and benefit from EU funds support. Czechia

could also benefit from regional cooperation with

other Member States from central and eastern

(

133

) European Commission: Directorate-General for Energy,

The

net-zero manufacturing industry landscape across the

Member 2025,

https://data.europa.eu/doi/10.2833/2181110.

kom (2025) 0203 - Ingen titel

digitalisation, automation, and the shift towards

electric vehicles and away from internal

combustion engines. As part of these trends, the

least skilled workers are being replaced with

robots, while the educational requirements for

medium and highly skilled employees are

constantly increasing. The automotive industry

directly employs over 180 000 people in Czechia,

while up to half a million are in associated sectors.

In light of projected changes to the Czech labour

market(

136

), it would be beneficial for Czechia to

work with carmakers and trade unions to

implement continuous reskilling and upskilling

measures for current employees, and to put

measures in place to attract foreign skilled

professionals to fill emerging skill gaps.

as supply chain risks, environmental degradation

and social concerns.

In connection with the EU Critical Raw Materials

Act, a programme for the national exploration of

critical raw materials deposits was approved by

the government. The aim of the programme is to

complete

a full review of the country’s strategic

raw materials reserves by May 2026. Regarding

the circular use of materials as a way to reduce

dependence on imports, a positive shift towards

more sustainable materials management can be

observed in Czechia. Its circular materials use rate

has almost doubled over the last decade and has

been around the EU average since 2020.

Czechia’s reserves of strategic raw materials

such as lithium and manganese create a

significant opportunity for its industry.

The

Cínovec lithium project and the Chvaletice

manganese project can benefit both Czechia and

the EU, if proven to be economically viable. The

Cínovec lithium deposit is one of the largest in

Europe and represents 3-5% of the world’s total

lithium reserves(

139

). Production could start

between 2026 and 2028. The Chvaletice

manganese project, for the re-processing of a

deposit of a million tonnes of manganese, was

approved at the environmental impact assessment

stage and testing started in 2024. According to the

project promoter, construction could start in the

second half of 2026, and full operation in 2028 or

2029.

The Czech government and the European

Commission declared the lithium deposit in

Cínovec and the manganese deposit in

Chvaletice

deposits

strategic

importance.

This would enable faster approval of

the projects, attract investors and speed up

permitting procedures. Since both projects provide

key raw materials for the production of batteries

for electric cars, Czechia can leverage this

advantage to create jobs, diversify the economy,

secure its energy supply, and become a leader in

the European battery industry. Furthermore, the

country could benefit from the untapped potential

of smaller deposits of graphite, tin, tungsten,

copper and other raw materials.

Critical raw materials

Czech manufacturing depends heavily on

imports of critical raw materials needed for

the green and digital transitions.

Czechia is

among the top three EU producers of critical raw

materials(

137

) such as coking coal and feldspar.

However, it is heavily reliant on imports of critical

raw materials needed for the green and digital

transition. With 32.4% of material inputs

stemming from imports in 2023, compared to an

EU average of 22%, Czechia is particularly

vulnerable to supply chain disruptions. In 2023,

the main critical raw materials imported by

Czechia from non-EU countries, in terms of trade

values, were coking coal (primarily from the United

States and Canada), vanadium (from the Russian

Federation), phosphorus (from Kazakhstan), and

titanium (from Ukraine). Czechia’s import

concentration(

138

) was the fourth highest among

EU Members in 2023. This presents significant

challenges for sustainability and resilience, such

(

136

) A study of the Boston Consulting Group predicts that by

2030, the Czech labour market will undergo significant

changes, resulting in approximately 330 000 employees

losing their jobs due to the elimination of their positions,

while over half a million new jobs will be created. Boston

Consulting Group, Aspen Institute, 2022,

Budoucnost českého

pracovního trhu.

(

137

) European Commission, Raw material Information System,

country profile

Czechia.

(

138

) The import concentration index measures how much a

country relies on a limited number of sources for a basket of

critical raw materials. Source: COMEXT.

(

139

)

GEOMET s.r.o,

České lithium pro čistou energii.

kom (2025) 0203 - Ingen titel

Czechia’s waste management plan with

outlook to 2035(

140

), the Circular Czechia

2040 strategy(

141

) and the raw material

policy for minerals and their resources(

142

)

cover issues linked to critical raw materials.

Czechia focuses on key products that contain a

high level of critical raw materials, such as

batteries (extended producer responsibility,

collection systems, recovery of critical raw

materials); electrical and electronic equipment

(repair,

refurbishment,

extended

producer

responsibility, collection systems); vehicles

(extended producer responsibility); construction

and demolition waste (recycled materials); and

mining waste (recycling critical raw materials).

Czechia scores well in the recycling of e-

waste and end-of-life vehicles.

It is a

frontrunner in the recycling of e-waste, a key

source of critical raw materials, with a recycling

rate of 92,8 % in 2022 compared to the EU

average of 80,7 %. It is a top performer in the

reuse and recycling of end-of-life vehicles, with a

rate of 117.2% in 2022 compared to the EU

average of 89.1%.

euro of GVA, the emissions intensity of Czechia’s

manufacturing production is about 25% higher

than the EU total (270

g/€). Since 2017, the

emissions intensity of Czechia’s manufacturing

production improved by 10%, less than in the EU

on average (20%). A major share of Czechia’s

manufacturing greenhouse emissions

–

58%

–

comes from industrial processes and product use,

and the remainder primarily comes from industrial

processes. In the EU overall, these shares are

inverse, with 57% related to energy use.

Graph A7.1:

GHG emission intensity of manu-

facturing and energy-intensive sectors, 2022

KG CO

eq / €

C-C19

C17

Czechia

C20

EU-27

C23

C24

Source:

Eurostat.

Climate mitigation

Industry decarbonisation

A rather high share of greenhouse gas

emissions

Czechia’s

manufacturing

industry comes from industrial processes.

17% of Czechia’s total greenhouse gas emissions

come from industry (

143

). With 340 g CO2eq per

(

140

) Czech Ministry of Environment, 2022,

Plán odpadového

hospodářství České republiky pro období 2015 –

2024 s

v�½hledem do roku 2035.

(

141

) Czech Ministry of Environment, 2021,

Strategick�½ rámec

cirkulární ekonomiky České republiky 2040.

(

142

) Czech Ministry of Industry and Trade, 2017,

Raw Material

Policy for Minerals and Their Resources.

( )

In 2023. Manufacturing includes all divisions of the “C”

section of the NACE Rev. 2 statistical classification of

economic activities. In the remainder of this section, unless

indicated otherwise, data on manufacturing refer to the

divisions of the NACE section C excluding division C19

(manufacture of coke and refined petroleum products), and

the year 2022. The source of all data in this section is

Eurostat; data following the UNFCCC Common Reporting

Framework (CRF) are from the European Environment Agency

(EEA), republished by Eurostat.

143

Both for energy and industrial process-

related emissions, greenhouse emissions

intensity in Czechia has improved less than

in the EU on average (

144

Between 2017 and

2022, the energy-related greenhouse gas

emissions intensity of

Czechia’s manufacturing

industry increased by 8 %, while in the EU overall,

it improved by 16%. The rise in the energy-related

greenhouse emissions intensity of manufacturing

production started in 2020, with a peak in 2021. In

the same period, the share of electricity and

renewables in final energy consumption in

manufacturing was broadly stable, around 39%,

while the energy intensity of manufacturing saw

variations between 1.4 and 1.7 GWh/€ of GVA,

about 20% or more above levels in the EU overall.

The emissions intensity from industrial processes

and product use saw a decrease by 5% between

(

144

) For the GHG emissions intensity of GVA related to energy use

and industrial processes and product use respectively, GHG

emissions are from inventory data in line with the UNFCCC

Common Reporting Format (CRF), notably referring to the

source sectors CRF.1.A.2

–

fuel combustion in manufacturing

industries and construction and CRF.2

–

industrial processes

and product use. The CRF.1.A.2 data broadly correspond to

the NACE C and E sectors, excluding C-19. GVA data (in the

denominator for both intensities) are aligned with this

sectoral coverage. Therefore, they are not fully consistent

with the data referred to in other part of this section.

kom (2025) 0203 - Ingen titel

2017 and 2022, much below

improvements, with an average of 23%.

EU-wide

High energy prices and global competition

put pressure on energy-intensive industries

and their decarbonisation plans.

While having

eased since 2023, electricity prices for industries

remain high in the EU compared to non-EU

countries. in Czechia, they are above the EU

average and have increased by 145% since

2019 (

145

) (see Annex 8). Production of these

industries has declined by more than 12% since

2021.

Graph A7.2:

Manufacturing industry production:

total and selected sectors, index (2021 = 100),

2017-2023

energy and climate plan are projected to achieve

further reductions of 8.9 percentage points. Hence

Czechia is projected to overachieve its effort

sharing target of a 26% reduction by 9.8

percentage points (

147

Swift action on decarbonising transport and

buildings appears particularly exigent in

Czechia.

Between 2005 and 2023, greenhouse

gas emissions from road transport increased by

21% in Czechia, while decreasing by 5% in the EU

overall. From buildings, they decreased by 22%,

much less than the 33% decrease in the EU

overall. Speeding up climate mitigation in these

sectors would help protect households, businesses

and transport users in Czechia from the impact of

the forthcoming carbon price.

Supporting high-speed rail infrastructure

deployment in Czechia could be an avenue to

promote a modal shift from road to rail and

cut transport emissions.

The deployment of the

high-speed rail is a prime transport infrastructure

objective in Czechia having a support of the whole

political spectrum. Czechia has a very ambitious

plan covering all main transport axes.

The

construction of the first sections is starting this

year.

105

100

2017

2018

2019

2020

2021

2022

2023

Manufacturing

Manufacture of paper and paper products

Manufacture of chemicals and chemical products

Manufacture of other non-metallic mineral products

Manufacture of basic metals

Source:

Eurostat

Reduction of emissions in the effort sharing

sectors

Czechia is projected to reach its 2030 target

for the effort sharing sectors with the

climate mitigation policies currently in

place (

146

GHG

emissions from Czechia’s effort

sharing sectors in 2023 are expected to have been

5.7% below the level of 2005. By 2030, current

policies are projected to reduce them by 26.9%

relative to 2005 levels; additional policies

considered in Czechia’s final updated

national

(

145

) Eurostat,

Electricity price for non-household consumers.

(nrg_pc_205).

(

146

)The national greenhouse gas emission reduction target is

set out in Regulation (EU) 2023/857 (the Effort Sharing

Regulation). It applies jointly to buildings (heating and

cooling); road transport, agriculture; waste; and small

industry (known as the effort sharing sectors).

(

147

)The emissions from effort sharing sectors for 2022 are

based on approximated inventory data. The final data will

be established in 2027 after a comprehensive review.

Projections on the impact of current policies (‘with existing

measures’, WEM) and additional policies (‘with additional

measures’,

WAM) as per Czechia’s final updated

national

energy and climate plan.

kom (2025) 0203 - Ingen titel

Graph A7.3:

Greenhouse gas emissions in the

effort sharing sectors, 2005 and 2023

innovation; education and knowledge; economic

instruments; circular cities and infrastructure. The

action plan identifies initiatives for each priority

area, ranging from awareness raising to financial

support.

More can be done to divert reusable products

and recyclable waste from landfilling and

incineration.

With 570 kg of municipal waste

generated per capita in 2021, Czechia is above the

EU average (see Graph A7.4). With a recycling rate

of 43.3% in 2021, Czechia remains below the EU

average for municipal waste recycling. It is at risk

of not meeting the 2035 target of maximum 10%

of municipal waste being landfilled. At 45% in

2021, Czechia’s recycling rate for plastic

packaging waste was above the EU average. In

2022, 72.2% of construction and demolition waste

was recycled in Czechia, which remains well below

the EU average. Czechia’s material footprint in

2023 was 18.6 tonnes per capita, which is above

the EU average.

Investment in the circular transition has

been insufficient.

Czechia is estimated (

149

) to

need total additional investment of at least

EUR 470 million per year for the circular economy

transition, including for waste management. To

close the circular economy gap, an additional

EUR 108 million is needed for recent initiatives,

such as eco-design for sustainable products;

packaging and packaging waste; labelling and

digital tools; critical raw materials recycling; and

measures proposed under the amended Waste

Framework Directive. Another EUR 304 million is

needed in further investment to unlock Czechia’s

circular economy potential.

MtCO2e

2005

Domestic transport (excl. aviation)

Agriculture

Waste

2023

Buildings (under ESR)

Small industry

Source:

European Environment Agency

Sustainable industry

Circular economy transition

Despite positive trends, there is room for

accelerating Czechia’s circular transition.

12.8% in 2023, Czechia’s circular material use was

above the EU average but far behind that of EU

leaders. Czechia’s resource productivity, with

EUR 1.21 per kg of material consumed in 2023,

remained well below the EU average. Even though

Czechia’s resource

productivity has improved

slightly over the past decade, the gap between its

results and the EU average has not decreased. It

would be beneficial for Czechia to redouble its

efforts to minimise negative environmental

impacts and reduce dependence on volatile raw

material markets.

In 2021 Czechia adopted Circular Czechia 2040, a

strategic framework for its transition to a circular

economy by 2040, as part of a reform introduced

by the Czech recovery and resilience plan (

148

). The

implementing action plan for 2022-2027 was

adopted in June 2023. The plan specifies the

measures to be rolled out by 2027 to achieve the

strategic goals of Circular Czechia 2040 in 10

priority areas: products and design; industry, raw

materials, construction, energy; bioeconomics and

food; consumption and consumers; waste

management; water; research, development and

(

148

)Czechia’s

updated recovery and resilience plan, 2023,

https://www.planobnovycr.cz/ke-stazeni.

(

149

)European

Commission, DG Environment,

Environmental

investment needs & gaps assessment programme,

2025

update. Expressed in 2022 prices.

kom (2025) 0203 - Ingen titel

Graph A7.4:

Municipal waste treatment

700

600

543

570

500

Kg per capita

400

300

200

100

2019

Material recycling

2020

2021

EUR of gross value added (GVA)) and it has the

sixth highest damage to health and the

environment. The main contributors to emissions

to air are the energy sector for nitric oxide (NO

sulfur dioxide (SO

) and heavy metals; and the

waste sector for dioxins. As regards industrial

emissions of heavy metals to water, Czechia is in

tenth position in the EU for emission intensity

(above the EU average intensity of 0.864 kg /

billion EUR GVA) and also has the tenth highest

amount of emissions. The main contributors to

emissions to water in Czechia are the energy

sector for heavy metals; the pulp, paper and wood

sector for total phosphorus and total organic

carbon; and the chemical sector for total nitrogen.

The costs of pollution remain far higher than

investment in pollution prevention and

control.

Based on 2022 data, 6 900 deaths in

Czechia are attributed each year to fine particulate

matter (PM

2.5

); 730 deaths to nitrogen dioxide

(NO

); and 1 800 deaths to ozone (O

) (

152

). The

costs related to all industrial air pollutants in

Czechia are estimated at EUR 17.8 billion (

153

). In

contrast, to meet its objectives for pollution

prevention and control and to address the health

and economic costs of pollution, Czechia needs an

additional EUR 1 billion per year (0.38% of GDP),

mostly for air pollution control.

Composting and digestion

Landfill/disposal

Total incineration (incl. energy recovery)

Waste treatment unspecified

EU-27 total waste per capita

Source:

Eurostat

Zero pollution industry

Czechia has significantly reduced air

pollution, which is now decoupled from GDP

growth, but more can be done to reduce

industrial air pollution damage and intensity

and industrial releases to water and their

intensity.

In 2023, no exceedances above the

limit values established by the Ambient Air Quality

Directive (

150

) were registered in Czechia. However,

the target values for ozone concentrations were

not met for several air quality zones, and the

target value for benzo(a)pyrene concentration was

exceeded in three air quality zones (

151

). The 2020-

2029 emission reduction commitments under the

national air pollution control programme have

been met, and Czechia is on track to meet the

commitments for 2030 onwards as well.

Czechia’s industry continues to release

large

amounts of air and water pollutants.

regards industrial air pollutants, Czechia comes in

fourth place for emissions intensity in the EU

(above the EU average of EUR 27.5 / thousand

(

150

)

Directive 2008/50/EU on ambient air quality and cleaner air

(

152

)Latest

available annual estimates by the European

Environment Agency.

In terms of years of life lost (YLL),

this implies 70 700 years for PM

2.5

, 7 500 for NO

and

18 500 for O

(

153

)The latest available data (Value of Statistical Life (VSL)

methodology) from Czechia are from 2020. Source:

European Environment Agency, 2024,

The costs to health

and the environment from industrial air pollution in Europe

–

2024 update,

Link.

for Europe.

(

151

)

European Environment Agency,

Eionet Central Data

Repository.

kom (2025) 0203 - Ingen titel

Table A7.1:

Key clean industry and climate mitigation indicators: Czechia

Strategic autonomy and technology for the green transition

Net zero industry

Operational manufacturing capacity 2023

- Solar PV (c: cell, w: wafer, m: module), MW

- Wind (b: blade, t: turbine, n: nacelle), MW

Automotive industry transformation

Motorisation rate (passenger cars per 1000 inhabitants), %

New zero-emission vehicles, electricity motor, %

Critical raw materials

Material import dependency, %

Climate mitigation

Industry decarbonisation

GHG emissions intensity of manufacturing production, kg/€

Share of energy-related emissions in industrial GHG emissions

Energy-related GHG emissions intensity of manufacturing

and construction, kg/€

Share of electricity and renewables in final energy consumption

in manufacturing, %

Energy intensity of manufacturing, GWh/€

Share of energy-intensive industries in manufacturing production

GHG emissions intensity of production in sector [...], kg/€

- paper and paper products (NACE C-17)

- chemicals and chemical products (NACE C20)

- other non-metallic mineral products (NACE C23)

- basic metals (NACE C24)

Reduction of effort sharing emissions

GHG emission reductions relative to base year, %

- domestic road transport

- buildings

2005

Effort sharing: GHG emissions, Mt; target, gap, %

Sustainable industry

Circular economy transition

Material footprint, tonnes per person

Circular material use rate, %

Resource productivity, €/kg

Zero pollution industry

Years of life lost due to PM2.5, per 100,000 inhabitants

Air pollution damage cost intensity, per thousand € of GVA

Water pollution intensity, kg weighted by human factors per bn € GVA

1,048

708

621

794

75.0

1.0

972

702

571

27.5

0.9

2018

17.8

10.5

1.3

65.0

Czechia

2019

17.3

10.6

1.3

2020

16.0

11.5

1.4

2021

18.3

11.0

1.5

2022

19.5

11.3

1.7

2023

18.6

12.8

1.9

0.53

3.83

1.66

4.60

0.53

3.65

1.60

6.20

2018

8.5

-8.9

0.54

3.52

1.60

5.05

2019

9.5

-12.8

0.48

2.83

1.66

5.45

2020

2.1

-14.5

0.47

5.23

1.56

12.43

2021

-5.3

9.1

-11.2

2021

61.5

2017

0.38

61.7

173.4

37.8

1.56

2018

0.39

60.0

166.5

38.1

1.52

Czechia

EU-27

700-750 (t)

2017

522

0.14

2017

2018

540

0.28

2018

32.8

2019

554

0.31

2019

32.7

- Electrolyzer, MW

- battery, MWh

2020

576

1.65

2020

31.1

2021

579

1.54

2021

33.2

2022

582

2.13

2022

32.9

1000-1100

2023

597

3.09

2023

32.4

Trend

2018

539

1.03

2018

24.2

2021

561

8.96

2021

22.6

Czechia

2019

0.36

61.4

154.5

39.3

1.44

2020

0.38

61.4

180.5

38.5

1.61

2021

0.4

59.0

226.4

38.3

1.69

2022

0.34

55.4

186.8

39.9

1.46

9.3

0.50

3.93

1.54

22.26

2022

-6.7

11.8

-19.4

2022

60.6

0.43

3.73

1.62

13.07

2023

-5.7

20.7

-21.5

2023

61.2

2023

0.33

57.1

41.8

1.29

EU-27

2017

0.34

44.8

158.4

43.3

1.29

2022

0.27

42.5

132.9

44.2

1.09

7.3

0.73

1.25

2.53

2.79

2018

1.4

21.4

0.68

1.26

2.24

3.49

2023

5.2

32.9

WAM

9.8

Target

-26.0

Trend

WEM

0.9

EU-27

2018

14.7

11.6

2.1

2021

15.0

11.1

2.3

Source:

Net zero industry:

European Commission:

The net-zero manufacturing industry landscape across Member States: final

report,

2025.

Automotive industry transformation:

Eurostat.

Critical raw materials:

Eurostat.

Climate mitigation:

See

footnotes in the "climate mitigation" section; reduction of effort sharing emissions:

EEA greenhouse gases data viewer;

European

Commission,

Climate Action Progress Report,

2024.

Sustainable industry:

Years of life lost due to PM2.5: Eurostat and EEA,

Harm to human health from air pollution in Europe: burden of disease status,

2024. Air pollution damage: EEA,

EU large industry

air pollution damage costs intensity,

2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10,

PAH, SOX. Water pollution intensity: EEA,

EU large industry water pollution intensity,

2024. Releases into water covered from

cadmium, lead, mercury, nickel. Other indicators: Eurostat.

kom (2025) 0203 - Ingen titel

ANNEX 8: AFFORDABLE ENERGY TRANSITION

This annex outlines the progress made and

the ongoing challenges faced in enhancing

energy competitiveness and affordability,

while advancing the transition to net zero.

examines the measures and targets proposed in

the final updates to the national Energy and

climate plans (NECPs) for 2030.

The deployment of renewable energy sources

and flexibility of the grids remain low.

This is

especially due to the lack of support instruments

and slow roll-out of smart meters. However,

important legislative steps have been taken to

streamline permitting and empower consumers

(LEX RES I, II and III). Progress in energy efficiency

in buildings remains limited, despite various

programmes supporting the decarbonisation of

heating.

EU averages of 15,4% and 11,6% respectively). On

the other hand, network costs, higher than the EU

average, accounted for 21,2% of the final price for

electricity (compared to 15,5% at EU average) and

9,4% for gas (compared to 7,7% at EU average)

for non-household consumers. Retail prices for

household consumers also remained above the EU

average, and this was particularly true for

electricity, where retail prices continued to

increase. While network costs as well as taxes and

levies were below the EU average for both gas and

electricity, the energy and supply component of

retail prices for household remained slightly higher

than the EU average (49.1% compared to 47.8%

for electricity and 65,4% compared to 53,9% for

gas).

Graph A8.2:

Monthly average day-ahead wholesale

electricity prices and European benchmark

natural gas prices (Dutch TTF)

Energy prices and costs

Graph A8.1:

Retail energy price components for

household and non-household consumers, 2024

(i) For household consumers, consumption band is DC for

electricity and D2 for gas. Taxes and levies are shown

including VAT.

(ii) For non-household consumers, consumption band is ID for

electricity and I4 for gas. Taxes and levies are shown

excluding VAT and recoverable charges, as these are typically

recovered by businesses.

Source:

Eurostat

(i) the Title Transfer Facility (TTF) is a virtual trading point for

natural gas in the Netherlands. It serves as the primary

benchmark for European natural gas prices.

(ii) CEE and CWE respectively provide average prices in the

central-western European (Belgium, France, Germany,

Luxembourg, the Netherlands and Austria) and central-

eastern European (Poland, Czechia, Slovakia, Hungary,

Slovenia and Romania) markets.

Source:

S&P Platts and ENTSO-E

Czechia’s retail energy prices dropped

slightly in 2024, remaining above the EU

average, except for household electricity

price, which were the 5

highest in the EU.

the one hand, taxes and levies (excluding VAT),

skewed toward electricity, made up 9,9% of

electricity prices and 2,4% of gas prices for non-

household consumers (significantly lower than the

With an average of 85 EUR/MWh in 2024 (

154

Czechia’s

wholesale

electricity

prices

remained in line with the EU average

(84.7 EUR/MWh).

Overall prices declined early in

the year amid falling natural gas costs, but they

picked up in the spring/summer and surged in the

winter, outpacing increases in broader Central

Western European (CWE) markets. In the summer,

prolonged and more intense heatwaves led to

higher consumption (+1% in summer 2024 vs

(

154

) Fraunhofer (ENTSO-E data).

kom (2025) 0203 - Ingen titel

summer 2023) while lower coal output (-11% in

summer 2024 vs summer 2023) driven by rising

CO₂ costs and limited non-fossil

flexibility further

tightened the supply-demand balance in a context

of increasing wholesale gas prices. However,

growing solar production (+37% in summer 2024

vs summer 2023), increased hydropower

(+3%(

155

) in summer 2024 vs summer 2023) and

higher imports of cheaper electricity from

Germany(

156

) (and, to a lesser extent, Austria)

helped stabilise prices and prevented Czechia from

diverging as much from CWE markets as other

Central Eastern European (CEE) countries. In the

winter, an increased load (+3% in winter 2024 vs

winter 2023) due to colder-than-expected

temperatures, reduced regional renewable output

from the Dunkelflaute (

157

) , and diminished

nuclear power in Czechia (-4% in winter 2024 vs

winter 2023) led to ramped-up and expensive

natural gas-fired generation (+64% in winter 2024

vs winter 2023). These conditions triggered price

spikes (especially during peak demand hours, when

solar output declined but demand remained high)

that exceeded those observed in CWE markets.

Despite these trends, Czechia’s average electricity

price over the year still declined compared with

2023. There was an even greater difference in

average daytime prices, probably due to the

uptake in solar output both domestically (+38% in

2024) and in neighbouring markets (

158

calculation region (CCR) and is market-coupled on

all its borders with other members of this CCR. The

average wholesale prices show a high level of

convergence with the average regional electricity

prices. Member States should ensure that a

minimum of 70% of technical cross-border

capacity is available for trading and Czechia

complied with this requirement for 100% of the

hours(

160

)

–

the only country in this region to

achieve this. The interconnection rate reached

27% in 2024. To further support interconnectivity,

Czechia is pursuing electricity interconnection

projects with Germany and Slovakia. Internal

infrastructure was upgraded in 2024 with the new

400 kV Vernerov-Vitkov line, which was also

included in the first PCI/PMI list under the new

TEN-E Regulation. However, further efforts to

strengthen the grid infrastructure are needed

–

especially on the distribution grid level, where the

number of refused connection agreements due to

insufficient connection capacity or supply security

reasons rose significantly between 2022 and

2023(

161

) . With regard to hydrogen infrastructure,

Czechia adopted an updated hydrogen strategy in

mid-2024,

which

acknowledges

Czechia’s

participation in the Central European Hydrogen

Corridor.

Progress regarding streamlining permitting

for energy infrastructure remains uncertain.

Since January 2024, Czechia has significantly

reformed the Construction Act, by introducing the

Transport and Energy Authority (which covers

strategic infrastructure projects

–

including in the

energy sector) and a portal (the Builder’s Portal) to

digitalise the construction-permitting procedure.

This digitalisation process is not on track, however,

and could be delayed until 2027. This raises

concerns about prolonging the current system,

which continues to hinder construction timelines

for grid infrastructure and affects performance on

climate and energy goals. Spatial planning also

remains unreformed (see also Chapter 2).

Lack of grid capacity remains a key

bottleneck, because a significant backlog of

unmaterialised renewable energy projects is

preventing the connection for others.

address this challenge, the recently adopted LEX

(

160

) ACER market monitoring report.

(

161

) Monitoring of the Czech NRA, available at Monitoring

připojování v�½roben elektřiny do distribuční soustavy v České

republice 2021-2023 | eru.cz.

Flexibility and electricity grids

Czechia is well interconnected with most of

its neighbours and has a high level of cross-

border trade, but challenges persist at

distribution level in terms of grid

deployment.

Czechia is in the Core(

159

) capacity

(

155

) ENTSO-E.

(

156

) Net imports increased by 58% in summer 2024 vs 2023.

(

157

) In November-December 2024, electricity generation from

wind power decreased by -51% in Austria, -29% in Czechia

and -45% in Germany compared to the same period in 2023.

(

158

) Yearly electricity data, Ember (generation and consumption

data throughout the paragraph).

(

159

) Core is the capacity calculation region (CCR) which covers

Belgium, Czechia, Germany, France, Croatia, Hungary, the

Netherlands, Austria, Poland, Romania, Slovenia and Slovakia

(and, once connected, Ireland). A CCR is a group of countries

that calculate cross-border electricity trade flows together.

kom (2025) 0203 - Ingen titel

RES III includes a binding maximum timeline for

RES project grid connection to be ensured within

the connection agreement (as required by

Czechia’s recovery and resilience plan (RRP)).

Constraints on grids resulted in increased

occurrence of negative prices.

ACER data

indicate that these represented 134 hours in 2023.

This led to a rising interest from energy

distributors in installing ‘energy dissipators’ to

consume surplus electricity (particularly electricity

from solar sources), with a potential capacity of

1 000 MW.

Challenges remain, but Czechia has taken

some steps to support non-fossil flexibility.

Czechia has made a commitment to further

promote the development of demand-side

response and energy storage in order to increase

the flexibility of its energy system. It has adopted

a legal framework (LEX RES III) that allows

aggregation (including independent aggregation)

on wholesale markets. In terms of storage, the

deployment of batteries remains however at an

early stage (0,04 GW operating). A state aid

scheme of EUR 279 million, approved in March,

will help accelerate the roll-out by an additional

1.5GWh of energy storage projects. In addition,

Czechia is also putting in place a new entity

responsible for data provisions and exchange in

the electricity market: a central Electricity Data

Centre (EDC). This platform should further enable

services such as aggregation, and energy sharing

for energy communities. However, the full

implementation of the EDC functionalities is

currently delayed.

An incomplete legislative framework and

slow smart meter roll-out are hampering

consumer engagement, which remains rather

limited (despite recent steps).

In 2024, Czechia

adopted legislation on renewable energy

communities and citizen energy communities. This

provided a clearer framework, leading to a positive

trend in the development of energy communities.

However, secondary legislation to enable their full

participation in the energy market has not been

adopted yet. Most consumers are on fixed-price

retail contracts and supplier-switching was below

EU average (only 4.2% in 2023(

162

) ). Both the roll-

out of smart meters (below 10%) and the

percentage of prosumers households (3%) remain

(

162

) Report by ACER and CEER.

low. This indicates limited consumer engagement

in the energy market. Czechia recently adopted

legislation (LEX RES III), which should strengthen it

(especially as regards demand response, energy

communities, dynamic pricing and smart grids) as

well as comparison tools that allow consumers to

easily find a better offer. However, without a

completed smart meter roll-out, customers are

facing difficulties in providing flexibility services,

even though wholesale markets will be open for

demand response (by independent aggregation in

the near future). A postponed tariff reform is

further delaying the implementation of dynamic

pricing.

In 2023, electricity accounted for 21.1% of

Czechia’s final energy consumption (FEC)

(below the EU average of 22.9%) and this

share has remained largely stagnant in the

last decade(

163

) , partly due to an

unfavourable electricity-to-gas price ratio

that disincentivizes electrification and cost-

effective decarbonization.

Electricity accounts

for 20.7% and 32.9% of

households’ and

industry’s FEC respectively

(see also the Clean

Industry and Climate Mitigation Annex). For the

transport sector, this share remains negligible at

2.2%. Further progress in electrification across

sectors is required in order to cost-effectively

decarbonise the economy and bring the benefits of

affordable renewable generation to consumers. In

2024’s second semester, household electricity

prices in Czechia were among the highest in the

EU, with electricity costing 2.9 times more per unit

than gas before taxes and 3.2 times more after

(EU average: 2.3). Taxes and levies made up

25,4% of electricity prices (vs. 19,3% for gas). For

energy-intensive industries, prices were slightly

above the EU

average (€0.18/kWh vs. €0.17/kWh),

with electricity costing 2.9 times more than gas

before taxes and 3.1 times more after, further

discouraging the electrification of industry and

heating.(

164

)

(

163

) The CAGR (compound annual growth rate) was 0.6%

between 2013 and 2023. The minimum/maximum shares

were 19.8% and 21.1% respectively. Source: Final energy

balances, Eurostat.

(

164

) Analysis based on Eurostat data for the first semester of

2024. For household consumers, consumption band is DC for

electricity and D2 for gas, which refer to medium-sized

consumers and provide an insight into affordability. For non-

household consumers, consumption band is ID for electricity

and I4 for gas, referring to large-sized consumers, providing

kom (2025) 0203 - Ingen titel

Renewables and long-term contracts

Renewables deployment progresses at a slow

pace.

In 2024, renewable energy accounted for

17% of Czechia electricity mix. This was a slight

increase from 15% in 2023(

165

)

but

remains still

far below the EU’s overall RES share of 47%.

Installed renewables capacity grew by 16,6% in

2024, the total renewable energy capacity thus

reaching 6.453 MW(

166

) (see Graph A6.1) in

Czechia. As regards the steady acceleration of

solar deployment, the total installed capacity in

2024 represented 4159 MW (+908 MW, an almost

28% increase on 2023). In contrast, wind installed

capacity in Czechia grew modestly (+13 MW,

representing a 3,7% increase), reaching 356 MW

in 2024.

Graph A8.3:

Czechia's installed renewable capacity

(left) and electricity generation mix (right)

renewable projects. Czechia has also taken steps

to increase the digitalisation of the permit-

granting procedure through the Builder’s Portal,

but this does not yet cover the whole permitting

procedure. The Commission has an ongoing

infringement proceeding against Czechia for non-

transposition into national legislation of the

permitting provisions of Directive 2023/2413 on

the promotion of energy from renewable sources.

Czechia has not set more ambitious targets

for renewables in its final NECP.

Czechia’s

proposed contribution to the EU’s 2030 renewable

energy target is still 30%, below the value of 33%

arising from the formula set in the Governance

Regulation. By 2030, Czechia aims to have

installed 1.2 GW of onshore wind capacity and 8

GW of solar PV capacity.

Czechia made little progress in terms of

support to renewable energy sources in

2024, especially when it comes to auctions,

contracts for difference (CfDs) and power

purchase agreements.

However, as part of the

European Wind Power Action Plan, Czechia made a

commitment to have 70 MW installed onshore

wind capacity by 2026. No auctions took place in

2024, but annual auctions for 330 MW of wind

power are planned for 2025, 2026 and 2027.

Further solar rooftop deployment is foreseen

within the framework of the RRP. Despite some

recent progress, PPAs are not very common in

Czechia (the very first corporate PPA in Czechia

was concluded in 2021). In 2024, a large PPA was

concluded (a 10-year contract for the construction

of a 37 MW PV plant).

“Other” includes renewable municipal waste, solid biofuels,

liquid biofuels, and biogas.

Source:

IRENA, Ember

Czechia has made some progress in speeding

up RES permitting in 2024, but further steps

are needed.

Czechia is expected to adopt a

decision on renewables acceleration areas for wind

and solar PV by Spring 2025. This needs to be

complemented with an update of the national

spatial planning, which is currently facing strong

resistance at the local and regional levels. The

Single Environmental Opinion Act also streamlines

the environmental permitting procedures. The

Transport and Energy Construction Authority

(DESU) has been established to deal with the

permitting of major energy infrastructure and

an insight into international competitiveness (price used for

the calculation excludes VAT and other recoverable

(

165

) Yearly electricity data, Ember.

(

166

) IRENA 2025:

Renewable Energy Capacity Statistics 2025

Energy efficiency

Czechia has made progress towards helping

to achieve the EU’s 2030 energy efficiency

targets.

In 2023, both its primary energy

consumption (PEC) and final energy consumption

(FEC) decreased on 2022 levels (by 8.1% and

5.9% respectively). FEC decreased especially in

three main sectors (in industry by 9.4%, in the

residential sector by 11.7% and in services by

7.2%) but increased in transport by 3.0%. The

recast Energy Efficiency Directive (EED) requires

Czechia to try to reach a PEC of 29.18 Mtoe and a

FEC of 20.35 Mtoe by 2030. According to NECPR

kom (2025) 0203 - Ingen titel

2023, Czechia achieved new annual energy

savings of 120 ktoe/year.

Climate-corrected final energy consumption

of households in Czechia decreased by only

1.26% between 2018 and 2022.

This indicates

some progress but highlights the need for Czechia

to significantly intensify its efforts to achieve its

2030 target of reducing building energy

consumption by 8% compared with 2020 (as

outlined in its long-term renovation strategy).

Czechia is actively supporting energy-efficient and

deep renovations through its New Green Savings

Programme (Nová

Zelená Úsporám),

which

provides financial incentives for households

(including vulnerable households) to invest in

energy-saving measures. The 2024 reform of the

programmes ensures a more targeted approach

that focuses on more complex renovations, but

20% of the cost is not covered. Renovation of

public buildings also remains a challenge.

In 2022, heating and cooling represented

85% of Czechia’s residential final energy

consumption.

Approximately 56 000 heat pumps

were sold in 2023, a decrease of 11% on the

previous year. One of the main barriers has been

the fact that electricity in Czechia was 2.8 times

more expensive than gas in 2023 and this

difference increased to 3.1 times in the first half

of 2024

–

so end users save energy but do not

make any considerable financial savings if they

choose a heat pump for heating. When it comes to

the decarbonisation of district heating, which

covers 40% of households, support provided by

the RRP and Modernisation Fund includes support

for the shift from coal to energy-efficient CHP and

renewables (HEAT Programme).

Czechia has an effective supporting national

financing framework which mobilises energy

efficiency investments that are mainly

composed of grants (79%) and blended

schemes (4%).

The use of financial instruments

dedicated to energy efficiency accounted for 17%

of its RRP. Czechia continued the implementation

of several relevant financing measures, such as

the New Green Savings Programme. In 2024,

Czechia launched Energy Savings II (a subsidy

scheme with the aim of reducing the energy

demand of business buildings, production and

technological processes) and also a grant which

focuses on support for the reconstruction and

modernisation of public lighting systems (with the

option of installing innovative elements). In terms

of supported sectors, Czechia’s

RRP covers widely

the building sector, including residential and public

buildings as well as industry.

Security of supply and diversification

Czechia made substantial progress in

addressing its reliance on Russian oil.

The

completion of the TAL Plus pipeline in January

2025 means that Czechia is on track to be

independent from Russian oil supply by mid-2025.

Despite progress on renewables, Czechia’s

overall energy mix in 2023 remained heavily

reliant on fossil fuels.

Coal accounted for

27.3% of gross inland consumption, oil for 24.5%

and natural gas for 14.7%(

167

). Nuclear and

renewables (together with biofuels) contributed

19.3% and 13.4%(

168

) respectively. This reliance

underscores the importance of Czechia’s ongoing

efforts to diversify its energy sources, to phase out

coal and strengthen its energy security.

Nuclear energy has a key role to play (along

with renewables) in decarbonising the Czech

economy, securing energy supply and

providing affordable energy for consumers.

The government plans to further expand the share

of nuclear in Czechia's energy mix by up to 25-

33% (currently 15%) in primary energy sources

and up to 46-58% (against 37% in 2022) in gross

electricity production by 2040. To meet these

targets, both the construction of up to four new

nuclear reactors and the development of small

modular reactors (mainly at former sites) are

planned. In July 2024 the Korean consortium (led

by KHNP) was selected to build two nuclear

reactors in Dukovany, however the signature of

the contract is still pending. A second phase of

power upgrades in Dukovany was completed in

2024, increasing the power output of the plant to

512 MWe. This is expected to boost annual

production by approximately 300 000 MWh. The

government has also approved a strategic

partnership with Rolls-Royce to develop SMRs.

Czechia has moreover secured alternative nuclear

fuel supplies by concluding supply contracts with

(

167

) Electricity and heat are excluded to avoid double counting

focusing on primary energy sources.

(

168

) Gross Inland Consumption 2023,

Energy Balances - Eurostat

kom (2025) 0203 - Ingen titel

Westinghouse and Framatome. While these steps

will reduce reliance on nuclear fuel originating in

Russia, Czechia remains amongst the most

dependant Member States with Russian-designed

VVER reactors. It is important for Czechia to

develop a national plan to fully phase out its

dependency on Russian nuclear fuel, as foreseen

by the REPowerEU Roadmap adopted on 6 May

2025.

Fossil fuel subsidies

In 2023, environmentally harmful(

169

) fossil fuel

subsidies without a planned phase-out before

2030 represented 0.09%(

170

) of

Czechia’s GDP(

171

below the EU weighted average of 0.49%. Tax

measures accounted for 73.1% of this volume,

while income/price support and direct grants

represented 25.1% and 1.8%, respectively.

However, Czechia’s 2023 Effective Carbon

Rate(

172

) averaged

EUR 65.00 per tonne of CO₂,

below the EU weighted mean of EUR 84.80(

173

(

169

) Direct fossil fuel subsidies that incentivise maintaining or

increasing in the availability of fossil fuels and/or use of

fossil fuels.

(

170

) Numerator is based on volumes cross-checked with the

Czech authorities. For all Member States, it includes public

R&D expenditures for fossil fuels as reported by the IEA

(Energy Technology RD&D Budgets) and excludes, for

methodological consistency, excise tax exemption on

kerosene consumed in intra-EU27 air traffic.

(

171

) 2023 Gross Domestic Product at market prices, Eurostat.

(

172

) The Effective Carbon Rate is the sum of carbon taxes, ETS

permit prices and fuel excise taxes, representing the

aggregate effective carbon rate paid on emissions.

(

173

) OECD (2024), Pricing Greenhouse Gas Emissions 2024

kom (2025) 0203 - Ingen titel

Table A8.1:

Key Energy Indicators

Czechia

2021

Household consumer - Electricity retail price (EUR/KWh)

Energy & supply [%]

Network costs

Taxes and levies including VAT

VAT

Household consumer - Gas retail price

Energy & supply

Network costs

Taxes and levies including VAT

VAT

Non-household consumer - Electricity retail price

Energy & supply

Network costs

Taxes and levies excluding VAT

Non-household consumer - Gas retail price

Energy & supply

Network costs

Taxes and levies excluding VAT

Wholesale electrity price (EUR/MWh)

Dutch TTF (EUR/MWh)

0.1828

53.6%

23.2%

14.9%

0.0562

76.5%

8.5%

14.9%

14.8%

0.0944

50.5%

24.7%

11.9%

0.0320

72.7%

9.7%

4.1%

100.4

n/a

2023

0.3139

58.9%

22.9%

18.2%

17.6%

0.1115

70.7%

11.9%

17.4%

17.3%

0.1757

67.7%

14.3%

0.7%

0.0702

74.9%

6.1%

1.9%

101.1

n/a

2022

0.2091

58.9%

21.0%

20.1%

23.3%

0.0883

68.0%

14.6%

17.4%

17.3%

0.1688

66.9%

12.1%

4.4%

0.0820

76.2%

5.1%

1.6%

246.6

n/a

2024

0.3327

49.1%

27.0%

23.9%

17.3%

0.1052

65.4%

17.2%

17.4%

17.3%

0.1735

53.4%

21.2%

9.9%

0.0551

71.2%

9.4%

2.4%

85.1

n/a

2021

0.2314

36.6%

26.7%

36.7%

14.5%

0.0684

43.7%

22.5%

33.8%

15.5%

0.1242

43.0%

15.8%

30.4%

0.0328

66.2%

7.7%

12.5%

111.0

46.9

2022

0.2649

54.3%

25.3%

20.3%

13.4%

0.0948

61.0%

17.3%

21.7%

11.6%

0.1895

66.5%

10.7%

9.9%

0.0722

77.3%

3.8%

6.1%

233.2

123.1

2023

0.2877

55.6%

24.8%

19.6%

13.8%

0.1121

64.5%

17.1%

18.4%

10.2%

0.1971

63.0%

11.9%

11.2%

0.0672

77.3%

5.3%

7.3%

99.1

40.5

2024

0.2879

47.8%

27.2%

25.0%

14.6%

0.1128

53.9%

18.3%

27.8%

13.6%

0.1661

55.8%

15.5%

15.4%

0.0517

68.7%

7.1%

11.6%

84.7

34.4

2017

Gross Electricity Production (GWh)

Combustible Fuels

Nuclear

Hydro

Wind

Solar

Geothermal

Other Sources

Gross Electricity Production [%]

Combustible Fuels

Nuclear

Hydro

Wind

Solar

Geothermal

Other Sources

Net Imports of Electricity (GWh)

As a % of electricity available for final consumption

Electricity Interconnection [%]

Share of renewable energy consumption - by sector [%]

Electricity

Heating and cooling

Transport

Overall

87,056

52,783

28,340

3,040

591

2,199

103

60.6%

32.6%

3.5%

0.7%

2.5%

0.0%

0.1%

-13,037

-21.4%

19.3%

13.7%

19.7%

6.6%

14.8%

2018

88,038

52,338

29,921

2,679

609

2,365

125

59.4%

34.0%

3.0%

0.7%

2.7%

0.0%

0.1%

-13,907

-22.7%

21.7%

13.7%

20.6%

6.6%

15.1%

2019

87,035

50,474

30,246

3,175

700

2,316

124

58.0%

34.8%

3.6%

0.8%

2.7%

0.0%

0.1%

-13,097

-21.4%

25.4%

14.0%

22.6%

7.8%

16.2%

2020

81,525

44,933

30,043

3,437

699

2,294

118

55.1%

36.9%

4.2%

0.9%

2.8%

0.0%

0.1%

-10,153

-17.2%

27.5%

14.8%

23.5%

9.4%

17.3%

2021

85,016

47,677

30,731

3,620

602

2,250

136

56.1%

36.1%

4.3%

0.7%

2.6%

0.0%

0.2%

-11,075

-17.8%

24.3%

14.5%

24.3%

6.7%

17.6%

2022

84,851

47,346

31,022

3,083

641

2,626

132

55.8%

36.6%

3.6%

0.8%

3.1%

0.0%

0.2%

-13,529

-22.6%

28.6%

15.5%

25.8%

6.2%

18.1%

2023

77,004

39,458

30,410

3,427

702

2,892

115

51.2%

39.5%

4.5%

0.9%

3.8%

0.0%

0.1%

-9,184

-16.0%

25.3%

16.4%

27.8%

5.7%

18.6%

2024

27.0%

2020

Import Dependency [%]

of Solid fossil fuels

of Oil and petroleum products

of Natural Gas

Dependency from Russian Fossil Fuels [%]

of Natural Gas

of Crude Oil

of Hard Coal

38.8%

12.8%

101.2%

86.0%

100.0%

48.8%

10.1%

2021

40.0%

13.9%

96.9%

92.1%

100.0%

50.0%

4.3%

2022

41.8%

14.1%

99.9%

113.4%

79.4%

56.0%

1.2%

2023

41.7%

14.9%

99.4%

100.1%

8.1%

58.2%

0.0%

2020

57.5%

35.8%

96.8%

83.6%

41.0%

25.7%

49.1%

2021

55.5%

37.2%

91.7%

83.6%

40.9%

25.2%

47.4%

2022

62.5%

45.9%

97.8%

97.6%

20.7%

18.4%

21.5%

2023

58.3%

40.8%

94.5%

90.0%

9.3%

3.0%

1.0%

2017

Gas Consumption (in bcm)

Gas Consumption year-on-year change [%]

Gas Imports - by type (in bcm)

Gas imports - pipeline

Gas imports - LNG

Gas Imports - by main source supplier [%]

Norway

Russia

8.7

2.8%

8.9

0.0

0.8%

99.2%

2018

8.3

-5.3%

8.0

0.0

0.5%

99.5%

2019

8.7

5.0%

9.5

0.0

0.3%

99.7%

2020

8.8

1.6%

7.6

0.0

0.0%

100.0%

2021

9.5

7.2%

8.7

0.0

0.0%

100.0%

2022

7.6

-19.4%

8.6

0.0

17.2%

79.4%

2023

6.8

-11.3%

6.8

0.0

87.0%

8.1%

Source:

Eurostat, ENTSO-E, S&P Platts

kom (2025) 0203 - Ingen titel

ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT

Czechia faces significant challenges in

climate adaptation, particularly in developing

a comprehensive climate adaptation strategy

and enhancing water resilience.

It has well-

established specific environmental policies, such

as policies for soil, water, forests and air. However,

the overall approach to adaptation is often

fragmented. Responsibilities are shared across

ministries, including the Ministry of the

Environment and the Ministry of Agriculture,

lacking clarity. Improving water resilience is a key

priority, especially to tackle forms of pressure such

as industrial emissions and untreated wastewater.

Action to improve natural water retention and

implement nature-based solutions is crucial to

boost resilience against floods, droughts and

erosion and to support climate change adaptation

more broadly.

Czech ecosystems, with 26.5% of the country

severely affected by drought in 2018. The health

impacts of extreme heat have become more

pronounced, with heat-related mortality increasing

from an average of 16 deaths per 100 000

inhabitants between 2003-2012 to 28 deaths

between 2013-2022. These challenges underscore

the need for cohesive adaptation strategies to

boost resilience against such extreme events.

Czechia's adaptation policy, defined by its

national strategy and action plan, is

developing,

but

faces

implementation

challenges due to unclear responsibilities

among ministries.

Czechia’s adaptation policy is

embedded in two key documents: the national

adaptation strategy and the national action plan

on adaptation. Czechia is in the process of

conducting a national climate risk assessment,

with a significant focus on drought risk. While the

policies focusing on individual environmental

aspects (such as the protection of soil, water,

forests or air) are well established in the key

ministries, implementation of a comprehensive

adaptation policy is not yet at that stage. The two

key documents form a comprehensive adaptation

policy, but implementation often consists of a sum

of separate policies (see above), rather than

mutually reinforcing measures based on a climate

risk assessment. The division of responsibilities for

implementing the adaptation policy is neither clear

within the Ministry of the Environment, nor

between the Ministry of the Environment, the

Ministry of Agriculture and other authorities. At

sub-national level, some self-governing regions

have drafted climate change adaptation plans or

strategies. Implementation is generally at the

initial phase, with further action needed. Only 29%

of the Czech population live in areas covered by

the EU Covenant of Mayors. Several local action

groups have worked rather efficiently to

implement adaptation measures since they are not

limited to individual municipalities and can work,

for instance, at river-basin level. This work merits

further support. Climate adaptation at landscape

level also merits support as it enables action to

tackle all key aspects at the same time (soils,

water retention, forests, biodiversity, etc.) to

deliver tangible results. The educational and social

aspects of climate change adaptation should be

promoted.

Climate adaptation and preparedness

Czechia faces significant climate adaptation

challenges and substantial economic impacts

from weather and climate-related extreme

events such as floods, droughts and

heatwaves.

Between 1980 and 2023, economic

losses reached EUR 18.5 billion, with only 12%

covered by insurance. Flood events were

particularly damaging, accounting for EUR 10.2

billion of these losses (

174

). The risk of floods

caused by a combined effect of heavy

precipitation and low water retention of soils has

significantly increased (in terms of exposure of

both the population and property). During the

floods of summer 2024, Czechia demonstrated a

very good level of preparedness in terms of

prompt weather forecasts, an efficient early

warning system and effective cooperation under

its Integrated Rescue System. However, the floods

showed that some key causes of the fatalities and

damage still need to be tackled. For example,

current conventional agriculture and forestry

practices deteriorate the quality of soil, decrease

water retention in soils and prevent forests from

becoming resilient. These practices not only

exacerbate the impacts of floods, but also of

water and wind erosion, landslides, heatwaves,

droughts, etc. Droughts pose a major threat to

(

174

) EEA, 2024,

Economic losses from weather- and climate-

related extremes in Europe,

Link.

kom (2025) 0203 - Ingen titel

Water resilience

Czechia’s action to improve flood resilience

should continue.

The major floods of September

2024, which caused significant damage in several

regions, demonstrate the urgency. The economic

losses caused by floods in the country between

1980 and 2023 are estimated at EUR 10.2 billion.

Improving sustainable water management and

flood

protection,

prioritising

nature-based

solutions and restoring rivers is crucial to maintain

the competitiveness of many economic sectors.

Specific measures are in preparation or ongoing

under Czechia’s 2nd flood risk management plans,

which now include nature-based solutions and

cross-reference

work on floods under Czechia’s

updated climate change adaptation strategy.

Czechia is not one of the EU Member States

subject to major water stress. The Water

Exploitation Index Plus (WEI+) was 3.2 in 2022.

Manufacturing (40%) and the public water supply

(35%) were the sectors accounting for the highest

shares of water consumption in 2022. Czechia’s

water productivity is above the EU average at

EUR 159 per m

of abstracted water in 2022.

The water quality of Czechia’s surface water

and groundwater bodies is on a downward

trend in terms of ecological and chemical

status.

Czechia’s

third river basin management

plans, covering 2022-2027, show a decrease in

the number of surface water bodies with good (or

better) ecological status/potential from 18.8%

(under the second plan) to only 5.9% (third plan).

Even if this partly due to better monitoring, it is

also clear that the country severely struggles with

eutrophication, particularly in lakes. The sources of

pressure are industrialised large-scale agriculture,

which makes heavy use of fertilisers, and waste

waters polluting rivers and lakes with nutrients

causing eutrophication. In terms of the chemical

status of surface water bodies, there has been an

even greater deterioration between the 2nd and

the 3rd RBMPs, falling from 70% to only 38.9% of

surface water bodies in good chemical status.

Again, this is partly due to better monitoring, but

also due to ubiquitous and persistent bio-

accumulative and toxic substances, which are

difficult to tackle. The sources are discharges not

connected to the sewerage network, pollution from

agriculture and urban waste waters.

Although 93.7% of

Czechia’s groundwater bodies

are reported to be in good quantitative status in

the third plan, 13% are at risk of failing to achieve

good quantitative status by 2027. The sources of

pressure are water abstraction for the public water

supply, industrial and agricultural uses. Czechia is

one of the EU Member States with the highest

share of groundwater bodies (72.4%) failing to

meet good chemical status. This is mainly due to

pollution from agriculture (pesticides, nitrates and

ammonium). Non-agricultural pollutants have been

on a sustained upward trend, including arsenic,

nickel, cadmium, nitrates (from burning fossil

fuels) and aluminium.

Czechia’s wastewater treatment remains a

cause for concern.

Despite improvements in

compliance over the years, in particular thanks to

EU funding, Czechia has experienced difficulties in

implementing the Urban Wastewater Treatment

Directive. Incomplete implementation forced the

Commission to take legal action against Czechia in

2020 and issue a reasoned opinion. These

identified agglomerations failing to provide a

collecting system, or failing to provide secondary

treatment, or failing to ensure more stringent

treatment (

175

). The infringement proceeding is

ongoing. Overall, Czechia’s compliance rate in

2020 was 78%. The Directive was revised in

2024 (

176

), bringing in new requirements such as

additional treatment of micropollutants in urban

wastewater. Czechia has until 31 July 2027 to

transpose it into its legal system.

To meet the environmental targets under the

EU water legislation, Czechia has a gap in

investment in water of EUR 498 million per

year (0.18% of GDP), with over half related

to waste water (338 million per year).

Czechia’s annual water investment needs reach an

estimated EUR 1.56 billion (in 2022 prices), see

Graph A9.2. This comprises both the water industry

and water protection/management. The largest

part of the total annual need, EUR 958 million, is

for wastewater management, including additional

costs to implement

the revised Directive. Czechia’s

current annual water investments for the 2021-

2027 period are estimated to be around EUR 1

billion per year (in 2022 prices). Of the total

(

175

) Czechia responded to the reasoned opinion in 2020,

presenting its views on the various compliance issues raised

by the Commission.

(

176

) Directive 2024/3019, of 27 November 2024.

kom (2025) 0203 - Ingen titel

financing, 11.2% is provided by the EU

multiannual financial framework (mostly through

cohesion policy), with a further 4.8% from the

Recovery and Resilience Facility, reaching 16%

combined. European Investment Bank financing is

around 0.7% of the total, while the bulk of

financing

comes

from

national

sources

177

(83.4%) ( ).

Graph A9.1:

Direct dependency(1) on ecosystem

services(2) of the gross value added generated by

economic sector in 2022

Agriculture

Forestry

Fishery and acquaculture

Mining and metals

Construction

Water utilities

Healthcare delivery

Aviation travel and tourism

Food beverages and tobacco

Supply chain and transport

Public services and others

Electricity

Chemical and materials industry

Electronics

Oil and gas

Real estate

Heat utilities

Automotive

Retail consumer goods and…

Information technology

Banking and capital markets

Insurance and asset…

Digital communications

High

Medium

Low

20%

40%

60%

80% 100%

Biodiversity and ecosystems

The state of nature and ecosystems in

Czechia remains under pressure, affecting

climate resilience.

With a long history of

industrialisation, Czechia has one of the most

fragmented landscapes in the EU. According to the

latest available data (2018), only 19.4% of

Czechia’s habitats have a good status, higher than

the EU average of 14.7%. Data show only a slight

improvement since the previous reporting period.

Similarly, the conservation status of species, with

30% reported as having a good status (higher

than the EU average of 27.5%) shows only a slight

improvement. This situation has severe

implications for Czechia’s climate resilience, as the

loss of biodiversity

impairs ecosystems’ ability to

provide services that help mitigate the effects of

climate change, such as regulating water cycles,

maintaining soil health and sequestering carbon.

(1) Dependency based on the sector’s own operations,

excluding value chain operations within countries and across

international value chains. A high dependency indicates a high

potential exposure to nature-related shocks or deteriorating

trends, which means that the disruption of an ecosystem

service could cause production failure and severe financial

loss.

(2) Ecosystem services are the contributions of ecosystems to

the benefits that are used in economic and other human

activity, including provisioning services (e.g. biomass

provisioning or water supply), regulating and maintenance

services (e.g. soil quality regulation or pollination), and cultural

services (e.g. recreational activities).

Source:

Hirschbuehl et al., 2025,

The EU economy's

dependency on nature,

Link.

(

177

) Water investment levels are estimated by tracking EU funds,

EIB projects and national expenditure (EPEA accounts,

Eurostat).

Nature degradation creates significant risks

to the economy and to competitiveness as

Czechia is one of the Member States with a

high level of dependency on ecosystem

services.

44% of Czechia’s gross value added

highly and directly dependent on ecosystem

services, equal to the EU average. Several sectors

such as agriculture, forestry, fisheries, mining,

construction, water utilities and healthcare delivery

(see Graph A9.1) are particularly dependent on

ecosystem services. 100% of the gross value

added generated by these sectors is directly

dependent on ecosystem services. This means that

failure to maintain the capacity of ecosystems to

deliver services could entail significant costs or

even stop production in these sectors. Protecting

and restoring key ecosystems would help maintain

the long-term competitiveness of these sectors.

kom (2025) 0203 - Ingen titel

Focused action on nature protection and

restoration is necessary to meet Czechia’s

nature restoration targets.

Czechia’s most

recent biodiversity strategy (2016-2025) was

adopted in 2016. It sets out four priorities for the

protection and sustainable use of biodiversity (

178

Czechia is currently in the process of updating its

national biodiversity strategy and action plans. In

July 2024, it uploaded into the online reporting

tool

the

Convention

Biological

179

Diversity ( ) two preliminary new national targets

(on protected areas and on ecosystem integrity,

connectivity and management). In 2021, 21.9% of

the country was protected (including Natura 2000

and other nationally designated protected areas),

below the EU average of 26%.

Czechia’s investment needs for biodiversity

and ecosystems are estimated to be EUR 1.3

billion per year

(in 2022 prices) for the 2021-

2027 period (see Graph A9.2). The current level of

financing for biodiversity and ecosystems

conservation in Czechia is around EUR 1 billion per

year. The investment gap (EUR 251 million per

year, corresponding to 0.09% of Czechia’s GDP)

undermines

the country’s commitment to global

biodiversity agreements and its long-term

economic and social development.

Graph A9.2:

Investment needs and gaps in EUR

million, in 2022 constant prices

1.800

1.600

1.400

1.200

1.000

800

600

400

200

Biodiversity

Baseline

Gap

Water

Source:

European Commission, DG Environment,

Environmental investment needs & gaps assessment

programme, 2025 update.

Sustainable agriculture and land use

Czechia’s carbon removals fall short of the

level of ambition needed to meet its 2030

target for land use, land-use change and

forestry (LULUCF).

Carbon removals declined

slowly in recent decades before decreasing sharply

and turning into emissions between 2017 and

2019. To meet its 2030 LULUCF target, additional

carbon removals of -0.8 million tonnes of CO

equivalent (CO

eq) are needed (

180

). The latest

available projections show a gap to target of 0.2

million tonnes of CO

eq for 2030 (

181

). Therefore,

additional measures are needed to reach the 2030

target.

Czechia’s agriculture

is still a notable source

of greenhouse gas emissions and continues

to have a significant impact on air, water

and soils.

In 2022, agriculture generated 8.4

million tonnes of CO

eq, accounting for around

7.1% of the country’s total emissions. This

includes 4 million tonnes of CO

eq from livestock.

(

178

)

Ministerstvo životního prostředí, 2016,

Strategie ochrany

biologické rozmanitosti České republiky 2016–2025,

Link.

(

179

) Convention on Biological Diversity Reporting Tool,

Link.

(

180

) National LULUCF targets of the Member States in line with

Regulation (EU) 2023/839.

(

181

) Climate Action Progress Report 2024, COM/2024/498.

kom (2025) 0203 - Ingen titel

The utilised agricultural area (UAA) in Czechia

remained stable between 2012 and 2023 at 3.5

million hectares.

Nutrient loss from agriculture, mainly from

mineral fertilisers and manure, pose a

significant environmental concern and a

threat to human health.

This is reflected in the

country’s nitrogen balance of 62.9 kg of nitrogen

per hectare of UAA (in 2021). According to data

collected under the Nitrates Directive, 11.7% of

groundwater monitoring stations in Czechia

recorded average nitrate concentrations above

50 mg/l between 2016 and 2019, exceeding the

healthy threshold for human consumption.

Although the livestock density index was 0.47 in

2020, below the EU average of 0.75, ammonia

emissions have been on a downward trend

between 2018 (76.2 thousand tonnes annually)

and 2022 (68.7 thousand tonnes annually). 51%

of monitoring sites in Czechia reported (based on

2017-2022 data) levels of pesticides in surface

waters that exceed that threshold, significantly

above the European average of 29% (

182

). Czechia

is transitioning to a sustainable food system by

implementing policies to reduce the environmental

impact of agriculture. In 2022, 4.7% of its

agricultural land had landscape features such as

woods and non-productive grasslands, below the

EU average of 5.6%. Organic farming, which

reduces the use of synthetic fertilisers and

pesticides, has steadily increased in Czechia since

2005, making up 16% of agricultural land in 2022.

Under its common agricultural policy (CAP)

strategic plan, Czechia aims to reach 21.3%

of UAA under organic farming by 2030.

This is

achievable if the current growth trend in organic

farming surface continues over the coming years.

According to the latest aid application data under

2024 CAP strategic plan, the areas under organic

farming represents 590 thousand hectares, which

is 25 000 hectares more than in 2023 and

reaching 16.7% of UAA. Under the result indicator

R.12

–

Adaptation to climate change, Czechia plans

for 42% of UAA (1.5 million hectares of

agricultural land) to be subject to environmental

measures to improve agricultural adaptation to

climate change such as whole-farm eco-schemes,

grassing of arable land or new title agroforestry.

Other measures such as catch crops or integrated

(

182

) EEA, 2024, Pesticides in rivers, lakes and groundwater in

Europe,

Link.

production contribute significantly to result

indicator R.21

–

Protection of water quality, where

25.4% of UAA (895 thousand hectares) is covered.

kom (2025) 0203 - Ingen titel

Table A9.1:

Key indicators tracking progress on climate adaptation, resilience and environment

Climate adaptation and preparedness:

Drought impact on ecosystems

[area impacted by drought as % of total]

Forest-fire burnt area

(1)

[ha, annual average 2006-2023]

Economic losses from extreme events

[EUR million at constant 2022 prices]

Insurance protection gap

(2)

[composite score between 0 and 4]

Heat-related mortality

(3)

[number of deaths per 100 000 inhabitants in 2013-

2022]

Sub-national climate adaptation action

[% of population covered by the EU Covenant of Mayors

for Climate & Energy]

Water resilience:

Water Exploitation Index Plus, WEI+

(4)

[total water consumption as % of renewable freshwater

resources]

Water consumption

[million m

]

Ecological/quantitative status of water bodies

[% of water bodies failing to achieve good status]

Surface water bodies

Groundwater bodies

Biodiversity and ecosystems:

Conservation status of habitats

(6)

[% of habitats having a good conservation status]

Common farmland bird index

2000=100

Protected areas

[% of protected land areas]

Sustainable agriculture and land use:

Bioeconomy's added value

(7)

[EUR million]

Landscape features

[% of agricultural land covered with landscape features]

Food waste

[kg per capita]

Area under organic farming

[% of total UAA]

Nitrogen balance

[kg of nitrogen per ha of UAA]

Nitrates in groundwater

(8)

[mgNO

/l]

Net greenhouse gas removals from LULUCF

[Kt CO

-eq]

14.8

94.7

18.0

(9)

(5)

Czechia

2018

26.46

159

2019

10.19

2020

1.74

184

2021

0.03

689

2022

5.86

1.25

2023

0.27

1.50

EU-27

2018

6.77

2021

2.76

24 142

62 981

Czechia

2018

4.3

2019

3.4

2020

2.4

2021

2.3

2022

3.2

2023

EU-27

2018

4.5

2021

4.5

388

376

348

351

356

Czechia

94%

EU-27

59%

93%

2018

19.4

70.6

2019

68.5

2020

67.7

2021

63.5

2022

2023

2018

14.7

72.2

2021

74.4

Czechia

2018

10 188

2019

10 690

2020

10 707

2021

11 458

2022

2023

EU-27

2018

634 378

2021

716 124

15.2

75.6

17.7

6 493

15.3

56.9

18.7

9 700

108

15.6

62.9

18.5

6 588

101

16.0

3 378

7.99

256 077 -

240 984

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System.

(2) Scale: 0 (no protection gap)

–

4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes.

(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented

warming demands unprecedented action, The Lancet Public Health.

(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given

territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than

40% indicate situations of severe water scarcity.

(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on

the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin

Management Plans and Second Flood Risk Management Plans).

(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28.

(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards.

(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources

(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO

/L to avoid threats to human health.

(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024

greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839

–

Annex IIa.

Source:

Eurostat, EEA.

kom (2025) 0203 - Ingen titel

ANNEX 11: SOCIAL POLICIES

Czechia continues to have one of the highest

employment rates in the EU but faces

persistent challenges.

Labour shortages remain

significant, with job vacancy rates among the

highest in the EU. Despite strong overall

employment figures, women encounter barriers to

employment, limiting workforce participation and

inclusivity. Disadvantaged groups, including

Ukrainian refugees, people of Roma background

and persons with disabilities, also struggle to

access jobs. Job transition rates remain low and

the tax system disproportionately burdens low-

income and part-time workers, exacerbating

economic inequality. Additional efforts to ensure

reskilling and upskilling could help workers access

better-paid jobs, meet the demand for new skills,

and boost Czechia’s competitiveness.

Czechia also

saw one of the steepest declines in real wages,

which remain below 2019 levels despite signs of

recovery.

Czechia continues to have one of the highest

employment rates in the EU.

In 2024, the

employment rate for people aged 20-64 reached

82.3.%, significantly above the EU average of

75.8%, keeping the country on track to meeting its

target of 82.2% in 2030. Czechia’s labour market

is also characterised by a significantly low

unemployment rate, which stood at 2.6% in -2024,

one of the lowest in the EU, and is projected to

increase only slightly to 2.7% by 2026 (

183

Graph A10.1:

Employment rate by sex

100

Despite strong overall employment figures,

women continue to face barriers in the

labour market.

At 12.6 percentage points (pps) in

2024, the gender employment gap remains one of

the widest among Member States (EU: 10 pps).

Furthermore, the gender pay gap was 18 pps in

2023 (EU: 12 pps). Only 7.3% of children under the

age of 3 were enrolled in formal childcare in 2024,

an increase of nearly 3pps from 2023 but still far

below the EU average of 39.2%. This low

enrolment rate significantly contributes to the

gender employment gap, as it limits women’s

participation in the labour market. The European

Structural and Investment Funds and the Recovery

and Resilience Facility are helping create

affordable and accessible childcare, but challenges

persist in ensuring sufficient capacity and quality

in all regions. Further efforts are needed to

strengthen data collection, scale up national

funding for quality assurance, and improve

cooperation and coordination across early

childhood education and care services for children

(

184

Reducing

disincentives

women’s

employment is key to addressing labour

shortages and promoting a more inclusive

labour market.

In 2023, Czechia introduced a 5%

tax reduction in social security contributions for

part-time employment of target vulnerable groups,

including parents and informal carers. In 2024, a

tax reform restricting the use of the dependent

spouse tax credit to households where one spouse

is caring for a child under the age of three was

introduced to reduce financial disincentives for

second earners. In 2024, the percentage of part-

time contracts increased again by 0.8 pp to 7.6%

(EU average 17.2%) and the gender employment

gap declined by 1.3 percentage point (pp.) in 2024.

Nevertheless, more can also be done in the areas

of taxation, parental leave (which extends to up to

three years), and flexible work arrangements to

overcome existing disincentives to women’s

employment. An estimated 200 000-300 000

people, primarily women, provide unpaid informal

care to people in need, and half of them are

unable to take up full-time employment because

of this. Addressing these systemic challenges is

crucial for reducing labour shortages and ensuring

that the labour market is more inclusive.

(

184

) Consolidated Recommendation Report For the

‘Developing

Comprehensive Framework for the Monitoring and Evaluation

of Early Childhood Education and Care in the Czech Republic’.

2015

2016

2017

2018

Total

2019

2020

2021

Female

2022

2023

2024

Male

Source:

Eurostat

(

183

)

Economic forecast for Czechia - European Commission

kom (2025) 0203 - Ingen titel

Disadvantaged groups, including Ukrainian

refugees, people of Roma background and

persons with disabilities, continue to face

challenges in accessing employment.

In 2024,

80% of economically active Ukrainian refugees

were in employment but 50% reported that their

work did not correspond to their qualification.

Furthermore, 47% struggle with financial stress,

37% with unstable employment and 33% with a

lack of legal or social protection.(

185

) Roma citizens

remain particularly vulnerable, and only an

estimated 45% of working-age Roma are

employed, whereas the percentage of people in

employment in the general population is 82.3% in

2024. The same is true for other age groups and

whereas the share of the general population aged

15 to 29 that is not in employment, education or

training in 2024 is 8.6% (EU: 11%), the rate

among young Roma people (16-24) was 47% in

2021(

186

). The disability employment gap was

21.7. pps in 2024 (EU: 24 pps). In December 2024,

Czechia set an employment goal of 45% for

persons with disabilities. To achieve this target, in

2024 Czechia approved measures to support

social enterprises, cooperatives and non-profits

employing persons with disabilities by providing

access to funding and improving regulatory

conditions.

Czechia faces high job vacancy rates as

companies struggle to find workers with the

right skills.

Over 80% of companies reported

difficulties finding workers with the right skills (vs

EU: 77%) and reported labour shortages were

particularly high in the construction sector(

187

). In

2023, the job vacancy rate exceeded 3.5% despite

a slight decline from previous years. The country

had one of the highest vacancy rates in the EU in

manufacturing (3.4% vs EU: 1.8%), construction,

(6.5% vs 3.1%) and transportation and storage

(4.5% vs 2.2%). By Q4-2024, the job vacancy rate

stood at 3.2% (EU: 2.3%), with industry (3.0% vs

EU: 1.6%), trade and transport (4.1% vs 2.1%) and

services (4.7% vs 2.5%) all exceeding EU averages.

By contrast, the vacancy rates in information and

communication (1.6% vs EU: 2.9%) and finance

(

185

)

The Voice of Ukrainians: Integration of Ukrainian Refugees:

Labour Market, Housing, Czech Language Proficiency, and

Children's Education

(

186

) FRA report 2021 new data available soon

(

187

) Eurofound (2024),

Company practices to tackle labour

shortages,

Publications Office of the European Union,

Luxembourg.

and insurance (0.8% vs 1.7%) were below the EU

average (

188

). In 2024, labour shortages were

reported for several occupations requiring specific

skills related to the green transition, including

refuse sorters, forestry and related workers, and

mixed crop and livestock farm labourers (see

Annex 12).

Czechia’s potential to help

the EU reach

its Digital Decade target for ICT specialists

remains untapped with only limited progress

shown. ICT specialists accounted for only 4.5% of

total employment in 2024, below the EU average

of 5.0%, marking an increase from the previous

year (4.3%). Women remain underrepresented,

comprising only 13.0% of ICT specialists (

189

Legal migration currently plays a relatively small

factor in addressing labour shortages, with only

about 300 000 foreign-born workers in 2023,

which represents about 6% (vs 14%) of all

employed people. The European Social Fund Plus

(ESF+) is investing EUR 293 million to improve

access to employment for jobseekers with a

particular focus on disadvantaged groups in the

labour market and the recovery and resilience plan

is investing EUR 275 million for upskilling and

reskilling.

Graph A10.2:

Quarterly job vacancy rates,

seasonally adjusted

2019-Q1

2020-Q1

2021-Q1

2022-Q1

EU-27

Czechia

2023-Q1

2024-Q1

Source:

Eurostat

The labour market exhibits limited job

transition rates.

The quarterly probability of job

changes or transitions to unemployment is

approximately 1.5% (EU: 3.1%). Some of the

reasons for this are low levels of unemployment

support, which encourages quick job choices, the

fact that skills development offers limited job or

wage benefits and limited regional mobility. This

(

188

)

Home Page | Euro indicators dashboard.

kom (2025) 0203 - Ingen titel

reduces efficiency when allocating human

resources, allowing low-productivity sectors to

persist due to low wages, while emerging, high-

productivity industries struggle to attract skilled

labour. The 2025 amendment to the Czech Higher

Education Act simplifies academic recognition, but

regulated professions still require lengthy

adaptation periods. This can in some instances

restrict competition and raise barriers to entry into

certain professions, without necessarily a

corresponding increase in expertise or quality (

190

Real wages rebounded in 2024 after

significant losses in 2022 and 2023.

Nominal

wages grew by 5.9% in 2024 and are projected to

grow by 6.5% in 2025. Real wages rose by 3.4% in

2024 and are projected to increase by 4.0% in

2025 (

191

), driven by continued growth in nominal

wages, combined with rapid disinflation, from

12.0% in 2023 to 2.7% in 2024. Despite this

recovery, real wages remain below 2019 levels by

more than 5%, one of the steepest losses in the

EU compared to pre-pandemic levels. The

statutory minimum wage increased by more than

28% between Q1-2022 and Q1-2025 in nominal

terms and only by about 2% in real terms over the

same period due to high inflation. The

transposition of Directive (EU) 2022/2041 on

adequate minimum wages contributed to the

increase in the minimum wage. At the same time,

the transposition removed guaranteed wages for

workers in the private sector, raising concern

among trade unions. Concerns have grown about

deteriorating cost competitiveness for Czechia.

Further efforts to increase productivity growth

represent a sustainable way towards further real

wage growth which could help to address

remaining social challenges.

Czechia’s

labour

taxation

system

disproportionately

burdens

low-income

workers

and

part-time

employees,

contributing to economic inequality and

limiting workforce participation.

The tax

wedge on labour is relatively high for workers on

low wages. Indeed, the Czech personal income tax

system tends to be flat, with tax wedges being

only marginally lower for those earning less.

Relatively high tax burdens on low-income earners

increase distortions in both labour demand and

(

190

)

navrhy-NERV.pdf.

(

191

)Based on the European Commission Autumn 2024 economic

forecast.

supply and can complicate the hiring of low-skilled

workers. A recent study suggests that reducing

labour taxation including social security

contributions for low-income workers could lift up

to 29 000 people above the poverty line and

incentivise up to 50 000 employees to transition

from informal or precarious work arrangements to

standard employment, addressing inefficiencies in

the labour market (

192

The share of people working in emission

intensive industries remains significant and

employment

in environmental

sectors

limited.

Between 2011 and 2023, the emissions

intensity of the workforce declined from 23.1

tonnes of greenhouse gases to 16.2 tonnes of

greenhouse gases per worker, but it remains one

of the highest among Member States (EU: 12.3

tonnes per worker). Furthermore, in 2024, energy

intensive industries employed 7.1% of the

workforce, one of the highest rates in the EU,

whereas the environmental goods and services

sector employed in 2022 only 2.9% of people

employed (EU: 3.3%).

Social conditions in Czechia exhibit a

relatively low overall risk of poverty and

social

exclusion

despite

increasing

challenges, particularly among children and

Roma communities.

Energy poverty remains

comparatively low, but the country grapples with

significant issues in ensuring housing affordability.

Moreover, the Czech long-term care system

remains heavily focused on residential care. The

high level of indebtedness of many households

remains a key social challenge and, for many

people, continues to be an obstacle to accessing

the job market. Addressing these challenges will

contribute to achieving inclusive growth and

enhancing the country's competitiveness.

The risk of social exclusion remains low in

Czechia, despite a slight increase.

In 2024, the

rate of people at risk of poverty or social exclusion

(AROPE) remained well below the EU average

(11.3% vs 21%). Poverty and social exclusion tend

to be concentrated in specific regions, with

Ústeck�½, Moravskoslezsk�½ and Karlovarsk�½ kraj

being the most affected. Czechia’s poverty

reduction target is to reduce the number of people

at risk of poverty or social exclusion by 120 000

(

192

)

Navrhujeme chytřejší danění zaměstnanců. Pomůže

pracovnímu trhu, rozvoji chudších regionů i omezení chudoby.

kom (2025) 0203 - Ingen titel

by 2030, with a specific goal of reducing the

number of children in this category by 50 000.

While the overall population at risk of poverty or

social exclusion decreased by 17 000 between

2019 and 2023, the number of children at risk

rose sharply by 55 000, highlighting the growing

challenge to meet the national target. In order to

mitigate the impact of poverty on children, Czechia

is implementing the European Child Guarantee

(ECG) as part of its 2022 action plan. The

European Social Fund Plus (ESF+) is investing

EUR 434 million over the 2021-2027 period to

foster active inclusion and equal opportunities.

Graph A11.1:

Persons at risk of poverty or social

exclusion by age

2016

2017

2018

2019

2020

2021

2022

2023

2024

Eldery (65+)

Children (<18)

Working age (18-64)

Source:

Eurostat

House prices have increased steadily, more

than doubling over the last decade.

Having

grown by 19.7% and 16.9% in 2021 and 2022,

house prices decreased by 1.7% in 2023, adjusting

to the higher interest rate environment. The

growth in house prices resumed in 2024, with

recent data signalling an increase of 5.9% in Q3-

2024, year-on-year. As of end-2024, house prices

were estimated to be overvalued by around 20%.

The increase in mortgage rates had a moderating

effect on mortgage credit, and house transactions

stabilised at a low level in 2023. Building permits

decreased by 7.1% and 16.3% in 2022 and 2023,

which is expected to limit new housing supply

going forward.

Overall

housing

affordability

has

deteriorated over the past decade.

The house

price-to-income ratio has increased steadily over

the past 10 years with a mild decrease in 2023. At

the end of 2023, the standardised house price-to-

income ratio stood 15% above its long-term

average, reflecting a deterioration in housing

affordability with possible structural implications

for the domestic economy. Borrowing capacity of

households that considers both household incomes

and interest rates grew much less than house

prices. Considering the cost of mortgage funding,

the borrowing capacity of households worsened

significantly over the past decade as well, since an

average household needs a significantly higher

share of its annual income for mortgage

payments. While the rental market is rather small,

the ratio of new rents to incomes increased over

the last decade especially in the city centres. The

rental affordability deteriorated as well and the

ratio of new rents to incomes is very high,

especially in the cities, which has an adverse

impact on labour mobility. The ratio of dwellings

per capita (housing stock) has increased by 4%

since 2015, as the increase in the number of

dwellings outpaced population growth (+8% vs.

+4% since 2015). However, this ratio remains

relatively low in EU comparison. The ratio of house

completions per capita has increased over the past

years and stands close to the EU average. The

public rental housing sector is one of the lowest in

the EU, while the construction of affordable rental

housing has been very low in the last decades. The

problem is exacerbated by structural factors.

Residential building permits have decreased over

the past years, which could indicate limited new

housing supply looking ahead. Stringent urban

planning and inefficient permitting procedures are

generally believed to be the main reason for

insufficient new housing supply, which is also

reflected in a very low and persistently declining

housing transactions. Other issues include planning

permission processes, insufficient municipal

incentives to build affordable housing, a poorly

targeted welfare system and suboptimal tax

incentives (low property taxes, mortgage

deductibles, taxation of rent). This has led to

limited housing options, rising energy costs and an

increasing burden on lower-income households.

The housing cost overburden rate in Czechia

increased by more than 2 percentage points to

9.2% between 2022 and 2024, bringing it above

the EU average of 8.2%. In 2024, the percentage

of the population living in an overcrowded

household in Czechia was 16.6%, very close to the

EU average of 16.9%. There are over 100,000(

193

)

homeless people in Czechia. and over 200 000

long-term unoccupied dwellings, 7.5% of all

(

193

)

OECD Country Note: Data on homelessness in Czechia

kom (2025) 0203 - Ingen titel

apartments are unoccupied(

194

). While new

legislation on affordable housing and construction

projects is being negotiated, it is unclear how

much impact this will have for children and

marginalised groups, such as Roma. In January

2025, the European Committee of Social Rights

(ECSR) found that Czechia violated Article 16 of

the 1961 European Social Charter by failing to

ensure adequate safeguards for vulnerable

groups, particularly Roma families, as regards

access to housing and eviction protections. The

ECSR highlighted issues such as insufficient social

housing, ineffective legal remedies, and obstacles

preventing low-income and disadvantaged groups

from accessing housing benefits. Additionally, it

ruled that the State’s failure to provide adequate

protections against discriminatory housing

practices disproportionately affects Roma families,

further violating Article 16 in conjunction with the

Charter’s non-discrimination

clause.

Despite some progress in terms of total

numbers, over indebtedness and debt

enforcement continues to push many into

poverty and undeclared work in Czechia.

The

number of people in debt enforcement

proceedings has decreased from 646 000 to

615 000 between 2023 and 2024, reflecting

some progress in addressing indebtedness.

Additionally, 95 965 individuals are currently

undergoing debt relief. However, the absolute

numbers remain high and factors such as high

repayments, property seizure risks, bureaucratic

hurdles, and the challenge of surviving on the

minimum living allowance after deductions deters

many debtors from entering debt relief.

Approximately 400 000 people in Czechia are

trapped in multiple debt enforcement proceedings

with no viable path to resolution. Key measures to

improve the situation include making debt relief

more accessible, more tailored and less

burdensome coupled with increased efforts to

legalise incomes, and improved State regulation

against profiteering from debt enforcement.

The Roma population faces severe and

worsening risks of social exclusion.

The AROPE

rate for Roma increased from 58% in 2016 to

77% in 2021. For Roma children, the situation is

even worse, with 85% at risk in 2021, up from

(

194

)

Ministry for Regional Development: Structure of Vacant

Dwellings in the Czech Republic and Tools for Their Activation

Used in OECD Countries

65% in 2016 (

195

). These figures underline the

importance of addressing systemic inequality and

social exclusion within Roma communities. The

Roma population in Czechia is estimated at

250 000 (

196

) but the lack of specific data

collection for this population makes targeted

measures difficult. Introducing ethnic data

collection would allow for targeted policy

measures to support this most vulnerable group

and would make it easier to assess and monitor

the situation, including in the context of ongoing

policy reforms supporting inclusive education. In

April 2024, the Czech government adopted a non-

binding definition of ‘antigypsyism,’ or anti-Roma

attitudes recognising both individual and

institutional discrimination against Roma people

but without legal enforcement measures.

Compliance with the Race Equality Directive is

essential to ensure equal treatment and prevent

discrimination in all aspects of society, including

education. Effective implementation of the

directive helps address structural inequalities and

promotes inclusive policies that safeguard the

rights of all individuals.

The social integration of Ukrainians in

Czechia remains uneven.

While 80% of

economically active individuals are employed,

many work below their qualifications and only

20% of households have incomes above the Czech

median. While most children attend Czech schools

and over two-thirds demonstrate good Czech

language skills, adult social inclusion remains a

challenge. As more refugees plan to stay long-

term, improving language

teaching,

job

197

opportunities and social inclusion remains key ( ).

The Czech long-term care system is

characterised by a high emphasis on

residential care.

Public long-term care

expenditure on residential care in 2022 was 60.2%

(EU average: 46.2%) but the percentage of home

care spending within long-term care was only

8.3%

(EU

average:

28.8%).

The

deinstitutionalisation process in Czechia faces

challenges

due

slow

legislative

implementation, limited repurposing of existing

(

195

)

Roma in 10 European countries. Main results

–

Roma Survey

2021.

(

196

)

Government of the Czech Republic: Roma national minority

(

197

)

The Voice of Ukrainians: Integration of Ukrainian Refugees:

Labour Market, Housing, Czech Language Proficiency, and

Children's Education

kom (2025) 0203 - Ingen titel

facilities and insufficient data collection. For

community-based services, there is a deficit of

between 15 000 to 30 000 care places (out of the

current 75 000). High reliance on residential

services, a declining capacity of community-based

services (from 120 000 in 2015 to 104 000 in

2023)(

198

) which disincentivises investments by

private providers, and low salaries are further

challenges in the Czech care sector (

199

)(

200

). The

recovery and resilience plan (RRP) and the ESF+

are investing EUR 365 and 197 million,

respectively, to improve equal and timely access to

quality, sustainable and affordable services over

the 2021-2027 period but private investment as

well as sufficient national resources are essential

for their long-term sustainability. A new long-term

care law, coming into force in March 2025 as part

of the RRP, aims to integrate healthcare and social

care, set quality standards, promote home-based

and community-based care, and ensure adequate

funding.

A reform of the social benefits system,

consolidating four means-tested benefits

into one single payment, will come into force

in 2025.

In Czechia, 93.5% of people aged 18-64

that are at risk of poverty and living in a (quasi-

)jobless household received benefits in 2023 (EU:

83.5%). Nevertheless, the current benefits system

is complex and has inefficiencies in certain areas,

with housing allowances that are not aligned to

local rents and small income increases leading to

sharp benefit cuts. The reform aims to simplify

processes and boost self-sufficiency through work

incentives but it is important to monitor the

impacts of the reform on the most vulnerable

people.

Energy poverty remains low in Czechia.

The

percentage of the population unable to keep their

homes adequately warm is significantly lower than

the EU average (4.9% in 2024 vs 9.2%), although

this figure is higher than in 2022 by 2 pps.

Structural issues, such as leaks, damp or rot,

affect a limited proportion of the population (8.5%

vs 15.5% for the EU in 2023). To address energy

poverty, Czechia has launched national energy

(

198

) Statistical yearbook of the Ministry of Social Affairs..

(

199

)

Problémy sociálně-zdravotního pomezí v terénních službách

–

kde brát inspiraci? (Díl 1).Initiative for Effective Healthcare:

Problems at the Social-Health Interface in Field Services

–

Where to Find Inspiration?

(

200

)

a4-financovani-terenni-sluzby-2023-final.pdf.

efficiency programmes. However, the country’s

current policies primarily focus on social and

consumer protection measures, with fewer

targeted initiatives addressing the structural

causes of energy poverty.

kom (2025) 0203 - Ingen titel

ANNEX 12: EDUCATION AND SKILLS

Czechia’s potential to transform into a

knowledge economy is limited by growing

inequalities in basic skills, low tertiary

educational attainment, including in science,

technology, engineering and mathematics

(STEM) fields, and low levels of adult

learning.

The education and training system

needs to better equip young people and adults

with relevant skills to tackle rapidly changing

labour market needs linked to the green and

digital transitions and the increasing demand for

highly skilled professionals in technical fields and

natural sciences.

Persistently low participation in early

childhood education and care (ECEC)

negatively impacts skills development and

perpetuates social inequalities early in life.

In 2023, 85.3% of children aged three to the start

of compulsory primary education participated in

ECEC, which is one of the lowest rates in the EU

(average: 94.6%) and well below the EU target of

96%. Despite their legal entitlement to a place in

ECEC, attendance is particularly low among three-

year-olds (74.0%, EU: 89.0% in 2022), partly due

to insufficient kindergarten capacity as well as tax

and benefit disincentives. Only a small percentage

of children younger than three participate in

formal childcare (7.3%, EU: 39.2% in 2024). Low-

income families face financial obstacles in

accessing quality ECEC. Many kindergartens do not

have the capacity to admit younger children, and

the alternative children’s groups have higher fees.

Czechia has committed to increasing ECEC

capacity, and new facilities are financed via the

Recovery and Resilience Facility (RRF). However,

the ECEC system remains fragmented, hindering

effective capacity forecasting and equal

foundational learning opportunities for all children.

With support from the Technical Support

Instrument (TSI), Czechia aims to improve data

collection to identify supply and demand and

create a common quality and monitoring

framework for all types of ECEC.

Deteriorating performance in basic skills

hampers the

future workforce’s

innovation

potential and employability.

While Czech

students perform above the EU average in

mathematics, reading and science, these

historically good results are on the decline.

Although reading performance has remained

stable over the years, trends in mathematics and

science are more worrying. According to the results

of the 2022 OECD Programme for International

Student Assessment (PISA), one out of four 15-

year-old students (25.5%) does not reach the

basic proficiency level in mathematics, and this

proportion has grown over the past decades. In

reading and science, the shares of underachievers

are 21.3% and 18.8% respectively, below the EU

average, but over the EU level target of 15%. The

2023 TIMSS (Trends in International Mathematics

and Science Study) results among the younger

generations (fourth and eighth graders) also show

an increase of the share of pupils performing at

the lowest level. In September 2025, a pilot

implementation of the revised curricula will start

in Czech schools. The reform is expected to

strengthen, among other things, the development

of STEM concepts and critical thinking in

education, and it will introduce foreign language

from the first grade. To implement curricular

innovation effectively, teachers and school leaders

could benefit from comprehensive support to

prevent struggling students from falling further

behind.

Czechia continues efforts to make the

teaching profession more attractive, but

there are still shortages in critical subjects.

As part of the comprehensive reform of initial

teacher training, the practical component of

teacher education has been strengthened. In 2024,

the Ministry of Education published a new teacher

competence framework that has become part of

the accreditation criteria for teacher education

programmes. As a result of a sectoral agreement,

the government aims to increase teacher base

salaries by 7% in 2025. However, salary

progression is slow, especially for less experienced

teachers. 13.8% of teachers in primary education

intend to leave the profession (

201

). Among

younger teachers, the main reasons for this are

related to salaries and equipment shortages (

202

Teacher shortages in STEM subjects

–

mathematics, physics, chemistry and computer

science

–

remain critical in multiple regions. In

2025, Czechia plans to start financing the

employment of school psychologists, special

education professionals and social pedagogues

from the state budget, which is a major move

towards the institutionalisation of these positions

(

201

)

Straková, J. and Simonová, J. (2024), ‘Why do teachers leave

schools? Evidence from lower secondary schools in the Czech

Republic’, International Journal of Educational Management, Vol. 38

No 5, pp. 1 444-1 458.

(

202

) Ibid.

kom (2025) 0203 - Ingen titel

to improve the inclusiveness of the education

system.

Graph A12.1:

Isolation of high-achieving students

(top 25%) in mathematics from all students (PISA

2022)

0.45

0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00

IE*

DK*

LV*

NL*

Source:

OECD PISA 2022

The segregation of Roma pupils at all levels

of education persists despite legislative and

administrative changes.

Czechia has formally

abolished ‘practical’ schools, which favoured an

overrepresentation of Roma pupils. However, it

continues to allow for ethnic segregation through

the disproportionate and often unjustified

enrolment of Roma students in classes that teach

a reduced version of the curriculum, which is

intended for students with mental disabilities (

204

In 2024, the Commission sent an additional letter

of formal notice to Czechia for failing to comply

with the Race Equality Directive. With support from

the RRF, Czechia is creating a support programme

for vulnerable schools and is working on a funding

index that accounts for disadvantaged pupils.

Collecting disaggregated data on Roma pupils will

be crucial to evaluating the impact of measures on

desegregation.

A comprehensive reform of secondary

education aims to better equip students with

in-demand skills and to reduce early

tracking.

Czechia tracks students early compared

to other countries, and permeability between

educational pathways is low. In addition, interest

among students in general upper secondary tracks

leading to higher education has grown over the

past decades, but the number of schools offering

such programmes has not kept track(

205

). In 2022,

32% of students in upper secondary education

were enrolled in general education, below the EU

average of 51%. Announced in 2024, a wide-

sweeping reform of secondary education, will

introduce a new, experimental educational

pathway (lyceum) combining general secondary

education with later specialisation in professional

subjects. One of the integrated study areas of the

new pathway is applied STEM education.

Czechia has one of the highest vocational

enrolment rates in the EU, but work-based

experience is among the lowest.

A high

proportion of students in medium-level education

are enrolled in vocational education and training

(VET) programmes (70.7% vs 52.4% in the EU in

2023). In 2024, only 13.4% of recent vocational

graduates in Czechia had work-based learning

experience, far below the EU average of 65.3%.

Nevertheless, the employment rate for recent VET

(

204

) PAQ and STEM, 2023, Research report.

(

205

) OECD (2025),

OECD Economic Surveys: Czechia 2025,

OECD

Publishing, Paris

Inequalities in education are widening,

contributing to skills gaps in the workforce.

While the proportion of young people leaving

education without obtaining an upper secondary

certificate is consistently low across the country

(5.4%) and below the EU target of 9%, it remains

high (11.6%) in regions affected by poverty and

the housing crisis (Karlovy Vary and Ústí nad

Labem). Close to half of disadvantaged students

(48.5%) underachieved in mathematics in PISA

2022, which is an increase compared to 2018

(38.5%). The difference in mathematics

performance linked to differences in social and

economic status is the second highest in the EU

(51 points vs the EU average of 40.6 points),

pointing to deeply ingrained inequalities that the

school system fails to offset. There is a great

difference between school types and pathways.

Almost 60% of students enrolled in vocational

fields not leading to a high school diploma do not

reach a basic level of mathematical literacy (

203

Moreover, only half of those students demonstrate

a basic level of creative thinking (as opposed to

almost all students in general secondary

education). At the same time, students in elite

multi-year grammar schools largely outperform

their peers in basic schools: over half of eighth

graders achieved high levels of mathematical

knowledge according to the 2023 TIMSS. This

highlights significant differences in skills and

innovative potential across secondary school

pathways, with negative implications for the job

prospects of vocational and technical graduates.

(

203

) Czech School Inspectorate, 2023, PISA 2022 National report.

kom (2025) 0203 - Ingen titel

graduates was high at 88.3% (EU 80.0%) for the

same year. Recent VET reforms aim to improve the

quality and labour market relevance of this field.

The strategic measures for improving VET focus on

making it a more attractive career choice by

strengthening STEM education, polytechnic training

and career counselling, starting from primary

education. Whereas many enter VET after primary

school, with technical fields, such as technology,

manufacturing and construction, being the most

popular choices (39%), fields like ICT only attract

6.4% of students (

206

). A key objective is to ensure

that at least 60% of VET graduates gain work-

based learning experience by 2025, boosting their

employability and career readiness. Efforts are

being

made

modernise

educational

programmes by incorporating labour market data

through initiatives such as ‘Kompetence 4.0,’ which

focuses on aligning training with emerging

industry requirements, including digital and green

skills. Additionally, legislative support and financial

incentives, such as tax deductions for companies

offering practical training, are being introduced to

encourage stronger collaboration between

employers and educational institutions, ensuring

students are better equipped for evolving job

market demands.

Persistently low tertiary attainment and

weak student support limit the supply of

highly skilled professionals.

By 2026, a 16%

increase is predicted in the overall demand for

tertiary-educated workers and a 26% increase in

technical fields, such as civil engineering, ICT and

natural sciences (

207

). In 2024, only 33.5% of

Czechs aged 25-34 had a tertiary education

degree (EU: 44.2%), with particularly low rates

among men (26.1% vs 41.3% for women; the

average difference in the EU is 11.2 pps). In

response to the growing demand for high-skilled

workers in the healthcare and education sectors,

the government provides targeted funding for

tertiary institutions in these fields, but a long-term

funding reform to support a more general

expansion of higher education, aligned with

industry needs, is yet to be developed.

Graph A12.2:

Key skills indicators

Individuals with Basic or Above Basic Digital Skills

Adult Participation in Training (12 months), excluding guided on-the-

job training

Young People Not in Employment, Education, or Training (NEET)

Early School Leavers

Czechia (%)

EU Average (%)

Source:

Eurostat

Financial barriers contribute to high drop-out

rates.

About 70% of students work during term

time, one of the highest rates in the EU, with two

thirds working to cover living cost (

208

). Affordable

housing is a major challenge for university

students. Just 2% of their income comes from

government grants, compared to a 12% average

according to the Eurostudent survey. Students

from disadvantaged backgrounds therefore often

struggle to access and complete higher education.

23.5% of first-year students drop out annually at

the programme level (2024), and 13.4% leave

higher education permanently (

209

). Study success

rates are higher among general education

graduates than among VET graduates (

210

). A

comprehensive reform of needs-based grants

would be beneficial to diversify the student body

and help students succeed.

Policy efforts to boost the number of STEM

graduates are limited despite growing skill

shortages in these fields.

The proportion of

young STEM graduates (aged 20-29) per 1 000 of

the population is below the EU average of 23 at

15.8. The share of students enrolled in STEM fields

at tertiary level is slightly below the EU average

(25% vs 27.1%) and has declined since 2017. This

is concerning, especially given the generally low

tertiary education attainment rate. In 2023, 42.0%

of pupils enrolled in medium-level vocational

education and training (VET) in Czechia were in

STEM fields, compared to 36.3% EU-wide. Under

its recovery and resilience plan, Czechia will launch

new accredited study programmes in high-demand

(

208

) Hauschildt, Kristina (Ed.), Christoph

Gwosć, Hendrik Schirmer,

Sylvia Mandl, Cordelia Menz, 2024.

Social and Economic

Conditions of Student Life in Europe,

EUROSTUDENT 8 Synopsis

of Indicators 2021-2024.

(

206

) Ministry of Education, Youth and Sport, 2024,

Strategy for

vocational education.

(

207

) OECD (2025),

OECD Economic Surveys: Czechia 2025,

OECD

Publishing, Paris

(

209

) Data from Ministry of Education, 2025

(

210

) OECD (2025),

OECD Economic Surveys: Czechia 2025,

OECD

Publishing, Paris

kom (2025) 0203 - Ingen titel

and fast-growing fields (such as applied

informatics, information and network security,

quantum informatics and AI) as well as new

courses and academic and lifelong learning

programmes relevant to the green transition.

Skills shortages pose challenges to Czechia’s

competitiveness.

More than 80% of companies

and 90% of small and medium-sized enterprises

report difficulties finding workers with the right

skills (

211

). In 2024, labour shortages were reported

in several occupations requiring specific skills

needed for the green transition, including electrical

engineers, electricians, civil engineers, and forestry

and agricultural workers (

212

). Moreover, the ability

of workers to contribute to the green transition

varies significantly. While 54% of respondents feel

they have the skills to contribute to the green

transition, 37% do not, highlighting substantial

potential for upskilling to equip more people for a

sustainable and digital economy (

213

). Czechia has

untapped potential to boost the EU’s Digital

Decade ICT specialist target but lags with limited

progress, as ICT specialists represent 4.5% of total

employment in 2024 -

below the EU’s 5.0%

average. Women make up just 13.0% of ICT

specialists in Czechia - one of the lowest shares in

the EU. In 2021, 77.0% of businesses struggled to

fill ICT vacancies (vs EU: 62.8%) (

214

). Reducing

these shortages through targeted skills

development, vocational training and workforce

mobility measures is essential. Moreover, aligning

policies across ministries to equip the workforce

with skills for fair twin transitions poses a

challenge.

Czechia performs well in digital skills, but

some population groups still require further

training.

In 2023, 69.1% of the population had at

least a basic level of digital skills (EU 55.6%). The

share is particularly high among young people

(16-19) at 92.3%. Data from the International

Computer and Information Literacy Study (ICILS)

corroborates strong digital skills among the

younger generations, as Czech eighth graders

(

211

) Eurofound (2024), Company practices to tackle labour shortages,

Publications Office of the European Union, Luxembourg.

(

212

) European Labour Authority,

EURES Report on labour shortages and

surpluses 2024,

2025.

(

213

)

https://data.europa.eu/data/datasets/s2672_97_4_sp527

_eng?locale=en.

(

214

ranked the highest among participating EU

countries. However, 28% of students did not reach

the baseline proficiency level (EU: 43%). The gap in

digital skills between students with lower and

higher parental education is smaller than the EU

average, indicating that Czechia has been

successful in narrowing this gap through targeted

support for vulnerable pupils, including with RRF

support. The differences in digital skills among

adults are greater, with 42.1% of older adults (55-

74) and 58.6% of adults with lower levels of

education reporting at least a basic level of digital

skills, both falling behind the general population.

Adult participation in lifelong learning

remains low, limiting the development of

skills for the green and digital transitions.

2022, only 21.2% of adults aged 25-64

participated in formal or non-formal learning in

the previous 12 months, compared to the EU

average of 39.5%. This is 23.8 pps short of the

national 2030 target of 45%. According to the

analysis of the 2022 Adult Education Survey by

the Czech Statistical Office, formal education is

the least common type of adult learning, with only

an 8% participation rate (EU 12%) (

215

). Non-

formal learning is more common, with 40% of

adults aged 18-69 participating in at least one

activity, slightly under the EU average of 42%.

Most non-formal learning is work-related, driven

by employer or legal requirements (57%), followed

by efforts to improve job performance (51%) and

personal interest in acquiring new skills or

knowledge (18%). In Czechia, 16% of adults score

at the lowest levels in literacy, numeracy and

problem-solving: 25% struggle with basic reading,

21% face difficulties with multi-step arithmetic

problems and 29% struggle with complex

problem-solving. Only a small share excels in

these areas (

216

). The Ministry of Labour and Social

Affairs is piloting individual learning accounts

through the ‘Database of Re-training

and Further

Training Courses’. After the pilot, the

database will

be managed by the Labour Office, ensuring long-

term support for reskilling initiatives and signalling

Czechia's commitment to lifelong learning and

workforce development. More effective and

widespread campaigns seem necessary to

increase engagement with individual learning

accounts and adult learning more generally.

(

215

) Education and Training Monitor 2024.

(

216

)

Education GPS - Czechia - Adult skills (Survey of Adult Skills, PIAAC,

2023).

)

ICT specialists - statistics on hard-to-fill vacancies in

enterprises - Statistics Explained

kom (2025) 0203 - Ingen titel

ANNEX 13: SOCIAL SCOREBOARD

Table A13.1:Social

Scoreboard for Czechia

Adult participation in learning (during the last 12 months, excl. guided on

the job training, % of the population aged 25-64, 2022)

Early leavers from education and training

(% of the population aged 18-24, 2024)

Equal opportunities and

access to the labour market

Share of individuals who have basic or above basic overall digital skills

(% of the population aged 16-74, 2023)

Young people not in employment, education or training

(% of the population aged 15-29, 2024)

Gender employment gap

(percentage points, population aged 20-64, 2024)

Income quintile ratio

(S80/S20, 2024)

Employment rate

(% of the population aged 20-64, 2024)

Dynamic labour markets

and fair workingconditions

Unemployment rate

(% of the active population aged 15-74, 2024)

Long term unemployment

(% of the active population aged 15-74, 2024)

Gross disposable household income (GDHI) per capita growth

(index, 2008=100, 2023)

At risk of poverty or social exclusion (AROPE) rate

(% of the total population, 2024)

At risk of poverty or social exclusion (AROPE) rate for children

(% of the population aged 0-17, 2024)

Impact of social transfers (other than pensions) on poverty reduction

(% reduction of AROP, 2024)

Social protection and

inclusion

Disability employment gap

(percentage points, population aged 20-64, 2024)

Housing cost overburden

(% of the total population, 2024)

Children aged less than 3 years in formal childcare

(% of the under 3-years-old population, 2024)

Self-reported unmet need for medical care

(% of the population aged 16+, 2024)

Critical situation

To watch

Weak but improving Good but to monitor

On average

Better than average

Best performers

21.2

5.4

69.1

8.6

12.6

3.32

82.3

2.6

0.8

121.7

11.3

15.4

40.6

21.7

9.2

7.3

0.5

(1) Update of 5 May 2025. Members States are categorised based on the Social Scoreboard according to a methodology agreed

with the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2025 for details on the

methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0).

Source:

Eurostat

kom (2025) 0203 - Ingen titel

ANNEX 14: HEALTH AND HEALTH SYSTEMS

The performance of the Czech health system

leaves room for improvement, notably in

light of Czechia’s low life expectancy at birth

linked to high levels of treatable and

preventable mortality.

These issues are being

addressed by the ongoing reforms to strengthen

primary healthcare, make health services more

integrated, and digitalise the health system with

the support of the Recovery and Resilience Facility

and cohesion funds.

Graph A14.1:

Life expectancy at birth, years

81.3

80.4

80.1

80.6

81.4

non-communicable diseases prevention (including

cardiovascular, diabetes and mental health),

health workforce planning, clinical trials, medicine

shortages, anti-microbial resistance, the European

Health Data Space and European Reference

Networks for rare diseases. In February 2025, the

Ministry of Health introduced a new National

Cardiovascular Plan for 2025–2035 to strengthen

prevention (

219

). A new screening for abdominal

aortic aneurysms in men aged 65–67 (

220

) and the

“Be Fit 24” program for overweight children aged

6–11 (

221

) have been launched, fully covered by

the health insurance funds. The plan also includes

new guidelines supporting the effectiveness of the

general practitioners’ preventive examinations.

Graph A14.2:

Treatable mortality

per 100 000 population

124.2

120.3

125.9

79.3

78.3

77.2

79.0

79.9

122.9

2019

2020

Czechia

2021

2022

2023

113.2

91.3

89.2

91.7

93.3

89.7

Source:

Eurostat (demo_mlexpec)

Life expectancy at birth in Czechia remains

below the EU average but has rebounded

above its pre-COVID-19 level.

In 2023, life

expectancy at birth stood at 79.9 years, 1.5 years

below the EU average. There is a clear gender gap,

with women living 6 years longer than men.

However, women only live 1.2 years more than

men in good health. In 2022, the leading causes of

death were circulatory diseases (‘cardiovascular

diseases’), followed by cancer and respiratory

diseases. Compared to other EU countries, Czechia

has room to improve in preventable and treatable

mortality, which is also reflected in its relatively

high cancer mortality rate (258 per 100 000

population in 2022 vs an EU average of 235).

Lung cancer remains the most frequent cause of

death by cancer, followed by colorectal and

pancreatic cancer. Czechia also has among the

highest absenteeism rates in the EU (

217

Furthermore, 51% of Czechs are unsatisfied with

waiting times and 39% with pharmaceutical

shortages (

218

). Czechia participates in EU4Health-

funded joint actions aimed at cancer and other

(

217

)https://ec.europa.eu/eurostat/databrowser/view/lfsi_abt_q__c

ustom_15509084/default/table?lang=en

(

218

)

https://silapacientu.cz/wp-content/uploads/2024/11/NAPO-

KZP-VSE-Studie_2024.pdf

2018

2019

Czechia

2020

2021

2022

Age-standardised death rate

(mortality that could be

avoided through optimal quality healthcare)

Source:

Eurostat (hlth_cd_apr)

Spending on health in Czechia, including on

capital formation in the health system, is

low.

In 2022, health spending per inhabitant was

far below the EU average with the largest shares

going to outpatient and inpatient care (around

33% and 30% of total health expenditure

respectively). The share of healthcare expenditure

covered by public funds stood at around 85% of

overall health spending, above the EU average of

81.3%. Moreover, Czechia has a relatively high

number of hospital beds (565 per 100 000

population in 2022, above the EU average of 444).

Around 52% of all out-of-pocket payments are for

(

219

)

https://mzd.gov.cz/tiskove-centrum-mz/ministerstvo-

zdravotnictvi-predstavilo-novy-narodni-kardiovaskularni-

plan-pro-obdobi-2025-2035-za-cil-ma-posilit-prevenci-a-

snizit-podil-cechu-s-nemocemi-srdce-a-cev

220

( )

https://mzd.gov.cz/tiskove-centrum-mz/cesko-spousti-pilotni-

program-casneho-zachytu-tikajici-bomby-v-tele-screening-

na-casny-zachyt-vydute-brisni-aorty

221

( )

https://mzd.gov.cz/tiskove-centrum-mz/bud-fit-24-novy-

program-pomaha-detem-s-nadvahou-ke-zdravejsimu-

zivotnimu-stylu

kom (2025) 0203 - Ingen titel

Table A14.1:Key

health indicators

2019

Cancer mortality per 100 000 population

Mortality due to circulatory diseases per 100 000 population

Current expenditure on health, purchasing power standards, per capita

Public share of health expenditure, % of current health expenditure

Spending on prevention, % of current health expenditure

Available hospital beds per 100 000 population**

Doctors per 1 000 population*

Nurses per 1 000 population*

Mortality at working age (20-64 years), % of total mortality

Number of patents (pharma / biotech / medical technology)

Total consumption of antibacterials for systemic use,

daily defined dose per 1 000 inhabitants****

272.4

529.6

2 323

84.9

3.2

570

4.1

8.1

16.6

16.9

2020

268.0

557.8

2 666

88.2

3.9

572

4.1

8.2

15.1

13.4

2021

257.0

525.6

3 021

86.8

8.4

575

4.3

8.3

16.0

13.7

2022

258.4

505.5

2 908

85.0

5.2

566

4.3

8.3

15.3

17.1

2023

n.a.

85.0

n.a.

15.4

18.1

EU average*

(latest year)

234.7 (2022)

336.4 (2022)

3 684.6 (2022)

81.3 (2022)

5.5 (2022)

444 (2022)

4.2 (2022)*

7.6 (2022)*

14.3 (2023)

29 (2023)***

20.0 (2023)

*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple

average is used based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data

refer to practising

doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data

refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and

Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents.

Source:

Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023.

retail pharmaceuticals, followed by dental services

(

222

). Comparatively high unmet needs for medical

examination are reported in rural areas. Capital

formation, measured by capital expenditure on

health as a percentage of GDP is among the

lowest in the EU, hovering far below the EU

average in recent years. This is reflected in the

low availability of key diagnostic (medical

imaging) technology. Under the Czech recovery

and resilience plan (RRP), EUR 1.22 billion will go

towards health, notably: (i) setting up an

oncological institute; (ii) increasing training for

professionals; (iii) preventive screening; (iv)

intensive care medicine; (v) cardiovascular

diseases; and (vi) research and development.

As regards public health, Czechia’s high rate

of preventable mortality is a cause for

concern.

In 2022, the share of spending on

prevention dropped from its 2021 level of 8.4% to

5.2% of total spending on health, relatively close

to the EU average of 5.5%. In the same year, the

use of antibiotics in the community and hospital

sectors was well below the EU average. Areas for

further improvement include: (i) lowering alcohol

use among adults (or by raising taxes, for example

(

223

)); (ii) increasing the daily intake of fruit and

vegetables; and (iii) increasing physical activity

rates. Vaping is also a cause for concern, with

adult and particularly young adult vaping rates

among the worst in the EU (

224

). Overall,

preventable mortality has decreased by 11% over

(

222

)

OECD/European Commission (2024),

Health at a Glance:

Europe 2024 - State of Health in the EU Cycle,

pp. 186-187.

(

223

) https://www.paqresearch.cz/post/daneni-alkoholu/

(

224

)

Health at a Glance: Europe 2024,

Chapter 4.

the last decade but is still well above the EU

average (2022).

Czechia had more doctors and nurses than

the EU average in 2022.

It counted 831

practising nurses per 100 000 inhabitants, above

the EU average of 756. For several years, doctor

density

Czechia

(around

4.3

per

1 000 population in 2022) has been just above the

EU average of 4.2 per 1 000. However, there is a

greater concentration of doctors in the capital

region and in other major cities than in remote and

sparsely populated regions, which contributes to

the high rate of unmet needs for medical care in

rural areas. The number of recently graduated

doctors is above the EU average. By contrast, only

18% of all practising doctors were aged between

55 and 64 in 2022, which is below the EU average.

Regarding nurses, the number of nursing

graduates is among the lowest in the EU and more

than a quarter of nurses are aged 55 and over.

The number of nursing graduates per population

has increased over the past decade, but this has

been driven largely by a growing number of

graduates from training programmes that provide

lower nurse qualifications. Czech doctors, nurses

and other health workers obtained permanent pay

rises in 2021, 2022 and 2024. The government

has taken action to increase the number of

students in medical schools and offers subsidies

for opening primary care offices in underserved

areas. Czechia’s RRP

includes upskilling

opportunities for health professionals.

Czechia’s health system has untapped

potential to drive innovation and foster

industrial development in the EU medical

sector.

Czechia is among the EU countries

kom (2025) 0203 - Ingen titel

reporting low public spending on health research

and development (

225

). This is reflected in the low

number of European patents granted: 29 in 2023

in the combined areas of pharmaceuticals,

biotechnology and medical technologies (

226

exactly on par with the EU median of 29. Reported

clinical trial activity is also at an average level (

227

The RRP will support research and development for

priority areas of medical sciences and related

social sciences.

Czechia aims to accelerate the digitalisation

of its health system, with extensive support

from EU programmes.

It has among the lowest

shares in the EU of people accessing their personal

health records online. However, it is above the EU

average on the use of telemedicine/ online health

services (excluding phone) instead of in-person

consultations.

Czechia’s

recovery and resilience

plan includes measures to enhance digital

solutions in the healthcare sector. Additionally, the

country intends to dedicate funding toward e-

health services and applications, along with further

investment in the digitalisation of healthcare,

using resources from the 2021-2027 cohesion

funds.

(

225

) For further details, see Annex 3.

(

226

) European Patent Office,

Data to download | epo.org.

(

227

) EMA (2024),

Monitoring the European clinical trials

environment,

p. 9.

kom (2025) 0203 - Ingen titel

CROSS-CUTTING INDICATORS

ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS

This Annex assesses Czechia’s progress on

the Sustainable Development Goals (SDGs)

along the dimensions of competitiveness,

sustainability,

social

fairness

and

macroeconomic stability.

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

the EU.

Czechia performs particularly well on SDG 8

(Decent work and economic growth),

although it still needs to catch up with the

EU average on other SDGs related to

competitiveness

(SDGs 4 and 9).

Czechia’s

Graph A15.1:

Progress towards the SDGs in Czechia

long-term unemployment rate (SDG 8) was 0.8%

in 2023, well below the EU average (2.1% in

2023). Czechia also recorded a change in its

employment rate (SDG 8) from 81.7% of the

population aged 20 to 64 in 2023 to 82.3% in

2024, above the EU average of 75.8%. Additional

efforts should be made on research and

innovation (SDG9). The percentage of GDP spent

on R&D decreased from 1.95% in 2020 to 1.83%

in 2023, well below the EU average of 2.24%.

While Czechia is performing better than the EU

average on early leavers from education and

training (SDG 4; 6.4% of the population aged 18 to

24 in 2023, compared to 9.5%), it needs to catch

up on tertiary education and digital skills.

While Czechia has improved on all SDGs

related to

sustainability,

it is still lagging

behind the EU average on SDG 13 (Climate

action). Net greenhouse gas emissions are

higher (SDG 13; 11.4 tonnes per capital in

2022) than the EU average (7.3 tonnes per

capital in 2022), while the share of

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).

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

five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may

vary across the report and its annexes due to different cut-off dates.

kom (2025) 0203 - Ingen titel

renewable energy in gross final energy

consumption (18.6% in 2023) is still below

the EU average (24.6% in 2023).

The circular

material use rate (SDG 12) improved, from 11.3%

of material input for domestic use in 2022 to

12.8% of material input for domestic use in 2023.

The average CO

emissions per km from new

passenger cars (SDG 12) decreased, from 144.9 g

per km in 2020 to 136 g CO

in 2023, but

remained above the EU average (107.6 g CO

2023). Energy productivity (SDG 12) improved

slightly, from EUR 4.81 per kgoe in 2022 to

EUR 5.23 per kgoe in 2023 but remained below

the EU average (EUR 9.84 per kgoe in 2023). On a

more positive note, the country has continued to

decarbonise its energy mix by increasing its share

of renewable energy (SDG 7; from 15,1 % in 2018

to 18,6 % in 2023).

Czechia performs very well and is continuing

to improve on a number of SDGs related to

social fairness

(SDGs 1 and 10). At the same

time, there is a need for improvement on

SDGs 3, 4 and 7, and for a strong focus on

SDG 5 (Gender equality).

Czechia performs

particularly well on SDG 1 (No poverty) and

SDG 10 (Reduced inequalities), with both

significantly above the EU average (SDG 1; 63.9%

and SDG 10: 64.3%, even if the latter figure is a

decrease on the 2023 value of 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, and 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; 2.9% of the

population in 2022) remains below the EU average

(9.3% of the population in 2022). However, there

is some room for improvement, mainly on SDG 5

(Gender equality) as regards employment and

leadership positions. There have been some

positive trends in closing the gender gap (SDG 5;

from 21.1% of average gross hourly earnings of

men in 2017 to 17.9% in 2022). This remains

above the EU average of 12.7% in 2022.

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 indicators related to

SDG 16

(Peace,

justice

and

strong

institutions) and SDG 17 (Partnerships for

the goals).

The Czech government spends less

general government total expenditure on law

courts than the EU average (SDG 16; EUR 76.8 per

capita in 2022, against an EU average of

EUR 113.7). Czechia maintains very positive

macroeconomic standards, reflected mainly in low

general government gross debt (SDG 17; 43.6% in

2024), which is significantly below the EU average

(81.0% in 2024). The official development

assistance (SDG 17) which had reached 0.38% of

GNI in 2022 due to large-scale support for

Ukrainian refugees, has since decreased to 0.24%

GNI in 2023 -far lower than the EU average of

0.56% GNI- and to 0.17% in 2024(

228

). Czechia

could do more on the share of environmental

taxes in total tax revenues (SDG 17), which

decreased in recent years from 5.7% of total tax

revenues in 2017 to 4.6% in 2023.

As the SDGs form an overarching framework, any

links to relevant SDGs are either explained or

depicted with icons in the other annexes.

(

228

)

OECD, Preliminary official development assistance levels in

2024, Paris, 16 April 2025

kom (2025) 0203 - Ingen titel

ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION

Czechia faces structural challenges in a wide

range of policy areas as identified in the

country-specific recommendations (CSRs)

addressed to the country as part of the

European Semester.

They refer, among other

things, to taxation policies, active labour market

policies, the supply of childcare services, education

and skills, business environment, quality of public

administration, research and innovation, housing,

energy and transport.

The Commission has assessed the 2019-2024

CSRs considering the policy action taken by

Czechia to date and the commitments in its

recovery and resilience plan (RRP).

At this

stage, Czechia has made

at least ‘some progress’

on 63% of the CSRs (

229

and ‘limited progress’ on

37% (Table A16.2).

EU funding instruments provide considerable

resources

Czechia

supporting

investments and structural reforms to

increase competitiveness, environmental

sustainability and social fairness, while

helping to address challenges identified in

the CSRs.

In addition to the EUR 9.2 billion

funding from the Recovery and Resilience Facility

(RRF) in 2021-2026, EU cohesion policy funds (

230

)

are providing EUR 21 billion to Czechia (amounting

to EUR 26.7 billion with national co-financing) for

2021-2027 (

231

) to boost regional competitiveness

and growth. Support from these instruments

combined represents around 9.5% of 2024 GDP

(

232

). The contribution of these instruments to

different policy objectives is outlined in Graphs

A16.1 and A16.2. This substantial support comes

on top of financing provided to Czechia under the

2014-2020 multiannual financial framework,

which financed projects until 2023 and has had

significant benefits for

Czechia’s

economy and

(

229

) 10% of the 2019-2024 CSRs have been fully implemented,

8% substantially implemented, and some progress has been

made on 45%.

(

230

) In 2021-2027, cohesion policy funds include the European

Regional Development Fund, the Cohesion Fund, the

European Social Fund Plus and the Just Transition Fund. The

information on cohesion policy included in this annex is

based on adopted programmes with the cut-off date of 5

May 2025.

(

231

) European territorial cooperation (ETC) programmes are

excluded from the figure.

(

232

) RRF funding includes both grants and loans, where

applicable. GDP figures are based on Eurostat data for 2024.

society. Project selection under the 2021-2027

cohesion policy programmes is advanced, while

implementation of selected projects has also

gained

momentum,

enabling

substantial

investment.

The Czech RRP contains 105 investments and

58 reforms to stimulate sustainable growth

and support the digital transformation and

transition towards a low-carbon and climate-

resilient economy.

A year before the end of the

RRF timespan, implementation is on its way with

47% of the funds disbursed. At present, Czechia

has fulfilled 38% of the milestones and targets in

its RRP (

233

). Increased efforts are needed to

ensure completion of all RRP measures by

31 August 2026. The implementation faces

challenges, with the absorption of funds

particularly constrained by limited administrative

capacity at some of the implementing bodies as

well as suboptimal use of financial instruments.

This is particularly visible in areas such as the

green and digital transitions.

Czechia also receives funding from several

other EU instruments,

including those listed in

table A16.1. Most notably, the common

agricultural policy (CAP) provides Czechia with an

EU contribution of EUR 5.6 billion under the CAP

strategic plan for 2023-2027 (

234

). Operations

amounting to EUR 258.2 million (

235

) have been

signed under the InvestEU instrument backed by

the EU guarantee, improving access to financing

for riskier operations in Czechia.

(

233

) As of mid-May 2025, Czechia has submitted 3 payment

requests.

(

234

) An overview of Czechia´s formally approved strategy to

implement the EU’s common agricultural policy nationally

can be found at:

https://agriculture.ec.europa.eu/cap-my-

country/cap-strategic-plans/czechia_en

(

235

)Data reflect the situation on 31.12.2024.

kom (2025) 0203 - Ingen titel

Graph A16.1:

Distribution of RRF funding in Czechia

by policy field

programmes, career guidance and business-

education partnerships.

Other

funds

are

contributing

competitiveness in Czechia, for instance

through open calls.

The Connecting Europe

Facility has financed strategic investments for

instance in rail infrastructure and the development

of alternative fuel infrastructure and the

modernisation of inland waterways;

energy

market integration, decarbonisation of the energy

system and security of energy supply, in particular,

the diversification of natural gas sources and

routes in Czechia; as well as deployment of 5G

connectivity along transport paths, enabling

connected, automated cross border mobility along

sections of the Munich-Prague 5G corridor or

between the Czechia and Poland along the Baltic-

Adriatic 5G corridor. Horizon Europe has supported

research and innovation, from scientific

breakthroughs to scaling up innovations, with

Digital, Industry and Space and Climate, Energy

and Mobility as top priorities. The Technical

Support Instrument (TSI) assisted in the

preparation of the Social Climate Plan for Czechia,

the mapping out of tax administration reforms and

to improve Czechia’s administration and SME

support strategy.

Czechia’s RRP also contains ambitious

measures

improve

the

business

environment and competitiveness.

As part of

the measures covered by payment requests

submitted over the past year, Czechia made public

services for citizens and businesses operational via

the Single Digital Gateway, increased the number

of eGovernment services, strengthened the

digitalisation of services for the justice system and

published a call for projects to strengthen the

cybersecurity of critical public information

systems. Czechia also launched a regulatory

sandbox to test innovative products of companies

focusing on digital innovation in the fields of

fintech and digital ledger technology. Furthermore,

Czechia amended the Energy Act to incentivise

electricity-sharing and the development of energy

communities. The reform simplified the permitting

process for renewable energy by eliminating the

requirement for permits for small-scale

installations and streamlining permits for large

ones.

Green transition

Digital transformation

Smart, sustainable and

inclusive growth

Social & territorial cohesion

Health & resilience

Next generation

(1) Each RRP measure helps achieve the aims of two of the

six policy pillars of the RRF. The primary contribution is shown

in the outer circle, while the secondary contribution is shown

in the inner circle. Each circle represents 100% of the RRF

funds. Therefore, the total contribution to all pillars displayed

on this chart amounts to 200% of the RRF funds allocated.

Source:

European Commission

Graph A16.2:

Distribution of cohesion policy

funding across policy objectives in Czechia

Smarter Europe

Greener Europe

Connected Europe

Social Europe

Europe closer to citizens

JTF specific objective

Source:

European Commission

Cohesion policy funds aim to increase the

productivity and competitiveness of Czech

firms and improve the business environment.

The European Regional Development Fund (ERDF)

will contribute to the digitalisation of the country’s

private and public sectors, providing over 500

businesses, 30 000 households and almost 180

public institutions with enhanced access to very

high-capacity broadband. The Just Transition Fund

will support over 2 200 businesses in restructuring

for the transition to a low-carbon economy while

preserving jobs, and for diversification of the

economy in the Czech regions most affected by

the transition to a climate neutral economy. The

European Social Fund Plus (ESF+) is investing

EUR 180 million to support job transformation

amid the green and digital transition. ESF+ funds

support

digital

skills

training,

corporate

kom (2025) 0203 - Ingen titel

EU funds are playing a significant role in

promoting environmental sustainability and

green transition in Czechia during the current

seven-year EU budget (multiannual financial

framework).

The ERDF and the Cohesion Fund

are financing additional capacity for wastewater

treatment, which will benefit over 91 000 people.

Similarly, the funding will enable Czechia to

expand its waste-recycling capacity by nearly 175

000 tonnes/year and thereby make greater use of

the secondary materials which are key elements in

the EU’s environmental and competitiveness

policy. Czechia’s

CAP strategic plan allocates

EUR 756.4 million (54% of rural development

funding) to environmental and climate objectives

and EUR 1.24 billion (30% of direct payments) to

eco-schemes, supporting biodiversity, organic

farming and sustainable practices. With the help

of the CAP Plan, sustainability objectives are

supported by promoting biodiversity protection

through eco-schemes, such as dedicating 7% of

arable land to non-productive areas and limiting

pesticide use near water bodies, or specific new

support for landscape features. Moreover, Czechia

aims to grow its organic farming share from

15.6% to 21.3%.

Czechia’s RRP, including the REPowerEU

chapter, has a comprehensive set of reforms

and investments for the green transition.

Measures covered by the payment requests

submitted over the last year include, among

others, the implementation of 450 small

watercourses and water reservoir projects, 20

water retention in forests projects and the

adoption of a national and regional waste

management plan. Czechia also carried out an

assessment of the path towards decarbonisation

of district heating and trajectories of sustainable

use of bioenergy and supply of biomass and

provided a concrete plan for investment in

heat/power generation facilities that do not use

solid fossil fuels as a heat source. To improve

energy efficiency, Czechia renovated public and

residential

buildings

and

supported

the

revitalisation

former

industrial

sites

(brownfields). Measures were also taken to

modernise public transport and make it more

sustainable, including the electrification of 40 km

of railway lines to reduce emissions,

reconstruction of three existing railway lines

totalling 26 km, the renovation of eight station

buildings to improve their quality of service and

energy efficiency performance.

Promoting fairness, social cohesion and

improving access to basic services are

among the key priorities of EU funding in

Czechia.

The ESF+ allocates EUR 15 million to

support Roma communities by promoting

community work, early childhood services, and

parental skills. It funds NGOs to enhance Roma

participation in elections, combat hate speech, and

address domestic and gender-based violence.

Additionally, it strengthens Roma and pro-Roma

NGOs

through

training,

organisational

development, and collaboration with public

authorities. These efforts contribute to the Roma

Integration

Strategy

2021-2030,

tackling

structural challenges like anti-Gypsyism and child

poverty. The ERDF will expand and modernise the

country’s educational system infrastructure,

affecting 22 177 pupils in their classrooms.

Czechia´s RRP contains several reforms and

investments related to fairness and social

policies.

To boost digital and green skills, Czechia

created a database of reskilling and upskilling

courses, aiming to upskill or reskill at least 65 000

people in digital skills and another 65 000 in

Industry 4.0, and launched a call for projects

promoting green skills development in curricula.

Czechia has also supported 4 000 schools in

organising tutoring programmes for pupils at risk

of school failure, to tackle inequalities between

pupils and schools driven by social or other

disadvantages. The law on pre-school childcare

entered into force to ensure access to affordable

childcare for children below three years old, and

Czechia published a call for projects for providing

housing and care facilities for children at risk.

Moreover, Czechia continue to expand eHealth

services to citizens, awarded the public contracts

for the construction of new university areas in the

field of health sciences.

100

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Table A16.1:Selected

EU funds with adopted allocations - summary data (million EUR)

Instrument/policy

RRF grants (including the RepowerEU allocation)

RRF loans

Allocation 2021-2026

8 409.2

818.1

Disbursed since 2021 (1)

4 174.5

190.9

Disbursed since 2021 (3)

(covering total payments to the

Member State on commitments

originating from both 2014-

2020 and 2021-2027

programming periods)

14 248.3

7 383.0

4 175.2

2 108.3

581.8

20.2

Instrument/policy

Allocation 2014-2020 (2)

Allocation 2021-2027

Cohesion policy (total)

European Regional Development Fund (ERDF)

Cohesion Fund (CF)

European Social Fund (ESF, ESF+) and the Youth Employment

Initiative (YEI)

Just Transition Fund (JTF)

Fisheries

European Maritime, Fisheries and Aquaculture Fund (EMFAF)

and the European Maritime and Fisheries Fund (EMFF)

Migration and home affairs

Migration, border management and internal security - AMIF,

BMVI and ISF (4)

The common agricultural policy under the CAP strategic

plan (5)

Total under the CAP strategic plan

European Agricultural Guarantee Fund (EAGF)

European Fund for Agricultural Development (EAFRD)

22 676.2

12 848.2

6 143.9

3 684.0

21 054.1

10 346.3

6 635.4

2 430.9

1 641.5

31.1

30.0

85.3

Allocation 2023-2027

5 646.8

4 236.1

1 410.6

153.1

70.8

Disbursements under the

CAP Strategic Plan (6)

1 811.8

1 582.5

229.3

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025.

(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022.

(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member

State before 2021. Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The

cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025. The cut-off date for data on disbursements

under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025.

(4) AMIF - Asylum, Migration and Integration Fund; BMVI- Border Management and Visa Instrument; ISF - Internal Security Fund.

(5) Expenditure outside the CAP strategic plan is not included.

(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the

Member State declarations until March 2025. Disbursements for the Direct Payments (EAGF) started in 2024.

Source:

European Commission

101

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Table A16.2:Summary

table on 2019-2024 CSRs

Table 16.2: Summary table on 2019-2024 CSRs

Czechia

2019 CSR 1

Improve long-term fiscal sustainability of the pension and health-

care systems.

Adopt pending anti-corruption measures.

2019 CSR 2

Foster the employment of women with young children, including by

improving access to affordable childcare, and of disadvantaged

groups.

Increase the quality and inclusiveness of the education and training

systems, including by fostering technical and digital skills and

promoting the teaching profession.

2019 CSR 3

Focus investment-related economic policy on transport, notably on

its sustainability

, digital infrastructure

, and low carbon and energy transition, including energy efficiency ,

taking into account regional disparities.

Reduce the administrative burden on investment

and support more quality-based competition in public procurement.

Remove the barriers hampering the development of a fully

functioning innovation ecosystem.

2020 CSR 1

In line with the general escape clause, take all necessary measures

to effectively address the pandemic, sustain the economy and

support the ensuing recovery. When economic conditions allow,

pursue fiscal policies aimed at achieving prudent medium-term fiscal

positions and ensuring debt sustainability, while enhancing

investment.

Ensure the resilience of the health system, strengthen the availability

of health workers, primary care and the integration of care, and

deployment of e-health services.

2020 CSR 2

Support employment through active labour market policies,

the provision of skills, including digital skills, and access to digital

learning.

2020 CSR 3

Support small and medium-sized enterprises by making greater use

of financial instruments to ensure liquidity support,

reducing the administrative burden and improving e-government.

Front-load mature public investment projects and

promote private investment to foster the economic recovery.

Focus investment on the green and digital transition, in particular on

high-capacity digital infrastructure and technologies,

clean and efficient production and use of energy,

and sustainable transport infrastructure, including in the coal

regions.

Ensure access to finance for innovative firms and improve public-

private cooperation in research and development.

Assessment in May 2025

Some progress

Limited progress

Relevant SDGs

SDG 3, 8, 16

SDG 16

SDG 4, 5, 8, 10

Some progress

Limited progress

Some progress

SDG 4, 8, 10

SDG 10, 11

SDG 9, 10, 11

SDG 7, 9, 10, 11, 13

SDG 8, 9

SDG 9

No longer relevant

SDG 8, 16

Some progress

Substantial progress

Limited progress

SDG 3

SDG 8

SDG 4

SDG 8, 9

SDG 8, 9, 16

SDG 8, 16

SDG 8, 9

SDG 9

SDG 7, 9, 13

SDG 10, 11

SDG 8, 9

(Continued on the next page)

102

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Table (continued)

2021 CSR 1

In 2022, maintain a supportive fiscal stance, including the impulse

provided by the Recovery and Resilience Facility, and preserve

nationally financed investment.

When economic conditions allow, pursue a fiscal policy aimed at

achieving prudent medium-term fiscal positions and ensuring fiscal

sustainability in the medium term.

At the same time, enhance investment to boost growth potential.

Pay particular attention to the composition of public finances, on

both the revenue and expenditure sides of the budget, and to the

quality of budgetary measures in order to ensure a sustainable and

inclusive recovery. Prioritise sustainable and growth-enhancing

investment, in particular investment supporting the green and digital

transition.

Give priority to fiscal structural reforms that will help provide

financing for public policy priorities and contribute to the long-term

sustainability of public finances, including, where relevant, by

strengthening the coverage, adequacy and sustainability of health

and social protection systems for all.

2022 CSR 1

In 2023, ensure that the growth of nationally financed primary

current expenditure is in line with an overall neutral policy stance,

taking into account continued temporary and targeted support to

households and firms most vulnerable to energy price hikes and to

people fleeing Ukraine. Stand ready to adjust current spending to

the evolving situation.

Expand public investment for the green and digital transitions, and

for energy security taking into account the REPowerEU initiative,

including by making use of the Recovery and Resilience Facility and

other Union funds.

For the period beyond 2023, pursue a fiscal policy aimed at

achieving prudent medium-term fiscal positions.

Take measures to ensure the long-term fiscal sustainability of public

finances, including the sustainability of the pension system.

2022 CSR 2

RRP implementation is monitored by assessing RRP payment

Proceed with the implementation of its recovery and resilience plan,

requests and analysing reports published twice a year on the

in line with the milestones and targets included in the Council

achievement of the milestones and targets. These are to be

Implementing Decision of 8 September 2021.

reflected in the country reports.

Swiftly finalise the negotiations with the Commission of the 2021-

Progress on the cohesion policy programming documents is

2027 cohesion policy programming documents with a view to

monitored under the EU cohesion policy.

starting their implementation.

2022 CSR 3

Limited progress

Strengthen the provision of social and affordable housing, including

by adopting a specific legislative framework for social housing and

improved coordination between different public bodies.

2022 CSR 4

Reduce overall reliance on fossil fuels and diversify imports of fossil

fuel.

Accelerate the deployment of renewables, streamline permit

procedures and make grid access easier.

Increase the energy efficiency of district heating systems and of the

building stock by incentivising deep renovations and renewable heat

sources.

2023 CSR 1

Wind down the emergency energy support measures in force, using

the related savings to reduce the government deficit, as soon as

possible in 2023 and 2024. Should renewed energy price increases

necessitate new or continued support measures, ensure that these

are targeted at protecting vulnerable households and firms, fiscally

affordable and preserve incentives for energy savings.

Ensure prudent fiscal policy, in particular by limiting the nominal

increase in nationally financed net primary expenditure in 2024 to

not more than 6.0%.

Preserve nationally financed public investment and ensure the

effective absorption of RRF grants and other EU funds, in particular

to foster the green and digital transitions.

For the period beyond 2024, continue to pursue a medium-term

fiscal strategy of gradual and sustainable consolidation, combined

with investments and reforms conducive to higher sustainable

growth, to achieve a prudent medium-term fiscal position.

Take measures to ensure the long-term fiscal sustainability of public

finances, including the sustainability of the pension system.

Limited progress

Some progress

Substantial progress

SDG 7, 9, 13

SDG 7, 8, 9, 13

SDG 7

SDG 1, 2, 10, 16

No longer relevant

SDG 8, 16

No longer relevant

SDG 8, 16

No longer relevant

SDG 8, 16

No longer relevant

SDG 8, 16

Substantial progress

No longer relevant

SDG 8, 16

No longer relevant

SDG 8, 16

No longer relevant

Substantial progress

SDG 8, 16

SDG 8

Full implementation

SDG 8, 16

Full implementation

SDG 8, 16

Some progress

SDG 8, 16

Full implementation

SDG 8

Substantial progress

SDG 8, 16

(Continued on the next page)

103

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Table (continued)

2023 CSR 2

Accelerate the implementation of its recovery and resilience plan,

RRP implementation is monitored through the assessment of

also by ensuring an adequate administrative capacity, and swiftly

RRP payment requests and analysis of the bi-annual reporting

on the achievement of the milestones and targets, to be

finalise the addendum, including the REPowerEU chapter, with a

view to rapidly starting its implementation. Proceed with the speedy

reflected in the country reports. Progress with the cohesion

implementation of cohesion policy programmes, in close

policy is monitored in the context of the Cohesion Policy of the

European Union.

complementarity and synergy with the recovery and resilience plan.

2023 CSR 3

Strengthen the provision of social and affordable housing, including

by adopting a specific legislative framework, improving coordination

between different public bodies, and incentivising the construction of

new housing units as well as the refurbishment of existing ones.

2023 CSR 4

Reduce reliance on fossil fuels.

Increase the deployment of renewables with additional investments

in electricity grids and direct deployment of renewable capacity.

Streamline permitting procedures for renewables and make the grid

fit to accommodate access to renewables through additional

reforms, removing restrictions for small-scale renewables and

setting up a one-stop shop, boosting grid flexibility and creating

conducive conditions for energy communities.

Increase the energy efficiency of district heating systems and of the

building stock by incentivising deep renovations and renewable heat

sources, easing administrative access to subsidies for both

households and industry, and capacity building and skills in public

authorities.

Promote the uptake of zero-emission vehicles and boost the

availability of high-capacity charging and refuelling infrastructure

through new reforms to create enabling conditions for and remove

existing barriers to the deployment of vehicles and infrastructure.

Step up policy efforts aimed at the provision and acquisition of skills

and competences needed for the green transition.

2024 CSR 1

Submit the medium-term fiscal-structural plan in a timely manner.

In line with the requirements of the reformed Stability and Growth

Pact, limit the growth in net expenditure in 2025 to a rate consistent

with, inter alia, maintaining the general government deficit below the

3% of GDP Treaty reference value and keeping the general

government debt at a prudent level over the medium term.

Take measures to ensure the long-term fiscal sustainability of the

pension system.

Lower tax and benefit disincentives for parents to return to work to

promote higher female labour market participation.

Improve incentives for people close to retirement to continue

working.

Take steps to increase revenue from recurrent property taxes.

2024 CSR 2

Limited progress

SDG 1, 2, 10, 16

Some progress

SDG 7, 9, 13

Some progress

SDG 7, 8, 9, 13

Some progress

SDG 7, 8, 9, 16

Limited progress

SDG 11

Limited progress

Some progress

Full implementation

SDG 4

SDG 8, 16

Full implementation

SDG 8, 16

Substantial progress

Limited progress

Some progress

Limited progress

SDG 8

SDG 8, 10, 12

Strengthen administrative capacity to manage the recovery and

resilience plan, accelerate investments and maintain momentum in

the implementation of reforms. Address relevant challenges to allow

for continued, swift and effective implementation of the recovery and

RRP implementation is monitored through the assessment of

resilience plan, including the REPowerEU chapter, ensuring

RRP payment requests and analysis of the bi-annual reporting

completion of reforms and investments by August 2026. Accelerate

on the achievement of the milestones and targets. Progress

the implementation of cohesion policy programmes. In the context of

with the cohesion policy programming is monitored in the

their mid-term review, continue focusing on the agreed priorities,

context of the Cohesion Policy of the European Union.

taking action to better mobilise private sector resources, including

through the use of innovative financial instruments, while

considering the opportunities provided by the Strategic Technologies

for Europe Platform initiative to improve competitiveness.

2024 CSR 3

Strengthen the capacity of Czechia's public administration to attract,

retain and develop talent, particularly those with analytical,

managerial and IT skills

Reduce departmentalism and strengthen strategic steering

capacities to improve consistency across policies.

Support cooperation among municipal administrations, including by

providing support for administrative capacity building targeted to

structurally affected regions

2024 CSR 4

Boost innovation by improving technology transfer from academia to

businesses,

supporting the creation of spin-offs and start-ups,

and increasing participation in tertiary education.

Strengthen the competitiveness of the economy by addressing skills

mismatches, simplifying the recognition of foreign qualifications,

and by increasing the

underrepresented groups.

labour

market

participation

Limited progress

Some progress

Limited progress

Some progress

SDG 9

SDG 8, 9

SDG 4

SDG 8, 10

SDG 4, 16

SDG 16

Source:

European Commission

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ANNEX 17: COMPETITIVE REGIONS

The regional disparities between the capital

region Praha and the rest of Czechia

continue.

This is shown by various indicators that

are essential for competitiveness. The introduction

of targeted regional incentives together with the

stronger role regions play in defining their specific

needs could enable convergence towards the EU

average in terms of GDP per head and regional

development. This is particularly relevant for those

Czech regions experiencing a talent development

trap (

236

The Czech economy rebounded in the

aftermath of the COVID-19 pandemic.

However, this recovery remained lower than the

EU average and has been slowed down by high

inflation rates. While experiencing a slight

expansion of the economy of 0.1% in real terms in

2023, real GDP growth was 1.1% in 2024.

Czech regions have many competencies in

transport, education, healthcare, social care,

spatial planning, cultural development, and

assistance to municipalities.

The national

allocation of tax revenues represents a major part

of regional budget revenues (typically around

90%) and therefore determines their scope for

spending (

237

). In the current setting, the regional

governments distribute further nationally allocated

financial resources. It would be beneficial to

consider adding to the system incentives targeted

at regions that would motivate them to encourage

greater economic activity on their territory, make

strategic investments, or improve the quality and

efficiency of public services. Latest experience

from the territorial just transition plan for the

Czech Just Transition Fund regions shows a

positive role of regional strategies serving as an

instrument that coordinates the territorial

dimension under cohesion policy and other EU and

selected national resources at regional level.

Increasing regional growth requires a wide

range of policies.

Effective and efficient

spending of available EU funding, including the use

(

236

) Regions experiencing a talent development trap are affected

by a decline in the working-age population and a low and

stagnating share of people with a tertiary education. See the

European Commission Communication: COM(2023) 32 final

‘Harnessing talent in Europe’s regions’

points out to

Severozápad and Moravskoslezko as regions in the talent

development trap in Czechia.

(

237

)

Krajské rozpočty pod drobnohledem: odkud mají příjmy, na co

jdou v�½daje a co přinese změna RUD.

of financial instruments as a repayable form of

support, is an important part of it. The success of

the ‘Transformation loan’ in three JTF regions

shows the benefits of financial instruments also in

the less developed regions.

Regional disparities in Czechia have

remained broadly unchanged but are still

significant.

The country's capital region is highly

developed with GDP per head standing at 193% of

the EU average in 2023. In the rest of the country,

there is a group of three moderately developed

regions, where GDP per head ranges from 77% to

85% of the EU average, four regions below 75%,

and a poorer region (Severozápad) where GDP per

head corresponds to 63% of the EU average.

Most regions have grown faster than the EU

average, albeit at different speeds.

As a

result, Czechia continued to catch up rapidly with

the EU average (i.e. convergence), from 84% of

the EU GDP (purchasing power standard (PPS)) per

head average in 2011 to 95% in 2020. Since then,

convergence halted and in 2023 Czechia’s GDP per

head decreased to 90% of the EU average.

Competitiveness

The pattern of disparities between regions is

similar for labour productivity, displaying the

same divide between the capital region and

the rest.

In 2022, labour productivity (GDP (PPS)

per hour worked) in Czechia was at 77% of the EU

average declining from 79% in 2021. It was by far

the highest in the capital region (121% of the EU

average) in 2022, compared to 76% in the second

most productive Czech region (Střední Čechy), and

58% in the least productive region (Severozápad).

The trend in labour productivity shows that

almost all regions are catching up with the

EU average but at different speeds

(Graph

A17.1). Real productivity per hour growth was

highest in Praha, with an average annual growth

rate of 2.6% between 2013 and 2022, well above

the EU rate of 0.9%. The other regions experienced

lower productivity per hour growth, Severov�½chod,

Střední Čechy and Střední Morava were still above

the EU average. The country’s poorest region

Severozápad experienced a negligible productivity

decline of 0.09% over the same period.

105

kom (2025) 0203 - Ingen titel

Table A17.1:Selection

of indicators at regional level in Czechia

Productivity

GDP per head - GDP per

(PPS)

hour worked

(PPS)

Real

productivity

growth

(per hour

worked)

Working age

population

(20-64)

growth

Unemploy-

ment rate

Early leavers

from

Housing cost

education and overburden

training

Access to

healthcare

Quality&account

Access to

ability pillar of

Greenhouse

alternative fuel European Quality

gas emissions

infrastructure

of Government

Index (1)

Index

EU-27 = 100

Index

EU-27 = 100

Average

annual

% change

Average

annual

% change

% of labour

force

% of

population

aged 18-24

% of total

population

Population

within 10

minutes by car

from nearest

hospital (%)

2023

Number of

Change 2010 -

electric vehicles

tCO2eq. per

2024, percentage

charging points

person

points

within 10 km

2022

2024

287

415

1.10

0.58

0.18

0.29

0.50

0.48

0.32

0.26

2023

7.1

10.5

3.6

10.2

9.2

28.6

10.9

7.9

6.7

10.8

2023

European Union (27 MS)

Czechia

Praha

Střední Čechy

Jihozápad

Severozápad

Severov�½chod

Jihov�½chod

Střední Morava

Moravskoslezsko

100

193

2022

100

121

2013-2022

0.9

1.4

2.6

1.5

0.8

-0.1

1.6

0.8

1.4

0.7

2014-2023

-0.2

-0.5

0.3

0.2

-0.5

-1.1

-0.7

-0.5

-1.0

-1.2

2024

5.9

2.6

1.8

1.3

2.3

4.1

2.9

2.4

2.6

4.1

2024

9.3

5.4

1.3

6.1

7.9

11.6

5.5

2.7

4.3

5.1

2024

8.8

9.2

18.0

8.9

5.7

10.0

8.5

5.4

7.9

10.7

(1)

University of Gothenburg

Source:

Eurostat and JRC

Graph A17.1:

Labour productivity per hour

2015 EUR per hour worked

employment, higher productivity

lifetime earnings for individuals.

and

higher

Other NUTS2 regions

Capital region

National average

EU27

Unit: Real GDP per hour worked (EUR, 2015 prices)

Source:

ARDECO (JRC)

The concentration of skilled and educated

workforce in the capital region is also

reflected in innovation and technology.

2022, R&D expenditure was highest in the capital

region where it corresponded to 2.69% of GDP (in

Jihov�½chod it was also higher than in the EU

–

2.48%). 12.7% of workers were employed in high-

tech sectors in Praha, more than double the rate in

the EU. At the other end of the spectrum,

employment in high-tech sectors represented less

than 6% in the other regions, and R&D expenditure

was only 0.38% of GDP in the least developed

region of Severozápad.

There is a clear tendency for population to

cluster in the most prosperous regions.

Between 2014 and 2023, average annual

population growth was positive in all regions

except in Střední Morava and Moravskoslezsko.

Moravskoslezko and Severozápad are also

considered as experiencing a talent development

trap (

239

). The net out-migration particularly of the

young population deepens territorial disparities

and could be addressed with concrete measures.

Activities of the Moravskoslezko region, like the

talent management strategy may serve as an

example (

240

(

239

)

EC Communication ‘Harnessing talent in Europe’s regions’

/COM(2023) 32 final/

p. 5.

(

240

) The region prepares

‘Talent

management’ strategy that

includes also

‘Compatriots

welcome back‘ initiative.

2018

2000

2002

2004

2006

2008

2010

2012

2014

2016

2020

Several factors can help explain these

disparities. Human capital (

238

) levels are

considerably lower outside the capital region.

In all Czech regions, except the capital region, the

proportion of the population aged 30-34 with a

tertiary degree is below the EU average (44.8%),

with the four poorest regions (Severov�½chod,

Střední

Morava,

Moravskoslezsko

and

Severozápad) scoring below 30%. The Praha

region has by far the highest proportion (62.8%).

Educational attainment is an important factor that

also affects competitiveness. Higher levels of

education usually lead to higher rates of

(

238

) Human capital encompasses knowledge, skills and

competences, highlighting the importance of education,

training and experience in building a workforce that drives

economic growth, innovation and productivity.

2022

106

kom (2025) 0203 - Ingen titel

Social fairness

Labour market conditions are strong in

Czechia compared to other EU Member

States, but disparities within the country

continue to exist beyond the metric of

unemployment, i.e. poverty and healthcare.

The unemployment rate in 2024 was remarkably

low (2.6%) and did not vary widely between

regions. All regions had an unemployment rate

below the EU average (5.9%). The participation of

women in the labour market has also been high

compared to the EU average. The employment rate

of women is higher at national level (75.8%) than

the EU average (70.8%). Differences between

regions are small, between 79.1% in Praha and

72.8% in Severozápad.

Many Czech households are struggling to

access affordable housing, especially in

cities.

In terms of housing affordability, defined

as the ratio of wages to the price of new

apartments, Czechia ranked among the bottom

countries in Europe in 2023 (

241

). There are

differences between regions, but the housing

affordability is lowest in Praha.

The share of the population at risk of

poverty and social exclusion at national level

is among the lowest in the EU (see also

Annex 11) but varies significantly between

the regions.

This share was much higher than the

national average of 11.3% (although still below

the EU average of estimated 21%) in the less

developed regions, standing at 16.3% in

Moravskoslezsko and 12.5% in Severozápad. The

population in Severozápad has also been

significantly affected by foreclosures and personal

bankruptcies. In Q3-2024, more than 12% of

people were in foreclosure in Severozápad

compared to the country’s average of 7%

(

242

Access to healthcare varies widely between

the less developed and transition regions on

the one hand and Praha on the other.

In 2023,

the share of the population living within a 10-

minute radius by car from the nearest hospital in

Praha was 94%, compared to 46% in Střední

Morava and 48% in Jihozápad.

Sustainability

Map A17.1:

Greenhouse gas emissions per capita,

2023

Source:

Eurostat and JRC

Czechia's annual greenhouse gas emissions

per person in 2023, with an average of 10.5

tonnes of CO

equivalent, exceeded the EU

average of 7.1 tonnes of CO

equivalent, with

significant disparities between regions.

The

coal mining region of Severozápad was the highest

emitter with 28.6 tonnes per person. At the other

end, the capital region of Praha was the lowest

emitter with 3.6 tonnes per person in 2023. The

other regions were closer to the national average,

with between 6.7 and 10.9 tonnes per person. The

low level of emissions in the capital region can be

explained by the high percentage of employment

in the services sector (25% in financial services

and 21% in other services). Particulate matter

(PM2.5) concentration was slightly above the EU

average in Czechia (12 compared to 10.1), with a

peak of 16 in Moravskoslezsko.

On green transport infrastructure, Czechia

lags behind the EU

with an average of about 77

electric vehicle charging points within 10 km,

against 287 on average in the EU (

243

Unsurprisingly, the Praha region performs best in

(

243

) Indicators of access to alternative fuel infrastructure are

based on calculations by DG REGIO and the JRC, using data

from the European Alternative Fuels Observatory (EAFO),

Eurostat, TomTom and Eco-Movement.

(

241

)

Deloitte Property Index, 13th edition, August 2024.

(

242

)

Podíl osob v exekuci po krajích (Q3 2024) / Mapa zadlužení.

107

kom (2025) 0203 - Ingen titel

this category with 415 charging points, which is

still below the EU average for more developed

regions (539).

108