Presentation of the 2018 Economic Survey of Czech Republic

TOWARDS MORE SUSTAINABLE AND INCLUSIVE GROWTH 2018 OECD ECONOMIC SURVEY OF THE CZECH REPUBLIC & ENVIRONMENTAL PERFORMANCE REVIEW 2018 Prague, July 16th 2018 http://www.oecd.org/eco/surveys/economic-survey-czech-republic.htm

@OECDeconomy @OECD

The economy is thriving Real GDP growth, year on year per cent changes 8

Czech Republic

8

OECD

6

6

4

4

2

2

0

0

-2

-2

-4

-4

-6

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

2016

2017

2018

2019

-6 2

Unemployment is at a record low Unemployment rate, % of labour force 8

8

7

7

6

6

5

5

4

4

3

3

2

2

1

1

0

2010

2011

2012

2013

Source: OECD Quarterly National Accounts (database).

2014

2015

2016

2017

2018

0

3

The exchange rate is appreciating and inflation is around the target Exchange rate (left axis)

Headline inflation (right axis) Y-o-y % changes

CZK/EUR 28.0

3.0

27.5

2.5

27.0

2.0

26.5

1.5

26.0

1.0

25.5

0.5

25.0

2013

2014

2015

2016

2017

Source: OECD (2018), OECD Economic outlook (database) and Thomson Reuters Datastream (database).

2018

0.0

4

Well-being is higher than in other Central and Eastern European countries OECD Better Life Index, 2017 Index scale 0 (worst) to 10 (best) Czech Republic

OECD CEE peers

Income and wealth 10

Subjective well-being

8

Jobs and earnings

6

Personal security

4

Housing

2 0

Environmental quality

Work and life balance

Civic engagement and governance Social connections

Health status Education and skills

Note: For each dimension indicators are normalised and averaged. CEE peers are Estonia, Hungary, Poland, the Slovak Republic and Slovenia.

Source: OECD (2017), OECD Better Life Index, www.oecdbetterlifeindex.org.

5

Poverty is low Population with disposable income below the poverty line, % of population, 2015 30

25

25

20

20

15

15

10

10

5

5

0

0

CZE ISL DNK SVK FIN NOR FRA AUT NLD SVN LUX DEU HUN CHE SWE IRL BEL GBR POL OECD PRT KOR NZL ITA AUS GRC CAN JPN EST ESP LVA CHL USA MEX TUR ISR

30

Note: The poverty line is 60% of median household income. Household income is adjusted to take into account household size.

Source: OECD (2018), OECD Social and Welfare Statistics (database).

6

CHALLENGES TO SUSTAINABLE GROWTH

7

Wages are rising due to labour market shortages Thousands

CZK

Vacancies registered at the employment offices (left axis)

300

35 000

Average monthly wages of employees (FTE) (right axis)

30 000

250

25 000

200

20 000 150 15 000 100

10 000

50

0

5 000

2010

2011

2012

2013

2014

2015

2016

2017

2018

Note: 2017-preliminary; vacancies refer to numbers registered at the end of the respective year and for 2018 at the end of the first quarter, preliminary.

Source: Czech Statistical Office, Public Database.

0

8

Productivity is picking up but remains low Real GDP per person employed, growth and level Y-o-y % change 7

CZE, growth (lhs) CZE, level (rhs)

OECD, growth (lhs) OECD, level (rhs)

Thousand USD PPP 90

6

80

5

70

4 60

3 2

50

1

40

0

30

-1 20

-2

10

-3 -4

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: OECD (2018), OECD Productivity (database).

9

Reconciling work and family remains difficult for mothers of young children Employment gap of mothers with young children with respect to men aged 25-54, %, 2015

70

60

60

50

50

40

40

30

30

20

20

10

10

0

0

DNK SWE PRT SVN NOR ISR AUT LVA FIN BEL CAN NLD FRA ISL CHE LUX ESP POL USA DEU OECD IRL EST GBR AUS GRC NZL ITA JPN HUN SVK CZE CHL KOR MEX TUR

70

Note: Mothers with young children refer to working-age mothers with at least one child aged 0 to 14 years. The employment gap is the difference between the employment rate of men (aged 25-54 years) and that of young mothers, expressed as a percentage of the employment rate of men.

Source: OECD (2017), Employment Outlook 2017.

10

The population is ageing Percentage of population aged 65 years and over 2050

2015 40

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

0

ISR MEX TUR USA AUS LUX NZL NOR CHL DNK SWE ISL GBR IRL CAN FIN BEL FRA OECD LVA NLD HUN SVK CHE EST CZE AUT DEU POL SVN ITA KOR GRC PRT ESP JPN

40

Source: OECD (2017), Health at a Glance 2017: OECD Indicators.

11

Fiscal revenues rely heavily on social contributions 2016 or latest, % of GDP 50

Social Security Contribution

Other direct taxes

Indirect taxes

50

45

45

40

40

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

MEX CHL USA NZL SVK ESP POL CZE OECD PRT EST SVN DEU HUN AUT FRA DNK

Source: OECD (2017), Revenue Statistics (database).

0

12

Ageing-related spending will increase Change in gross public expenditure between 2016 and 2070, percentage points of GDP Pensions

Health care and long-term care

Other

8

8

6

6

4

4

2

2

0

0

-2

-2

-4

-4

-6

FRA

LVA

ITA

DNK POL SWE EU28 HUN SVK

NLD AUT DEU

BEL

CZE NOR SVN

Source: European Commission (2018), “The 2018 Ageing Report: Economic and Budgetary Projections for the EU Member States (2016-2070)”. Based on the reference scenario.

-6

13

Key recommendations Addressing labour shortages •

Increase resources to education, skilling, reskilling and upskilling.

•

Keep expanding the supply of affordable childcare facilities.

•

Increase the flexibility of jobs by better enforcement of rights to part-time work, flexible teleworking and shared jobs.

Tackling long run challenges, including the impact of an ageing society •

Keep some fiscal space to cope with future ageing-related spending.

•

Rebalance tax revenues by reducing social security contributions and raising indirect taxes (VAT through better compliance and environmental taxes).

•

Link tightly retirement age to life expectancy. Broaden the financing of health care and long-term care by expanding the base of contributions to all types of income.

More in the Key Policy Insights of the Economic Survey of Czech Republic 2018 and in Chapter 3 of the Environmental Performance Review

14

IMPROVING THE HEALTH CARE SYSTEM

15

Health outcomes have improved Life expectancy at birth in years, 2015 84

84

2005

Years gained during 2005-15

82 1.4

80

2.3 1.5

78

78

2.5 2.5

82 80

3.0

2.6

76

74

3.5

1.9

2.7

76

4.8

2.7

74

72

72

70

70

68

68

66

HUN

SVK

POL

EST

CZE

Source: OECD (2018), Health statistics (database).

CHL

OECD

SVN

GRC

PRT

ISR

ESP

66

16

Total health care expenditure is relatively low Total health care expenditure, 2016, % of GDP 20

18

18

16

16

14

14

12

12

10

10

8

8

6

6

4

4

2

2

0

0

TUR LVA MEX LUX POL EST SVK CZE ISR HUN KOR IRL GRC CHL SVN ISL ITA PRT ESP OECD NZL FIN AUS GBR AUT DNK BEL NOR NLD CAN JPN FRA SWE DEU CHE USA

20

Source: OECD (2017), Health at a Glance 2017: OECD Indicators, OECD Publishing, Paris.

17

Health spending will increase further as the population ages Drivers of health care expenditure, % of GDP Actual

10.0 9.5 9.0 8.5

10.0

Demographic scenario (ageing only) Expansion of morbidity Compression of morbidity Combination of non-demographic and demographic

9.5 9.0 8.5

8.0

8.0

7.5

7.5

7.0

7.0

6.5

6.5

6.0

6.0

5.5

5.5

5.0

2000 2005 2010

2015

2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070

Note: The projections do not anticipate future policy change. Health care expenditure includes long-term health care.

Non-demographic factors include e.g. technological and institutional improvements.

Source: Calculations based on data from OECD (2017), System of Health Accounts (database) and European Commission (2018), Population projections from the Ageing Working Group by Eurostat.

5.0

18

The number of doctor consultations is high Consultations per inhabitant, 2015 or nearest year

Source: OECD (2017), Health Statistics (database).

KOR

JPN

HUN

SVK

CZE

DEU

TUR

NLD

CAN

ESP

POL

AUS

OECD

SVN

ITA

0

BEL

0

AUT

2

EST

2

FRA

4

LVA

4

ISL

6

LUX

6

IRL

8

DNK

8

NOR

10

FIN

10

PRT

12

CHE

12

NZL

14

CHL

14

SWE

16

MEX

16

19

Adverse lifestyle affects health Litres of alcohol per capita consumed 14

12

12

10

10

8

8

6

6

4

4

2

2

0

0

TUR ISR MEX NOR CHL JPN SWE GRC ISL ITA NLD CAN FIN USA NZL OECD KOR ESP DNK CHE GBR AUS PRT SVK EST POL LVA HUN IRL DEU LUX CZE SVN FRA AUT BEL

14

Source: OECD Health Statistics 2017

20

Health care is still too hospital centred Number of hospital beds per 1 000 inhabitants 14

12

12

10

10

8

8

6

6

4

4

2

2

0

0

MEX CHL SWE DNK CAN GBR TUR NZL USA ESP IRL ISR ISL ITA PRT NOR AUS NLD GRC FIN SVN CHE OECD LUX EST LVA SVK FRA BEL CZE POL HUN AUT DEU KOR JPN

14

Source: OECD (2017), OECD Health Statistics (database).

21

Ageing of doctors and health workers is threatening the supply of medical care Percentage of doctors aged 55 years and over in 2015 (or nearest year)

Source: OECD (2017), Health at a Glance 2017.

GBR

KOR

IRL

NOR

NLD

AUS

FIN

SVN

NZL

CHL

ESP

AUT

CAN

SWE

CHE

OECD

USA

JPN

0

SVK

0

CZE

10

DNK

10

HUN

20

LUX

20

ISL

30

DEU

30

BEL

40

LVA

40

FRA

50

EST

50

ISR

60

ITA

60

22

Key recommendations for improving the health care system •

Gradually introduce a pay-for-performance scheme for hospitals and doctors based on a broad set of performance indicators.

•

Reduce the scope of the reimbursement decree by limiting its coverage and leave room for negotiations between insurance funds and health providers

•

Align payment schemes for long-term care in health and social care setting by coordinating the use of user fees.

•

Continue reducing hospital beds by encouraging regions and municipalities to restructure capacities of health services and facilities

•

Strengthen the role of primary care through gate-keeping and further shift towards a better mix of capitation fees and fee-for-service for General Practitioners.

•

Increase the capacity of medical faculties and the number of students through scholarships and ensure the sustainable financing of universities.

•

Increase taxes on tobacco, alcohol and consider introducing taxes on unhealthy food and beverages.

•

Promote healthier lifestyles and further develop education, disease prevention and screening programmes.

More in Chapter 1 of the Economic Survey of Czech Republic 2018

23

ENVIRONMENTAL PERFORMANCE REVIEW OF THE CZECH REPUBLIC Prague, July 16th 2018 http://oe.cd/epr-czech-republic

@OECD Environment @OECD

Good performance on some Sustainable Development Goals Czech performance compared with the OECD average, Distance to target (0 – target achieved) 0.0

Target

0.0 OECD Average

0.5

0.5

Cities

Inequality

Infrastructure

Energy

Economy

Prosperity

Note: This figure shows how far the Czech Republic must progress to meet the SDGs. Source: OECD (2017), "Measuring distance to the SDG targets: An assessment of where OECD countries stand".

Implementation

Planet

Institutions

People

Biodiversity

3.0

Oceans

3.0

Climate

2.5 Sustainable Production

2.5 Water

2.0

Gender Equality

2.0

Education

1.5

Health

1.5

Food

1.0

Poverty

1.0

Peace

Partnership 25

The Czech Republic has one of the most carbon intensive economies in the OECD CO2 emissions per unit of GDP, t/1000 USD 0.7

0.7

2015

2000 0.6

0.5

0.5

0.4

0.4

0.3

0.3

0.2

0.2

0.1

0.1

0.0

0.0

CHE SWE FRA NOR DNK IRL ISL LVA GBR ITA AUT ESP PRT LUX TUR HUN SVK NLD NZL BEL FIN DEU CHL SVN MEX ISR JPN OECD GRC USA POL CZE KOR AUS CAN EST

0.6

Notes: CO2 emissions from energy use only; excluding international marine and aviation bunkers; sectoral approach. GDP at 2010 prices and purchasing power parities.

Source: IEA (2017), IEA CO2 Emissions from Fuel Combustion Statistics (database).

26

A shift from coal to nuclear and renewables Electricity generation by source, GWh 100 000

100 000

90 000

90 000 Renewables and waste

80 000 Nuclear

80 000

Natural gas

70 000

Natural gas

60 000

50 000

70 000 60 000

Coal and coal products

50 000

40 000

40 000

30 000

30 000

20 000

4th lowest OECD share

20 000

Nuclear

10 000 0

10 000

Coal

0

Source: IEA (2017), IEA World Energy Statistics and Balances (database).

27

Achieving mid and long-term climate targets will require additional efforts Greenhouse gas emissions, Mt CO2eq Total GHG emissions

Targets

Kyoto Protocol target

200

200

180

180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

20

20

0 1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Note: Total greenhouse gas emissions excluding LULUCF. Source: OECD(2017),"Air and climate: Greenhouse gas emissions by source", OECD Environment Statistics(database); MOE (2017), Climate Protection Policy.

2045

2050

0

28

Carbon prices are low Average effective tax rates on CO2 from energy and carbon intensity, 2015

Average effective tax rates (EUR/t CO2)

120

120

CHE

Nuclear 90

90

Natural gas 60

60

Oil

SWE CZE

30

30

KOR

POL

AUS

EST

CAN

USA 0

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Coal 0.45

0

0.5

Carbon intensity of GDP (kg CO2 per 2010 USD at PPP) Note: The average effective tax rate is the price of carbon emissions resulting from excise taxes (it translates excise taxes on energy into rates per unit of CO2 emissions from energy use).

Source: OECD (2018), Taxing Energy Use 2018: Companion to the Taxing Energy Use Database.

29

The rate of mortality from air pollution is among the highest in the OECD Number of premature deaths due to outdoor air pollution, per million habitants, 2016 1000

1000

900 800

800

700 600

600

500 400

400

300 200

200

0

NZL AUS SWE ISL MEX FIN CAN NOR IRL ISR CHE FRA CHL EST ESP LUX USA DNK KOR OECD TUR PRT JPN GBR NLD AUT SVN ITA BEL DEU GRC CZE SVK POL LVA HUN

100

Note: Data have been updated after the finalisation of the publication.

Source: OECD (2018), OECD Environment Statistics (database).

0

30

Waste recovery is progressing but landfilling remains the main treatment method Municipal waste management, by type of treatment, 2015

100%

Landfill

Incineration without energy recovery

Incineration with energy recovery

Recycling and composting

Other treatment

100%

80%

80%

60%

60%

40%

40%

20%

20%

0%

0%

Notes: Data refer to the indicated year or to the latest available year. They may include provisional figures and estimates. Household and similar waste collected by or for municipalities, originating mainly from households and small businesses. Includes bulky waste and separate collection.

For the specific country notes see the source database.

Source: OECD (2017), "Municipal waste", OECD Environment Statistics (database); CZSO (2017) Generation, recovery and disposal of waste.

31

Car traffic volume is growing in Prague’s outer zone Passenger transport in Prague, 2006=100

Public transport

Outer zone road traffic volume

City centre road traffic volume 125

125

100

100

75

50

75

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

50

Note: Public transport: index based on the number of passengers transported; break in time series in 2014. Traffic volume: index based on the number of vehicles over the 24 hours of an average workday. City centre delineated at Petřín in the west, Letná in the north, Riegrovy sady in the east and Vyšehrad in the south (the Strahov and Mrázovka tunnels lie outside the central cordon). Outer zone: volume of traffic at the entrances of the main roads and motorways into the continually settled area of the city.

Source: City of Prague (2006-17), Prague transport yearbook.

32

Key recommendations 1

Towards Green growth

•

Strengthen political commitment to a low-carbon economy and align the State Energy Policy with the Paris Agreement objectives

•

Introduce a carbon component in energy product taxation to reflect the climate costs of energy use outside the EU ETS

•

Increase the share of permits auctioned under the EU ETS and establish a stable support framework for renewables development

•

Tighten environmental criteria of vehicle taxes to promote fleet renewal towards cleaner vehicles and extend distance-based charging to address air pollution and congestion

33

Key recommendations 2

Improving waste management

•

Speed up the adoption of the new Waste Act

•

Harmonise the national waste management information system and official statistics on waste and materials

•

Review waste-related taxation in line with the waste hierarchy

•

Ensure that municipal waste fees cover the full costs of service provision

Promoting compact cities for sustainable development •

Use a functional rather than administrative approach in delimiting metropolitan areas

•

Adopt a compact, co-ordinated, connected urban development model

•

Link urban transport solutions to housing and land use planning to improve mobility and reduce air pollution

•

Promote the development of brownfield sites 34

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

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

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