The Czech economy grew by 2.6% last year, well above the EU average of 1.5%. At the same time, however, government debt rose to CZK 3.7 trillion and debt-servicing costs reached CZK 98 billion. The Supreme Audit Office (NKÚ) warns that weaknesses threatening the country’s future competitiveness remain unresolved.

According to the NKÚ, low labour productivity, high energy costs and an ageing population are among the main challenges facing the Czech economy. “The Czech economy is being held back by high energy prices, and key reforms are no longer even being discussed, let alone launched by the government,” said NKÚ President Miloslav Kala. The office also pointed to lower-than-expected revenues from the sale of emission allowances as a factor behind last year’s larger-than-planned budget deficit of CZK 290.7 billion.

Kala warned that large state budget deficits have become a normal feature of Czech public finances, while some government spending fails to deliver sufficient improvements in competitiveness, productivity or innovation. “The Czech economy grew last year mainly thanks to higher household consumption and the number of hours worked, rather than labour productivity. This is not a model that can provide a sustainable foundation for long-term growth,” he said.

Government debt has increased by CZK 2 trillion over the past decade, while interest payments have more than doubled since 2021. The Ministry of Finance forecasts that debt could exceed CZK 4.4 trillion next year, with interest payments reaching up to CZK 139 billion.

The NKÚ also criticized public spending on transport and innovation. Nearly CZK 129 billion was allocated to transport last year, but the office said the spending has yet to deliver the expected results. In science, research and innovation, the state provided more than CZK 54 billion, yet Czechia remains classified as a “moderate innovator” and is still far from its goal of becoming a European innovation leader by 2030.

Source: e15
Prepared by the team of foreign office CzechTrade South Korea (Seoul)