Czech Republic: Skills shortage
Growth slowed in the first half of 2008 and is not expected to return to trend again until 2010. The slowdown started with weaker domestic demand in 2008, as the inflation spike eroded consumers’ purchasing power, and will continue as export market growth slows. The rebound is projected to be driven by both private consumption and exports. Inflation is expected to decelerate substantially in 2009 as the impact of one-off government measures wears off and global energy and commodity prices fall.
The key impediment to continued high trend growth is a shortage of labour and skills. The government could ease this shortage by further reducing marginal income tax rates and increasing graduation rates from tertiary education. Additional reforms of healthcare and pension systems are needed to ensure fiscal sustainability and enhance efficiency of public spending.