OECD report: Czechia facing mild recession and high inflation

The Czech Republic is expected to face a mild recession this year, with GDP falling by 0.1 percent, according to the latest OECD report, which was presented on Thursday by Prime Minister Petr Fiala and OECD Secretary General Mathias Cormann at a press conference in Prague. The country will also continue to struggle with high inflation, which is expected to be at 13 percent.

In order to combat inflation, the OECD recommends that Czechia maintains a strict monetary policy until inflation is down to near two percent. The report states that the relaxed macroeconomic policy of 2020 and 2021 contributed to high inflation and that it will be necessary for government support measures to be targeted, not blanket.

The report also draws attention to the high public finance deficit in recent years, and recommends that Czechia raise the retirement age and increase progressive tax rates in order to achieve medium-term fiscal sustainability.

Author: Anna Fodor