OECD predicts slower Czech growth, urges more fiscal reform

Prague  - The Czech Republic's booming economy is to grow slower in coming years and will be in need of further fiscal reform, according to a survey by the Organization for Economic Cooperation and Development (OECD) released Thursday.

OECD predicts that the Czech economy is to slow down to 4.5 per cent in 2008 and 5 per cent in 2009, still well above the Western European average but below the
6.5-per-cent levels of recent years, OECD general secretary Angel Gurria said.

The Czech Republic is one of the most successful post-communist economies that has been fuelled by car and electronics export industries.

According to the survey, the country could reach Western European levels of prosperity in 10 years if it keeps up its growth.

"Assuming real GDP-per capita growth of 2 per cent in the euro area and 5 per cent in the Czech Republic, the gap could close within a decade," OECD said.

The Czech Republic's gross domestic product per person is currently about 75 per cent of the eurozone average on a purchasing- power-parity (PPP) basis, the survey said.

OECD's Gurria praised the centre-right cabinet for setting out on a budget-tightening course, but also urged further fiscal reform that would sustain country's competitiveness in the face of population ageing.

"You are a small, open economy. You have to always keep in great shape," he said.

The OECD recommended that the Czech Republic increase retirement age, keep overhauling healthcare and improving conditions in the labour market.

The call for further fiscal reform came a day after the country's top court abolished one of the government's earlier measures aimed at taming public finances.

The government hopes to introduce further budget-tightening reforms, but faces hurdles from its own dissidents and leftist opposition in a tightly divided parliament. (dpa)

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