Czech Republic: Selected Issues
Author: International Monetary Fund
Publication Date:
04 Mar 2010
Language:
English
Keywords:
ISCR; CR; output gap; Mv method; FDI inflow; FDI; Mv approach; welfare reform package; reform effort; government plan; governance reform; reform policy; Health care; Insurance; Global
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This 2010 Article IV Consultation discusses Czech Republic’s economic condition. The Czech economy’s fundamentals were strong prior to the global economic and financial crisis. However, owing to its highly open nature, the economy was hit by spillover effects. A downturn in the euro area depressed exports while investment declined owing to a drop in FDI and the tightening of banks’ lending standards. Monetary and fiscal easing provided helpful stimulus, thereby cushioning the economic downturn.

Abstract

This 2010 Article IV Consultation discusses Czech Republic’s economic condition. The Czech economy’s fundamentals were strong prior to the global economic and financial crisis. However, owing to its highly open nature, the economy was hit by spillover effects. A downturn in the euro area depressed exports while investment declined owing to a drop in FDI and the tightening of banks’ lending standards. Monetary and fiscal easing provided helpful stimulus, thereby cushioning the economic downturn.

II. Structural Reform Agenda to Ensure Fiscal Sustainability and Promote Growth13

A. Introduction14

While the global economic and financial crisis is creating its own fiscal pressures, the Czech Republic will need to brace itself for an even greater challenge for fiscal sustainability over the medium term. Rapidly rising age-related pension and health spending underscores the need for fundamental pension and health care reform. The global crisis and associated decline in potential output are also accentuating the need for complementary growth-promoting structural reforms to enhance productivity growth and competitiveness.

1. Going forward, the Czech population is projected to age at one of the fastest rates among OECD countries, in line with other countries in Central Europe. By 2060, the oldage dependency ratio15 will have tripled to 61 percent, with the elderly accounting for 33 percent of the population compared with 14 percent in 2007. Meanwhile, the share of the working age population will have shrunk to 54 percent compared with 71 percent in 2007.

uA02fig01

Old-Age Dependency Ratio

(Above 64 in percent of 15-64 year-olds)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: European Commission.

2. At the same time, the pension and health care systems, which account for the bulk of age-related expenditures, remain largely unreformed, with only limited private participation.16 In particular, while public spending on pensions still remains comfortably below the averages of both the old (EU-15) and the new (EU-12) member states of the European Union, public health care spending is already high compared with the rest of the region.17

uA02fig02

Pension and Health Spending, 2007

(in percent of GDP)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: European Commission.

3. As a result, total age-related public spending is projected to increase faster in the Czech Republic than in the rest of the EU based on current policies. Spending will grow by 5.5 percentage points of GDP over the next 50 years compared with average increases of 4.8 and 3.4 percentage points in the EU-15 and EU-12, respectively.18 According to the 2009 EU Sustainability Report, the Czech Republic is ranked as a country with high long-term fiscal risks, with a sustainability gap of 7.4 percent of GDP (compared with an average EU gap of 6.5 percent), implying that in order to put public finances on a sustainable path, the structural primary balance would need to improve by this amount.19 Half of this gap is attributed to the current budgetary position, while the other half is attributed to the long-term cost of ageing.

Czech Republic: Pension and Health Care Spending Projections 2007 and 2060

(in percent of GDP)

article image
Source: European Commission
uA02fig03

Change in Total Age-Related Spending, 2007-2060

(in percent of GDP)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: European Commission.

4. Furthermore, the reduction in the working-age population will require complementary structural reforms to boost productivity growth and competitiveness. This will be key given the fiscal consolidation required to address the age-related spending pressures and the associated output costs. In line with the recommendations of the European Commission’s 2009 assessment of the implementation of the Lisbon Strategy in the Czech Republic, reform policies should focus on: increasing labor productivity and participation, and labor market flexibility; promoting the efficiency of higher education and research and development; and enhancing the business climate and the flexibility of the economy more generally.

5. While the 2007 welfare reform package was a step in the right direction, further steps will be needed. As part of the 2007 package, steps were taken to shift some of the tax burden from labor to consumption, better target certain social benefits, and introduce the first steps in pension and health care reforms, including the increase in the statutory retirement age and co-payments for doctor’s visits and pharmaceuticals. Still, this reform package was only the beginning of the reform process and further reforms will be needed in the years to come. While undertaking thorough structural reforms is a political challenge, the current crisis might now prove a “golden opportunity” to muster the needed political consensus.

B. Pension Reform20

The status quo

6. The current pension system consists of a public mandatory PAYG defined-benefit social insurance scheme (first pillar), which has been successful in achieving high coverage and low poverty among the elderly at relatively low cost. Pension benefits are highly redistributive, with net replacement rates declining with income.21 At the same time, benefits are quite moderate by international comparison, resulting in relatively low pension wealth in terms of the present value of pension entitlements. While the system was running surpluses through 2008, the Social Insurance Fund is estimated to have recorded a deficit of close to CZK 30 billion in 2009 reflecting the economic downturn and hence decline in contributions, as well as the temporary reduction in social insurance contribution rates as part of the anti-crisis fiscal package.

7. Meanwhile, the voluntary private supplementary pensions have only had limited success. Despite both tax allowances and direct subsidies, they remain at an early stage of asset accumulation (with current assets of only about 5 percent of GDP) and function largely as a state subsidized savings scheme rather than as retirement savings.

8. While the current statutory (official) retirement age is already low compared with most European and OECD countries, the effective retirement age is even lower. Since 1996, the statutory retirement age has been gradually increased from 60 to reach 63 by 2013 for men, and from 53–57 to 59–63 for women, depending on the number of children raised. However, many leave the work force even earlier through generous early retirement schemes and disability pensions, implying that the effective retirement age is even lower, in particular for women and low-wage earners. The effective accrual rate for pension benefits, which depends upon wage levels, is also relatively low by regional standards, providing strong incentives for early retirement. As a result, pension benefits combined with other social benefits have resulted in a net replacement rate of around 100 percent among low-wage earners.

uA02fig04

Official Retirement Age, 2002-07

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: OECD.

Parametric changes to the public pension scheme

9. Several measures in the 2007 welfare reform package, effective January 2010, aim to increase the effective retirement age. In particular:

  • The statutory retirement age will continue to be gradually increased to 65 for men (62-65 for women) by 2030;

  • The required insurance period will be gradually lengthened from 25 years of gainful occupation to 35 years by 2019;

  • Study periods will no longer be automatically insured but students will have the opportunity to voluntarily participate and pay contributions;

  • Disability pensions will be reclassified from a 2-tier to a 3-tier system, in effect implying a tightening of the conditions;

  • The old-age pension will be further reduced in case of early retirement.

These measures should help boost labor supply and reduce incentives for early retirement, hence further support the financial sustainability of the PAYG system. Meanwhile, the decision to gradually extend the period for early retirement from three to five years will negatively affect the effective retirement age.

10. In the near term, further parametric changes to the current PAYG system would help strengthen the fiscal position. While insufficient to ensure the long-term sustainability of the pension system, the following measures could be considered:

  • Better linking contributions to benefits, thereby also making the former seem more like savings and less like a tax and in turn reducing the tax wedge on labor income;

  • Moving forward to 2020 the increase in the statutory retirement age to 65;

  • Introduce same retirement age for women as for men (women already enjoy significant maternity/parental leave for raising children, which counts against the required insurance period);

  • Further review overall work-retirement incentives, including reducing the period for early retirement back to 3 years.

Yet increasing the social security contribution rates further should be avoided. These rates are already relatively high in comparison with other EU countries and a further increase would adversely impact labor supply.

uA02fig05

Social Security Contribution Rate, 2008

(In percent)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: OECD.

Expanding private pension schemes

11. In the short-term, a rationalization of the current tax allowances and direct subsidies for savings in the third-pillar voluntary supplementary private pension plan could also yield fiscal savings. While there is wide-spread participation in these pension funds, they have had only limited success in generating further savings, with most contributions set at a level that maximizes the public subsidy. In fact, based on international experience, there is scant evidence as to the effectiveness of such incentives; meanwhile, they carry a fiscal cost.

12. Looking ahead, pension reform should aim to reduce the reliance on the public pension system and increase the role of private pension schemes. Several proposals have been discussed over the past few years to address the long-term fiscal pressures from aging, although there is so far no consensus on a new pension model. A number of these reform proposals envisage a transition to fully funded second-pillar private pension schemes where workers could divert part of their social security contributions away from the existing PAYG public pension scheme. In most countries in Central and Eastern Europe that have introduced a multi-pillar pension system, the decision to switch to private pension funds has been voluntary. In cases where it has been mandatory it has only applied to new entrants or younger workers. Given the strong redistributive character of the Czech first-pillar system, there is a concern that mostly wealthy individuals might choose to opt out. As this would further undermine the financial sustainability of the first pillar, there is a case to be made for considering some degree of mandatory participation in a funded second-pillar pension system. More diversified sources of retirement income would help promote income security, in particular as the different systems face different shocks. While the PAYG system is more exposed to political bargaining, shocks to labor income and population aging, a funded pension system is more susceptible to inflation risk and financial market volatility.

Prefunding of future pension deficits

13. As the cyclical fiscal position improves, the authorities may also need to consider prefunding of reserves that would be used to finance future pension deficits (or transition deficits if moving toward private pension funds). This could be done through upfront fiscal consolidation measures, or possibly funding from any future pension surpluses or privatization revenues. While the authorities have already set aside some funds for this purpose, further significant financing will be needed. As the population ages, the reserve fund can be drawn down, avoiding an increase in contribution rates. Prefunding would improve inter-generational equity by ensuring that the output costs from the upfront fiscal consolidation are borne primarily by the beneficiaries of the government transfers. At the same time, it will be important to ensure a governance structure for the reserve fund that maintains independence for investment decisions and does not allow governments easy access to its resources.

14. Lastly, it is important that the current economic and financial crisis does not lead to a reversal of past reforms. In a number of OECD countries with mixed pension systems, there have recently been calls to move back to a pure reliance on public PAYG schemes. Still, fiscal constraints imply that private pensions must continue to play an important role in providing for old age. Rather, the current crisis underscores the need for changes in the way private-pension schemes operate, including better regulation, more efficient administration, clearer information about the risks and rewards of different options, and an automatic switch to less risky investments as people near retirement.

C. Health Care Reform22

The status quo

15. The current health care insurance system provides universal and near comprehensive coverage with a public price-setting mechanism. The public has the choice of health insurance fund and provider, which involves a public/private mix of hospitals and physicians. The government supervises and has the final authority over the negotiation of contracts between insurance funds and providers, specifying benefits coverage, fee structure, and reimbursements. Individuals and employers contribute through payroll taxes (13.5 percent: ⅓ employee, ⅔ employer) while the state provides for those outside the workforce, comprising more than 50 percent of the population.23 The share of public sources in total health spending amounted to 85.2 percent in 2007, well above the OECD average of 73 percent; private insurance is virtually nonexistent.

uA02fig06

Health Spending, 2007

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: OECD.

16. The health care system has experienced repeated financial strains over the years, reflecting inefficiencies, excessive demand and high utilization rates, and overcapacity. While the statutory health insurance is separated from the state budget, there have been reoccurring subsidies to indebted hospitals from the state budget. Reimbursements have been provided for specialist care on a fee-for-service basis, resulting in excessive demand and high utilization rates with few incentives for rationalization of service delivery or cost containment. There is overcapacity, with more physicians and hospital beds per capita than in most other OECD countries. Under current policies, health care expenditures are projected to rise to 8.5 percent of GDP in 2060 compared with a projected EU average of 7.2 percent.24 Pharmaceutical spending has risen in particular, accounting for 21.5 percent of total health spending in 2007, well above the OECD average of 17.1 percent.25

uA02fig07

Hospital Resources, 2007

(Per 1000 Inhabitants)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: OECD.

Recent reforms have been limited

17. Following a considerable amount of reform in the Czech health care system in the early 1990s, there has since been limited progress until more recently. Other than legislative changes in connection with EU accession, little was done in health care reform until the introduction in 2008 of nominal user fees for doctor’s visits, short-term hospital stays, emergency services, and prescriptions. The user fees had a noticeable immediate impact in containing excess demand, especially for drugs: looking ahead, these user fees could usefully be made means tested. The user fees have turned out to be politically contentious and amendments were introduced last year eliminating payments for doctor’s visits for children under 18, and halving the fee for people above 65. There also attempts by local hospitals to reimburse the fees from their own budgets and there are proposals pending in parliament for their complete abolition.

Further reforms are needed

18. Looking ahead, there is a need for more fundamental institutional and funding reforms to enhance efficiency and ensure long-term financial sustainability of the health care system. Such reforms could build on the 2006–08 government health care proposals and could focus on:

  • Institutional reform: Allowing greater scope for private sector provision of health services by pairing down the current wide coverage of publicly provided and insured services. Greater private sector participation in health services would in turn introduce more competition among insurers and providers, and create better incentives for health insurance funds to be cost effective. More competition among insurers would probably also require governance reforms regarding their Board representation—currently, the Board of the largest insurance fund consists entirely of political representatives, in contrast to more diversified representation structures at the Boards of the other smaller insurance funds.

  • Funding reform: Introducing a voluntary supplementary health insurance system, personal health accounts, and differing health benefit plans.

A thorough proposal for health care reform in the Czech Republic was prepared for the previous government by an independent think tank in 2005 (Box 1).

Box: Independent Health Care Reform Proposal1

In 2005, Health Reform.cz, a nonprofit professional Czech think tank prepared a reform concept as a basis for the government’s health care reforms. The proposal focused on institutional reform, i.e. changing the roles and relationships between insurers, providers, the state, and the citizens; and funding reform, to ensure long-term financial sustainability.

Institutional Reform:

  • ✓ Use health insurers as purchasers of health care, in addition to their main function of providing insurance. All developed health care systems have the specific function of a purchaser of health care, resulting in an “internal” market between payers and providers and eliminating the role of the state as a direct organizer of health services. Quality of health care should be measured in terms of inputs, processes, and outputs. Price negotiations between insurers and providers should be liberalized and there should be competition among health insurers;

  • ✓ Strengthen competition among health insurers and health facilities, leading to the creation of a regulated market in the area of health insurance and health care provision:

  • ✓ Change the incentives and hence behavior of individuals by introducing limited user charges and changes in drug reimbursement, while introducing caps on total individual spending (such measures were introduced in 2008);

  • ✓ Improve the role of the state as a regulator and consumer advocate in the health care system.

Funding Reform:

  • ✓ Divide health insurance into Basic and Supplementary parts, with the former covering some 70 percent of the current scope of public health insurance and defined using medical and financial criteria. The supplementary insurance should be voluntary but largely supported from public sources, as outlined below;

  • ✓ Introduce personal health accounts, to allow more independence and responsibility for health care costs on the part of the citizens. The personal health accounts could be used to buy supplementary insurance or to pay for medical care directly. This would limit the scope of mandatory health insurance while maintaining general financial accessibility to health care.

  • ✓ Offer different health benefit plans;

  • ✓ Combine public and private mandatory and voluntary funding: (i) public contribution toward basic health insurance (including from levies on wages); (ii) public contribution toward personal health accounts; (iii) mandatory private contributions toward personal health accounts; and (iv) voluntary private contributions toward personal health accounts.

1 Based on Hroboň, Macháček, and Julínek (2005).

19. While fundamental health care reform would require a strong reform effort, it could yield significant savings over time. While there are various options to consider, with different countries choosing different systems, international experience underscores the need to, as a first priority, establish a team to lead the reform effort given the sheer complexity of overall health care reform. A broad public discussion regarding an acceptable definition of entitlement—benefits publicly covered and insured—could be a good starting point for future reforms. The reform efforts could pay off: over time, enhanced competition among providers and insurers would help keep costs down, private co-payments would rationalize demand, and a reduction in the current very generous coverage would keep public spending in check.

D. Labor Market Reform26

Recent reforms

20. A number of steps have been taken in recent years to reduce the existing administrative burden on businesses and ease labor and skill shortages. These include the removal of certain restrictions in the labor code effective January 2007, the reduction of direct taxation of labor as part of the 2007 reform package and the temporary reduction in social security contributions rates for low-skilled workers in early 2009, as well as recent measures to support training of employees in existing firms.

The status quo and outlook

21. Yet problems remain in the labor markets, including low geographic and sectoral mobility and skills mismatch. Youth participation, although in line with the rest of the region, has declined over the last few years and is much lower than the EU-15 average.27 Labor market participation among women is in line with EU-15 and even higher than elsewhere in the region, but it is still lagging behind the best performers in Europe. Part-time jobs are still uncommon, preventing flexibility and leaving a significant part of the labor pool untapped. Also, while the unemployment rate has declined substantially over the past few years before rising sharply during the crisis, long-term unemployment remains high, in line with the rest of the region. While there seems to be an excess supply of vocational schools oriented toward traditional industries, local governments might not be providing sufficient capacity for more general pre-university secondary education, which is increasing in demand. Lastly, following strong growth over the last number of years, labor productivity has fallen significantly during the current crisis, declining by an estimated 3 percent in 2009 compared with average annual gains of some 4 percent during the boom years, possibly reflecting labor hoarding as firms sought to retain employees during the downturn.

22. Structural labor market reforms will be all the more important in light of the current economic crisis. Unemployment in many European countries is expected to rise well into next year, reaching levels not seen for a decade. As noted by the European Commission in its Annual Assessment of the implementation of the Lisbon Strategy, “[o]ne of the main challenges facing the Czech economy in the post-crisis environment will be to ensure a rapid adjustment of the labor market to the downturn.”28 There is a risk that the large drop in economic activity might translate into an extended period of high unemployment, in particular in export-oriented regions.

uA02fig08

Labor Market Participation Rate, 2008

(In percent)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

uA02fig09

Long-Term Unemployment Rate, 2008

(In percent of total unemployment)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: European Commission

Reform proposals

23. Future reforms to enhance labor participation and labor productivity could focus on:

  • Improving work incentives for low-income households and reducing their still high effective marginal tax rates, once cash benefits are included, through further reforms of the tax-benefit system;

  • Enhancing post-retirement work incentives, in addition to raising the retirement age, to boost labor market participation among the elderly—currently, working pensioners make contributions but there is no corresponding adjustment of the payout;

  • Enhancing access to affordable daycare, possibly by giving municipalities greater incentives to provide such services, to further promote female labor participation;

  • Removal of barriers to nonstandard work, including the minimum social contribution, to enhance part-time work;

  • Reducing the age limit until which individuals are eligible for tax credits and child benefits from the current 26 years of age to 18. This would boost youth labor supply, as well as tax revenue, while reducing transfer spending;

  • Complete liberalization of the rental market to promote labor mobility within the country and hence productivity;

  • Enhanced access to secondary training with greater emphasis on general competencies, to allow workers to move across sectors and occupations while avoiding having young people entering too narrow vocational training too early. For example, Poland has postponed by one year the move from lower secondary to vocational education to allow students to absorb more general knowledge and avoid too early specialization;

  • Reducing the relatively costly dismissal protection for newly hired by linking it to length of employment to enhance labor market flexibility.

uA02fig10

Strictness of Employment Protection, 2008 1/

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

1/ The strictness of regulation on dismissals and the use of temporary contracts in a scale of 0-6.Source: OECD

E. Education Reform29

The status quo

24. As economies mature, there is an increasing demand for more general skills such as adaptability, analytical thinking and communication skills, acquired through additional academic schooling. Recent survey data from the region suggest that merely completing tertiary education generates a strong wage premium, an indication that the associated certification is a signal in itself about competencies and attributes valued by employers.30

25. However, while tertiary education in the Czech Republic has expanded rapidly, graduation rates remain relatively low compared with the rest of the EU, including other new member states. A recent study commissioned by the European Commission on the efficiency and effectiveness of public spending on tertiary education ranks the Czech Republic among the least efficient within the EU.31 Tertiary education efficiency is related both to institutional factors and the quality of secondary education. As tertiary education is seen as one of the driving forces of growth, with strong linkages to labor and total factor productivity, it will be important to take measures to enhance its efficiency.

uA02fig11

Tertiary Education Graduation Rates, 2007

(in percent)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: OECD

Reform proposals

26. Reforms to enhance the efficiency of tertiary education and promote innovation (R&D) and productivity growth could include:

  • Introduction of tuition fees, to raise revenues and enhance efficiency by creating cost incentives for students to complete their studies in a timely manner; such fees should be backed by student loans with income-contingent repayments. There are currently advanced proposals for the introduction of such a system of student loans, which in turn could pave the way for introducing the tuition fees looking ahead;

  • Enhanced licensing and accreditation procedures for universities, with more emphasis on quality assessment;

  • Increase the share of public funding that depends on the quality of output, including publication history—while Czech universities are highly dependent on public funding, they enjoy a significant degree of independence, with few checks and balances;

  • Enhanced collaboration between employers and universities/research institutes to cope with changing skill requirements;

  • Expanding the range of programs and improving access for adults, including through shorter-term studies and long-distance learning.

F. Business Environment32

Recent reforms and the status quo

27. Steps to enhance the business climate will be key to attract FDI and enhance overall factor productivity. Capital flows to transition and emerging economies are likely to be considerably lower looking ahead given the reduced appetite for risk, and will go to countries with the most attractive business environment.

28. Despite some recent reforms, there is still room for improving the business climate in the Czech Republic. A substantial amendment to the trade law became effective in July 2008, which significantly simplified licensing procedures, including through electronic registration, and thus made starting a business easier and faster. Also, a new insolvency law came into effect in 2008, which should shorten the duration of bankruptcy procedures and strengthen creditors’ position. It also introduced the possibility of personal bankruptcy for private individuals. Still, license and permits systems and communication of rules and regulations remain relatively cumbersome, in particular for new firms, discouraging competition and productivity increases.

29. The recent World Bank Group Doing Business Report 2010 points to starting and closing a business as particularly onerous in the Czech Republic.33 In particular, while the number of procedures and time required to start a business are only slightly above the OECD average, there is a much larger financial burden in the Czech Republic both in terms of upfront costs and minimum capital as percent of per capita income. Also, despite the adoption of the new bankruptcy law, closing a business still takes much longer and is significantly more costly compared with the OECD average.

30. Other concerns noted are paying taxes, protection of investors, enforcement of contracts, and dealing with construction permits. While the issuance of construction permits has been streamlined by reducing the internal processing time for registering new plots, there are still many more procedures compared with the OECD average. Similarly, despite the recent introduction of electronic filing, paying taxes still takes much longer in the Czech Republic. Looking ahead, the government plans to further simplify paying taxes and levies by unifying the assessment tax bases, establishing one account for all payments, and creating one single institution for revenue administration.

uA02fig12

Costs of Starting a Business, 2009

(In percent of income per capita)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

uA02fig13

Closing a Business, 2009

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: World Bank.
uA02fig14

Dealing with Construction Permits, 2009

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

uA02fig15

Time Paying Taxes, 2009

(Hours per year)

Citation: IMF Staff Country Reports 2010, 059; 10.5089/9781451943207.002.A002

Source: World Bank.

Reform proposals

31. Looking ahead, reforms could address the following areas:

  • Further streamlining the implementation of the new trade and insolvency laws to encourage entrepreneurship, including further efforts to train judges and administrators;

  • Improve communication of rules and procedures;

  • Facilitate new entry by reducing state ownership in network industries (airlines, post, and rail) and strengthen competition in the gas sector; and

  • Further enhance the effectiveness of e-government, in particular at the regional and municipal levels, and ensure that it covers all basic business needs, including paying taxes, business registration, obtaining permits and licenses, and public procurement.

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  • World Bank (2009b), “Program Document for a Proposed Loan in the Amount of €1 Billion to the Republic of Poland to Support an Employment, Entrepreneurship, and Human Capital Development Policy Program,” Report No. 48644-PL, June, http://www-wds.worldbank.org/.

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  • World Bank (2009c), “Turmoil at Twenty—Recession, Recover, and Reform in Central and Eastern Europe and the Former Soviet Union,” by Pradeep Mitra, Marcelo Selowsky, and Juan Zalduendo, November, http://web.worldbank.org/.

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  • World Bank Group (2009), “Doing Business 2010,” http://www.doingbusiness.org, Washington.

13

By Ann-Margret Westin (EUR).

15

Defined as the population aged 65 and above as a share of the population aged 15–64.

16

Age-related spending also includes spending on long-term care, unemployment, and education.

17

In addition, experience from other countries suggests that as countries grow richer over time, age-related spending in proportion to GDP tends to increase.

21

Net replacement rates are defined as individual net pensions relative to individual net earnings, taking into account personal income taxes and social security contributions paid by workers and pensioners.

23

The state covers the unemployed, pensioners, dependents up to the age of 26, students, women on maternity leave, military, prisoners, and individuals on social welfare.

26

This section draws on Dalsgaard (2008); European Commission (2009b&c); European Employment Observatory (2009); Mattina (2007); OECD (2008, 2009a); and World Bank (2009c).

27

While this in large part this reflects higher inflow to secondary and tertiary education, there is also a relatively high incidence of unemployment among those aged 20–24.

Same Series

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Czech Republic: Selected Issues Paper
Author: International Monetary Fund
Volume/Issue:
Volume 2010: Issue 059
Publisher:
International Monetary Fund
ISBN:
9781451943207
ISSN:
1934-7685
Pages:
29
DOI:
https://doi.org/10.5089/9781451943207.002

Old-Age Dependency Ratio

(Above 64 in percent of 15-64 year-olds)

Pension and Health Spending, 2007

(in percent of GDP)

Change in Total Age-Related Spending, 2007-2060

(in percent of GDP)

Official Retirement Age, 2002-07

Social Security Contribution Rate, 2008

(In percent)

Health Spending, 2007

Hospital Resources, 2007

(Per 1000 Inhabitants)

Labor Market Participation Rate, 2008

(In percent)

Long-Term Unemployment Rate, 2008

(In percent of total unemployment)

Strictness of Employment Protection, 2008 1/

Tertiary Education Graduation Rates, 2007

(in percent)

Costs of Starting a Business, 2009

(In percent of income per capita)

Closing a Business, 2009

Dealing with Construction Permits, 2009

Time Paying Taxes, 2009

(Hours per year)