Annual Progress Report (2025) – Fiscal-Structural Plan of the CR for 2025–2028 period
The Annual Progress Report follows the amendment of the Stability and Growth Pact. Its content is framed by Regulation (EU) No 2024/1263 of the European Parliament and of the Council on effective coordination of economic policies and on multilateral budgetary surveillance. It aims at an annual assessment of the implementation of the Fiscal-Structural Plan. The currently assessed plan was prepared by the Czech Republic for the period 2025 to 2028, approved by the Czech Government on 16 October 2024; the EU Council issued a recommendation on 21 January 2025. On the basis of the Fiscal-Structural Plan and the recommendations of the European Commission, the Council of the European Union set a net expenditure path for the Czech Republic. This is defined as the growth of total public expenditure net of interest expenditure items, expenditure on European Union projects, national financing of projects co-financed by the European Union, discretionary revenue measures and one-off measures. The Fiscal-Structural Plan has been prepared in such a way that it is also fully consistent with national legislation in the form of the Act on the Fiscal Responsibility Rules.
When the Fiscal-Structural Plan was drawn up, the 2024 general government deficit was forecast at 2.8% of GDP, and 2.1% of GDP after adjusting for the effects of the business cycle and one-off measures. According to data from the Czech Statistical Office, the deficit was 2.2% of GDP, and 1.9% of GDP in structural terms. We estimate net expenditure growth for 2024 at 2.8%.
This report summarises the current steps and planned activities of the Czech Republic in the areas defined by the Fiscal-Structural Plan in response to specific recommendations of the Council of the European Union. As part of the energy sector measures, the Government approved an update of the National Energy and Climate Plan in December 2024. In January 2025, the National Action Plan for Smart Grids was approved to support the integration of new technologies in the energy sector. Progress continues on ending energy dependence on Russia. In addition, reforms in the field of energy regulation are under preparation. In the area of decarbonisation financing, investment in strategic technologies continues to be promoted. The science and research sector is focusing on innovation in the energy sector through programmes such as THÉTA 2 and Environment for Life 2. The transformation of the Energy Consultation and Information Centres into Points of Single Contact for energy saving advice is also underway.
In the area of social systems, the final part of the pension reform was approved and implemented, bringing, among other things, a further increase in the retirement age to 67 and a gradual decrease in replacement rate on newly granted pension benefits. Its overall positive impact on public finances is estimated at 1.5% of GDP. As regards social benefits, a reform of the system is being discussed by Parliament, which merges the current four benefits into one, changes the way eligibility for benefits is assessed and reduces the administrative burden of providing benefits by applying digitalisation tools.
The efficiency of healthcare in the Czech Republic is strengthened by the CZ-DRG system for categorising hospital admissions, which covers more than half of acute care. In addition, there is a transformation of the inpatient pool for follow-up and long-term care. At the same time, the Government approved the Act on the Social-Health Inpatient Care, which allows for coordinated care for people requiring both services. The reforms also address the digitalisation of the healthcare system. The amendment to the Act on the Electronization of Healthcare extends the electronic health record or introduces a shared health record, which improves coordination between healthcare providers. In the area of prevention and quality assurance of care, a project to improve cancer screening programmes and the construction of specialised oncology and cardiovascular centres is ongoing. In 2025, a system to optimize the training of healthcare professionals and the construction of a simulation centre for intensive care medicine will be completed.
The Czech labour market has been tight for a long time. At the same time, however, it is subject to change, which is why programmes aimed at retraining workers as a result of decarbonisation and economic transformation are being implemented. Support is given to people with accumulated social problems and to the employment of people with specific needs. Amendments to employment laws and a new Act on Social Entrepreneurship aim to increase flexibility in the labour market and promote the employment of disadvantaged groups. In the context of preparing for future careers, modernisation of school curricula and increased funding for higher education is continuing, and teacher professional development and lifelong learning, including digital skills, are being promoted. Furthermore, changes are planned to support affordable and social housing, including cost-effective housing modernization programmes for those on lower incomes.
In the area of public administration modernisation, the Czech Republic is in the process of reforming the judiciary, including an amendment to the Act on Procedure in Matters of Judges, which increases transparency in the judiciary, and the launch of the justice portal simplifies citizens’ access to legal services. In the area of eGovernment, new digital services have been introduced with the aim of simplifying citizens’ communication with the public administration. In research and innovation, a new research law has been prepared to strengthen the innovation environment and the science-business interface. Investment in high-speed networks and 5G coverage is ongoing.