The Czech economy grew faster than the EU average last year. However, the national debt also increased significantly
SAO OPINION ON THE DRAFT STATE CLOSING ACCOUNT OF THE CZECH REPUBLIC FOR 2025 (31 August 2026)
In 2025, the economy of the Czech Republic grew faster than the EU average. Yet, at the same time, the national debt continued to rise. Gross domestic product (GDP) went up by 2.6%, while the EU economy average stood at 1.5%. Efforts to address the weaknesses threatening the country’s future competitiveness were unsuccessful. The mentioned economic growth was driven primarily by higher household consumption. Last year, the national debt amounted to CZK 3.7 trillion, and expenditure on servicing that debt rose to CZK 98 billion. In its Opinion on the Draft State Closing Account of the Czech Republic for 2025, the Supreme Audit Office (SAO) states that the future performance of the Czech economy is threatened by low labour productivity, high energy intensity, and an aging population.
“Last year, the Czech economy grew mainly due to higher household consumption and number of working hours, rather than labour productivity. However, this model is not sustainable in the long term, especially given how fast the population is aging. Future growth must be based on innovation, automation, and modern technologies,” said the SAO President Miloslav Kala.
A major obstacle to the competitiveness of the Czech economy is the country’s energy consumption, which is twice the EU average. Compared to, for example, Germany, the Czech Republic consumes nearly 2.5 times more energy to generate one unit of GDP. At the same time, the Czech Republic is facing a significant ageing of its population as last year saw the lowest birth rate since 1785. The labour market is already experiencing shortages of workers across numerous industries. Here, the SAO sees an opportunity to, among other things, strengthen the so-called “silver economy”, which can harness the purchasing power of the ageing population and meet its needs.
Government debt has risen by two trillion over the past ten years
At the end of 2025, government debt stood at CZK 3.7 trillion, having risen by two trillion over the past decade. Debt servicing expenditure reached CZK 98 billion last year and has more than doubled since 2021. The Forecast of the Ministry of Finance predicts that, in 2028, the national debt will exceed CZK 4.4 trillion and the cost of its servicing will rise to as much as CZK 139 billion.
The state budget also ended the year 2025 with a deficit of CZK 290.7 billion, almost CZK 50 billion higher than projected in the approved budget. “State budget deficits running into hundreds of billions of Czech crowns have become a common feature of public finances. In the long term, however, budget deficits are justifiable only if they finance investments that boost the economy’s performance and support its future growth. Yet much of government spending fails to deliver corresponding results in terms of the country’s competitiveness, productivity or innovation performance,” commented the SAO President on the development of the Czech Republic’s budget.
Transport: record spending, limited results
Nearly CZK 129 billion was allocated to transport from the state budget last year, but the significant funds have yet to yield the expected results. This can be illustrated, for example, by developments in the railway infrastructure. Although Czech Republic possesses one of the densest rail networks in Europe, its capacity is limited by the low proportion of multi-track lines, which account for only 22% of the whole network. By contrast, in the last few decades Poland has focussed on developing high-capacity multi-track corridors, which now account for 45% of the length of its rail network.
Meanwhile, the Czech Republic maintains a relatively extensive railway network, which is under-utilised in some areas. Its operation and maintenance consume considerable resources that could be used more effectively to modernise key railway lines.
Science and research: Innovation Leader? So far only on paper
Last year, the state invested more than CZK 54 billion in science, research and innovation. Nevertheless, the Czech Republic continues to rank among the so-called “Moderate Innovators” and is still far from achieving its goal of becoming a European Innovation Leader by 2030.
Estonia serves as a case in point. A country with a population one-tenth of the Czech Republic’s has created 15 start-ups valued at over billion dollars, while the Czech Republic has only four such companies registered. The competitive advantage of Estonia lies primarily in its fully digitalised public administration, zero taxation on reinvested profits and low administrative burden.
Communication Department
Supreme Audit Office