The Czech Republic faces a number of structural problems that affect its economic growth and social stability. Key challenges include a high fiscal burden and an inefficient tax system that relies heavily on social security contributions. This situation creates a high tax burden for low-income and second earners in families, reducing incentives to work and encouraging the informal economy. Moreover, fiscal policy lacks long-term sustainability, especially in the context of an ageing population and the associated pressure on the pension system.

Administrative fragmentation and low efficiency of public administration are other major problems. The Czech Republic has the smallest average size of municipalities in the OECD, leading to low quality and efficiency of public services. Many small municipalities lack the administrative capacity to manage investments and public finances, which limits their ability to implement long-term development projects. The OECD recommends merging municipalities or at least strengthening inter-municipal cooperation to improve public service delivery.

The Czech economy also faces challenges in education and the labour market. Despite a solid primary and secondary education system, there is a decline in the performance of disadvantaged students, exacerbating social inequalities. The vocational education system is too specialised, leading to a mismatch between labour market supply and demand. There is also a shortage of teachers, especially in science and technology, and low participation of adults in lifelong learning. Improving the education system would require better financing of schools with a high proportion of disadvantaged students, increasing teachers' salaries and modernising vocational training.

Finally, the inefficient use of real estate and the high energy intensity of buildings are other major problems. The Czech Republic still relies on coal for energy production and much of the housing stock is outdated and poorly insulated, leading to high greenhouse gas emissions and air pollution. Changing the property tax system to more closely reflect real property prices could incentivise owners to make better use of vacant apartments and houses. Programmes to support building renovation should also be expanded and permitting processes for renewable energies should be accelerated.