{
  "title": "IMF Executive Board Concludes Article IV Consultation with Czech Republic",
  "publication": "IMF News, June 13, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/06/12/pr19215-czech-republic-imf-executive-board-concludes-article-iv-consultation",
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  "summary": "Press Release No. 19/215",
  "publishDate": "2019-06-13",
  "sections": [
    {
      "heading": "Background and timing",
      "content": "- Press Release No. 19/215\n- Date: June 13, 2019; Executive Board conclusion date: June 12, 2019\n- Press officer: Meera Louis; Phone: +1 202 623-7100; Email: MEDIA@IMF.org"
    },
    {
      "heading": "Current economic assessment",
      "content": "- The economy is doing well but supply constraints are biting.\n- Growth has slowed as the economy has reached capacity limits, with very low unemployment even as participation has increased.\n- Recent wage increases have been very strong, ahead of productivity.\n- So far, inflation remains contained.\n- The economy continues to run a current account surplus, even though domestic absorption has picked up.\n- The housing market is pressured, especially in metropolitan areas."
    },
    {
      "heading": "Growth outlook and inflation",
      "content": "- Growth is forecast to moderate to 2.5 percent for 2019 and continue around that rate over the medium term.\n- Near term: domestic demand expected to remain strong but slow down.\n- External demand: expected to slow in the first half of the year and recover in the second half.\n- Outlook for inflation—and hence the monetary stance—is uncertain, depending on whether domestic inflationary or imported disinflationary pressures dominate.\n- Risks to the outlook are mainly external and to the downside (examples cited: a disorderly Brexit or further weakness in Germany)."
    },
    {
      "heading": "Executive Board assessment (endorsing staff appraisal)",
      "content": "- The economy is doing well but is up against capacity constraints; no major imbalances, but growth is expected to slow as supply pressures bite.\n- The real exchange rate (REER) is moderately undervalued and likely to appreciate over the medium term.\n- The REER has appreciated steadily since 2016, but the external position in 2018 was nonetheless moderately stronger than the level consistent with fundamentals and medium-term policies.\n- The current account balance is expected to converge to a small deficit over the medium term, supported by household income growth and small fiscal deficits.\n- The current policy mix is appropriate.\n  - Staff favors holding policy conditions as present, with a bias to raising policy interest rates rather than tightening the fiscal stance if inflation pressures were to continue, which would be more consistent with gradual exchange rate appreciation.\n  - Macroprudential measures can help insure that households do not take on too much debt, but should be complemented with measures to enhance housing supply.\n  - If external conditions were to be substantially worse than expected, the first response would be to ease policy rates and allow automatic fiscal stabilizers to work; if shocks are persistent, there is ample space for discretionary fiscal easing."
    },
    {
      "heading": "Longer-term policy priorities",
      "content": "- A durable and coordinated policy agenda that facilitates higher productivity is crucial for staying on a path of increasing living standards.\n- Coordination across government—among ministries, and across the layers of central, regional, and municipal bodies—needs improvement to implement plans effectively and address bottlenecks in labor supply, housing, and infrastructure.\n- Fiscal policy focus:\n  - Emphasize spending and revenue choices that are as friendly as possible to raising growth.\n  - Priority for investment in public goods that boost productive potential, especially as public debt is already low and will decrease further over the next few years; financing costs remain low.\n  - Investment includes major physical structures (roads), resources such as child care, and “intangibles” such as education and digital access.\n  - Hard choices will be needed over social spending ahead of further population aging; otherwise, seek efficiency gains.\n  - Targeting extra taxes at particular sectors risks distorting economic incentives for potentially little return in revenues."
    },
    {
      "heading": "Financial sector and AML/CFT",
      "content": "- The banking system is stable, well capitalized, and well placed to direct credit toward investment.\n- Recent cases of money laundering (ML) in several EU countries have revealed weaknesses in AML/CFT regimes across Europe, heightening concerns about cross-border flows.\n- Recommendations:\n  - Continue AML/CFT efforts, monitoring financial flows coming into and going out of the Czech Republic, especially those associated with non-resident accounts, and identifying sources of foreign funds.\n  - Continue to monitor ML risks associated with the real estate sector, including by enhancing data collection on non-residents and beneficial owners."
    },
    {
      "heading": "Key statistics and projections (selected exact figures from Czech Republic: Selected Economic Indicators, 2014–24)",
      "content": "- Real GDP (expenditure): 2014: 2.7; 2015: 5.3; 2016: 2.5; 2017: 4.4; 2018: 2.9; 2019 (staff projection): 2.6\n- Domestic demand (annual percent change): 2014: 3.4; 2015: 5.9; 2016: 1.1; 2017: 3.5; 2018: 3.9; 2019: 3.1; 2020: 3.2; 2021: 3.0\n- Investment (percent of GDP): 2014: 25.1; 2015: 26.5; 2016: 24.9; 2017: 24.8; 2018: 26.2; 2019: 26.4; 2020: 26.6; 2021: 26.8; 2022: 26.9; 2023: 27.0; 2024: 27.1\n- General government revenue (percent of GDP): 2014: 40.3; 2015: 41.1; 2016: 40.2; 2017: 40.5; 2018: 41.7; 2019: 41.8; 2020: 41.6; 2021: 41.5; 2022: 41.4; 2023: 41.3; 2024: 41.2\n- General government expenditure (percent of GDP): 2014: 42.4; 2015: 39.5; 2016: 38.9; 2017: 40.8; 2018: (figure not listed)\n- Net lending / Overall balance (percent of GDP): 2014: -2.1; 2015: -0.6; 2016: 0.9; 2017: 0.2; 2018: -0.1\n- Structural balance (percent of potential GDP): 2014: -1.5; 2015: 0.5\n- General government debt (percent of GDP): 2014: 42.2; 2015: 40.0; 2016: 36.8; 2017: 34.7; 2018: 32.7; 2019: 31.7; 2020: 30.6; 2021: 29.8; 2022: 29.1; 2023: 27.4\n- Trade balance (goods and services, percent of GDP): 2014: 6.4; 2015: 5.8; 2016: 7.4; 2017: 7.7; 2018: 5.4\n- Gross international reserves (billions of euros): 2014: 44.9; 2015: 59.2; 2016: 81.3; 2017: 123.4; 2018: 124.5; 2019: 126.8; 2020: 129.2; 2021: 132.1; 2022: 135.4; 2023: 139.2; 2024: 143.3\n- Nominal GDP (USD billions): 2014: 207.8; 2015: 186.8; 2016: 195.1; 2017: 215.9; 2018: 244.1; 2019: 248.4; 2020: 263.7; 2021: 277.7; 2022: 292.4; 2023: 306.8; 2024: 322.8\n- Population (millions): 10.5; 10.6\n- GDP per capita (USD): 2014: 19,769; 2015: 17,729; 2016: 18,485; 2017: 20,410; 2018: 23,007; 2019: 23,382; 2020: 24,794; 2021: 26,082; 2022: 27,432; 2023: 28,762; 2024: 30,245\n- Real GDP per capita and some series (e.g., certain labor market, price, and money & credit entries) contain gaps or ellipses in the published table.\n\nIMF Executive Board Concludes Article IV Consultation with Czech Republic, Press Release No. 19/215 (June 13, 2019).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/06/12/pr19215-czech-republic-imf-executive-board-concludes-article-iv-consultation"
    }
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    "Published: June 13, 2019",
    "Press Release No. 19/215",
    "Date: June 13, 2019; Executive Board conclusion date: June 12, 2019",
    "Press officer: Meera Louis; Phone: +1 202 623-7100; Email: MEDIA@IMF.org",
    "The economy is doing well but supply constraints are biting.",
    "Growth has slowed as the economy has reached capacity limits, with very low unemployment even as participation has increased.",
    "Recent wage increases have been very strong, ahead of productivity.",
    "So far, inflation remains contained.",
    "The economy continues to run a current account surplus, even though domestic absorption has picked up.",
    "The housing market is pressured, especially in metropolitan areas.",
    "Growth is forecast to moderate to 2.5 percent for 2019 and continue around that rate over the medium term.",
    "Near term: domestic demand expected to remain strong but slow down.",
    "External demand: expected to slow in the first half of the year and recover in the second half.",
    "Outlook for inflation—and hence the monetary stance—is uncertain, depending on whether domestic inflationary or imported disinflationary pressures dominate.",
    "Risks to the outlook are mainly external and to the downside (examples cited: a disorderly Brexit or further weakness in Germany).",
    "The economy is doing well but is up against capacity constraints; no major imbalances, but growth is expected to slow as supply pressures bite.",
    "The real exchange rate (REER) is moderately undervalued and likely to appreciate over the medium term.",
    "The REER has appreciated steadily since 2016, but the external position in 2018 was nonetheless moderately stronger than the level consistent with fundamentals and medium-term policies.",
    "The current account balance is expected to converge to a small deficit over the medium term, supported by household income growth and small fiscal deficits.",
    "The current policy mix is appropriate.",
    "A durable and coordinated policy agenda that facilitates higher productivity is crucial for staying on a path of increasing living standards.",
    "Coordination across government—among ministries, and across the layers of central, regional, and municipal bodies—needs improvement to implement plans effectively and address bottlenecks in labor supply, housing, and infrastructure.",
    "Fiscal policy focus:",
    "The banking system is stable, well capitalized, and well placed to direct credit toward investment.",
    "Recent cases of money laundering (ML) in several EU countries have revealed weaknesses in AML/CFT regimes across Europe, heightening concerns about cross-border flows.",
    "Recommendations:",
    "Real GDP (expenditure): 2014: 2.7; 2015: 5.3; 2016: 2.5; 2017: 4.4; 2018: 2.9; 2019 (staff projection): 2.6",
    "Domestic demand (annual percent change): 2014: 3.4; 2015: 5.9; 2016: 1.1; 2017: 3.5; 2018: 3.9; 2019: 3.1; 2020: 3.2; 2021: 3.0",
    "Investment (percent of GDP): 2014: 25.1; 2015: 26.5; 2016: 24.9; 2017: 24.8; 2018: 26.2; 2019: 26.4; 2020: 26.6; 2021: 26.8; 2022: 26.9; 2023: 27.0; 2024: 27.1",
    "General government revenue (percent of GDP): 2014: 40.3; 2015: 41.1; 2016: 40.2; 2017: 40.5; 2018: 41.7; 2019: 41.8; 2020: 41.6; 2021: 41.5; 2022: 41.4; 2023: 41.3; 2024: 41.2",
    "General government expenditure (percent of GDP): 2014: 42.4; 2015: 39.5; 2016: 38.9; 2017: 40.8; 2018: (figure not listed)",
    "Net lending / Overall balance (percent of GDP): 2014: -2.1; 2015: -0.6; 2016: 0.9; 2017: 0.2; 2018: -0.1",
    "Structural balance (percent of potential GDP): 2014: -1.5; 2015: 0.5",
    "General government debt (percent of GDP): 2014: 42.2; 2015: 40.0; 2016: 36.8; 2017: 34.7; 2018: 32.7; 2019: 31.7; 2020: 30.6; 2021: 29.8; 2022: 29.1; 2023: 27.4",
    "Trade balance (goods and services, percent of GDP): 2014: 6.4; 2015: 5.8; 2016: 7.4; 2017: 7.7; 2018: 5.4",
    "Gross international reserves (billions of euros): 2014: 44.9; 2015: 59.2; 2016: 81.3; 2017: 123.4; 2018: 124.5; 2019: 126.8; 2020: 129.2; 2021: 132.1; 2022: 135.4; 2023: 139.2; 2024: 143.3",
    "Nominal GDP (USD billions): 2014: 207.8; 2015: 186.8; 2016: 195.1; 2017: 215.9; 2018: 244.1; 2019: 248.4; 2020: 263.7; 2021: 277.7; 2022: 292.4; 2023: 306.8; 2024: 322.8",
    "Population (millions): 10.5; 10.6",
    "GDP per capita (USD): 2014: 19,769; 2015: 17,729; 2016: 18,485; 2017: 20,410; 2018: 23,007; 2019: 23,382; 2020: 24,794; 2021: 26,082; 2022: 27,432; 2023: 28,762; 2024: 30,245",
    "Real GDP per capita and some series (e.g., certain labor market, price, and money & credit entries) contain gaps or ellipses in the published table.",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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