{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Czech Republic",
  "publication": "IMF News, January 29, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/01/25/pr2426-czech-republic-imf-executive-board-concludes-2023-article-iv-consultation",
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  "summary": "On January 22, The Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation with Czech Republic.",
  "publishDate": "2024-01-29",
  "sections": [
    {
      "heading": "Overview and near-term outlook",
      "content": "- On January 22, the Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation with Czech Republic.\n- Economic activity slowed notably in 2023 but a rebound is expected in 2024, driven by a recovery in domestic demand.\n- Staff projections:\n  - Real GDP growth (expenditure): 2023: -0.4 percent; 2024: 1.2 percent.\n  - Disinflation is expected to continue and inflation is projected to meet the Czech National Bank’s target by early 2025.\n  - Ongoing disinflation reflects diminishing commodity price shocks and a substantial decrease in domestic demand pressures; falling core inflation primarily reflects the dampening effect of the tight monetary policy stance.\n  - Continued drops in commodity prices (food and fuel) are expected to support a fall in administered price inflation."
    },
    {
      "heading": "Risks to the outlook",
      "content": "- Growth risks are tilted to the downside; inflation risks are tilted to the upside.\n- Downside growth risks include:\n  - Spillovers from a weaker global outlook.\n  - Possible renewed surge in global energy prices.\n  - New supply chain disruptions.\n  - Increase in geopolitical tensions and potential broader geo-economic fragmentation.\n  - Heightened global financial volatility that could negatively impact pricing and availability of financing.\n- Upside inflation risks include:\n  - Inflation expectations becoming untethered given high inflation, a tight labor market, and the currently elevated but declining saving rate.\n  - Strong wage growth combined with a failure of profit margins to compress rapidly during recovering growth, leading to stronger repricing of goods and services.\n  - New global energy or commodity price shocks or a reversal of the expected decrease in administered prices.\n  - An abrupt return of the household saving rate to near long-term average levels, boosting household consumption and demand-driven inflationary pressures.\n  - A falling differential in policy rates vis-a-vis major central banks or geopolitical shifts in regional sentiment could exert depreciation pressure on the koruna and add to inflationary pressures."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors commended the authorities for maintaining macroeconomic and financial stability amid challenging conditions and welcomed the expected economic recovery in 2024.\n- Monetary policy:\n  - Maintaining a tight monetary policy stance remains appropriate to ensure inflation returns to target in a timely manner.\n  - The central bank should adopt a cautious, data‑driven approach to potential further rate cuts.\n- Fiscal policy:\n  - Directors welcomed the authorities’ commitment to fiscal prudence and emphasized the need to remain flexible given the uncertain outlook.\n  - If current conditions persist, Directors broadly concurred that further fiscal consolidation is needed to support disinflation efforts and reach the medium‑term objective in the Fiscal Responsibility Act by 2028.\n  - Consolidation could help build fiscal buffers in the face of aging pressures and support economic transformation.\n  - Importance of protecting the most vulnerable and support for pension system reforms were emphasized.\n- Financial sector and macroprudential policy:\n  - Directors welcomed the resilience of the financial sector: banks are well‑capitalized, liquid, and profitable while asset quality remains strong.\n  - Macroprudential policy settings are broadly adequate, but vigilance is needed; pockets of vulnerabilities warrant close monitoring, including in the housing market, foreign currency corporate loans, and cyber security.\n  - Several Directors found no immediate need to reactivate debt‑ and debt‑service to income ratios at this stage.\n  - Improvements in risk‑based supervision were welcomed and further progress encouraged.\n  - Continued efforts to strengthen safeguards against AML/CFT risks were recommended.\n- Structural reforms:\n  - Addressing structural challenges from demographic dynamics and the global energy transition is critical for sustainable growth.\n  - Structural reform policies should facilitate reallocation of labor and capital and advance technological innovation to support economic transformation toward a greener and more digitalized economy.\n  - Directors welcomed the authorities’ decarbonization strategy and noted the need for continued efforts to meet climate targets."
    },
    {
      "heading": "Selected economic indicators, 2020–28 (staff projections)",
      "content": "- NATIONAL ACCOUNTS (Real growth rates by year)\n  - Real GDP (expenditure): 2020: -5.5; 2021: 3.5; 2022: 2.4; 2023: -0.4; 2024: 1.2; 2025: 2.5; 2026: 2.7; 2027: 2.6; 2028: (not listed in the row).\n  - Domestic demand: 2020: -5.6; 2021: 8.2; 2022: -3.7; 2023: 0.6; 2024: 2.3.\n  - Consumption (aggregate): 2020: -4.1; 2021: 3.3; 2022: -0.3; 2023: -1.5; 2024: 2.2.\n    - Public consumption: 2020: 4.2; 2021: 1.4; 2022: 1.1.\n    - Private consumption: 2020: -7.2; 2021: 4.1; 2022: -0.8; 2023: -3.2; 2024: 3.0; 2025: 3.2.\n  - Investment: 2020: -9.3; 2021: 20.4; 2022: 8.8; 2023: -8.2; 2024: -2.7; 2025: 2.1.\n  - Exports: 2020: -8.0; 2021: 6.8; 2022: 7.2; 2023: 5.0; 2024: 5.1; 2025: 5.2; 2026: 5.4.\n  - Imports: 2020: 13.2; 2021: 6.3; 2022: 1.9; 2023: 4.9; 2024: 5.3.\n  - Contribution to GDP (net exports): 2020: -5.1; 2021: 7.8; 2022: 1.5; 2023: -3.0.\n  - Investment (percent of GDP): 2020: 26.5; 2021: 26.0; 2022: 26.8; 2023: 25.9; 2024: 26.2; 2025: 25.6; 2026: 25.5; 2027: 25.7.\n  - Gross domestic investments (percent of GDP): 2020: 30.2; 2021: 32.2; 2022: 28.9; 2023: 27.2; 2024: 26.7; 2025: 26.6.\n  - Gross national savings (percent of GDP): 2020: 28.1; 2021: 27.5; 2022: 27.0; 2023: 27.4; 2024: 28.0; 2025: 28.6.\n  - Output gap (percent of potential output): 2020: -0.6; 2021: 0.8; 2022: -0.5; 2023: 0.5.\n  - Potential growth (year-specific entries): 2020: -2.2; 2021: 2.8; 2022: 1.0; 2023: 2.9.\n- LABOR MARKET\n  - Employment: 2020: -1.4; 2021: 0.3; 2022: -1.6; 2023: -0.1.\n  - Total labor compensation (growth): 2020: 6.1; 2021: 7.9; 2022: 3.9; 2023: 4.3; 2024: 4.4; 2025: 4.8.\n  - Unemployment rate (average, in percent): (values not provided in the table excerpt).\n- PRICES\n  - Consumer prices (average): 2020: 3.8; 2021: 15.1; 2022: 10.6; 2023: 2.0.\n  - Consumer prices (end-of-period): 2020: 6.6; 2021: 15.8; 2022: 7.4.\n  - Producer price index (average): 2020: 7.1; 2021: …\n  - GDP deflator (average): 2020: 8.6; 2021: 9.0; 2022: 3.7; 2023: 1.6; 2024: 1.7.\n- MACRO-FINANCIAL\n  - Money and credit (end of year, percent change): Broad money (M3): 2020: 10.0; 2021: 8.5; 2022: 4.6.\n  - Private sector credit: 2020: 3.6; 2021: 8.9; 2022: 4.5; 2023: 4.0.\n  - Interest rates (in percent, year average): Three-month interbank rate and Ten-year government bond: (values not provided in the excerpt).\n  - Exchange rate indices:\n    - Nominal effective exchange rate (index, 2005=100): 2020: 99.7; 2021: 103.6.\n    - Real effective exchange rate (index, CPI-based; 2005=100): 2020: 100.0; 2021: 104.6.\n- PUBLIC FINANCE (percent of GDP)\n  - General government revenue: 2020: 41.5; 2021: 41.4; 2022: 42.6; 2023: 41.9; 2024: 41.6.\n  - General government expenditure: 2020: 47.2; 2021: 46.5; 2022: 44.6; 2023: 46.2; 2024: 44.1; 2025: 43.3; 2026: 43.0; 2027: 42.2.\n  - Net lending / Overall balance: 2020: -5.8; 2021: -3.6; 2022: -1.7; 2023: -1.2.\n  - Primary balance: 2020: -5.2; 2021: -4.5; 2022: -2.8; 2023: -0.7; 2024: -0.2.\n  - Structural balance (percent of potential GDP): 2020: -5.4; 2021: -3.4; 2022: -2.1; 2023: -1.8; 2024: -1.3.\n  - General government debt: 2020: 37.7; 2021: 42.0; 2022: 44.2; 2023: 44.3; 2024: 44.0; 2025: 43.6; 2026: 42.5.\n- BALANCE OF PAYMENTS (percent of GDP)\n  - Trade balance (goods and services): 2020: 6.7.\n  - Current account balance: 2020: -6.1; 2021: -0.9.\n  - Gross international reserves (billions of euros): 2020: 135.4; 2021: 153.3; 2022: 131.3; 2023: 140.3; 2024: 149.3; 2025: 158.3; 2026: 166.3; 2027: 172.3; 2028: 176.9.\n  - Reserves (in months of imports of goods and services): 2020: 11.9; 2021: 11.0; 2022: 7.6; 2023: 8.4.\n  - Reserves (in percent of short term debt, remaining maturity): 2020: 142.8; 2021: 136.7; 2022: 116.2; 2023: 117.5; 2024: 119.3; 2025: 122.4; 2026: 126.5; 2027: 131.2; 2028: 137.0.\n- MEMORANDUM ITEMS\n  - Nominal GDP (USD billions): 2020: 246.0; 2021: 281.8; 2022: 290.5; 2023: 335.5; 2024: 350.4; 2025: 368.4; 2026: 385.1; 2027: 400.1; 2028: 416.8.\n  - Population (millions): 2020: 10.7; 2021: 10.5; 2022: 10.8; 2023: 11.1.\n  - Real GDP per capita: 2020: -2.0.\n  - GDP per capita (USD thousands): 2020: 22.98; 2021: 26.79; 2022: 26.83; 2023: 30.50; 2024: 31.61; 2025: 33.33; 2026: 34.94; 2027: 36.42; 2028: 38.06.\n\nIMF Communications Department; Press Release No. 24/26; January 29, 2024 — Executive Board conclusions on the 2023 Article IV consultation with Czech Republic.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Czech Republic and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/01/25/pr2426-czech-republic-imf-executive-board-concludes-2023-article-iv-consultation"
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    "Published: January 29, 2024",
    "On January 22, the Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation with Czech Republic.",
    "Economic activity slowed notably in 2023 but a rebound is expected in 2024, driven by a recovery in domestic demand.",
    "Staff projections:",
    "Growth risks are tilted to the downside; inflation risks are tilted to the upside.",
    "Downside growth risks include:",
    "Upside inflation risks include:",
    "Directors commended the authorities for maintaining macroeconomic and financial stability amid challenging conditions and welcomed the expected economic recovery in 2024.",
    "Monetary policy:",
    "Fiscal policy:",
    "Financial sector and macroprudential policy:",
    "Structural reforms:",
    "NATIONAL ACCOUNTS (Real growth rates by year)",
    "LABOR MARKET",
    "PRICES",
    "MACRO-FINANCIAL",
    "PUBLIC FINANCE (percent of GDP)",
    "BALANCE OF PAYMENTS (percent of GDP)",
    "MEMORANDUM ITEMS",
    "[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)",
    "[Czech Republic and the IMF](http://www.imf.org/external/country/CZE/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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