Czech Republic: Staff Report for the 2015 Article IV Consultation
IMF Staff Country Reports, July 23, 2015
Source details
- Canonical URL
- Czech Republic: Staff Report for the 2015 Article IV Consultation
Other formats
Bibliographic details
- Published: July 23, 2015
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513583655.002
Summary and Growth Outlook
- The economy is growing strongly on account of improving domestic demand and robust exports.
- Inflation is still well below target despite central bank measures that have helped stem deflationary pressures.
- The financial system is sound and resilient to shocks.
- The challenge for the authorities is to safeguard macroeconomic stability and create conditions for strong and sustainable growth.
Fiscal Policy Findings and Recommendations
- Findings:
- Fiscal policy has been supportive of the recovery.
- The authorities’ medium-term fiscal objective is appropriate, but fiscal framework legislation that would anchor policy is yet to be approved.
- Recommendations:
- Maintain a supportive fiscal stance this year, but embark on a modest and very gradual fiscal consolidation thereafter, consistent with the medium-term deficit objective.
- Embed the medium-term deficit objective in a comprehensive framework to enhance its effectiveness in anchoring fiscal policy.
- Improve budget composition:
- Higher capital spending to address infrastructure needs.
- Offset higher capital spending by efficiency gains in current expenditure.
- Improve revenue administration.
Monetary Policy Findings and Recommendations
- Findings:
- The central bank’s use of an exchange rate floor as an additional instrument, in the context of the inflation-targeting framework, has helped stem deflationary pressures.
- Recommendations:
- Continue to focus on inflation targeting in policymaking and communication.
- Maintain supportive monetary conditions until deflation risks recede and inflation expectations become entrenched around the inflation target.
- Consider carefully the timing and mechanics of the eventual normalization of monetary policy.
Financial Sector Guidance
- Findings:
- The financial system is sound and resilient to shocks.
- Recommendation:
- Remain vigilant and be ready to address possible risks to financial stability.
Structural Reform Priorities
- Remove impediments to higher potential growth, including:
- Policies to increase labor market participation of certain segments of the population.
- Enhance investment in human and physical capital.
- Improve the business climate.