Central banker Lizal sees eurozone crisis as biggest risk to Czech outlook.

By bne IntelliNews May 19, 2011
The eurozone fiscal crisis poses the biggest risk to the Czech economic growth outlook, central bank board member Lubomir Lizal told Dow Jones in an interview. Lizal, who joined the board in February, voted for stable rates at the two meetings in March and May. The bank voted 5-2 on May 5 to leave the rates on hold, keeping the benchmark two-week repurchase rate at a record-low 0.75%, half a point below the European Central Banks main rate. Exports account or 70% of the Czech economy so external events, particularly in the countrys main trade partner Germany, have a direct impact on the economic growth. Lizal said rates will be raised when real demand pressures are present adding that the slow recovery of other economic sectors is one of the reasons not to hurry with a policy tightening. The central bank sees a rate hike in the fourth quarter of 2011 at the earliest to hold inflation at 2.2% at the second quarter of 2012 and at 2.1% in the third quarter. The Czech GDP grew by 2.5% y/y in the fist quarter, slowing down from 2.6% in the previous quarter and inflation slowed to its 10-month low of 1.6% in April from 1.7% in March. The central bank in May cut its 2011 GDP forecast to 1.5 % from 1.6%.

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