IMF sees Czech economy flat in 2012, to grow by 2% in 2013.

By bne IntelliNews February 28, 2012
The International Monetary Fund expects economic activity in the Czech Republic to be flat this year as the eurodebt crisis dents foreign demand, the main growth driver in the last two years, and domestic consumption remains weak, the fund said in a report released after concluding a regular country visit. In 2013 the economy is to expand by 2% with the improving of global conditions. Inflation is to stay at above 3% this year due to the VAT hike and fall back within the central banks target of 2% next year. The IMF expects the current account deficit to remain well-contained. The eurodebt crisis is a key downside risk to the forecast, the IMF said adding that a deepening of the crisis would affect the economy through the trade channel and also via banking and financial markets channels given the close financial integration of the Czech Republic with the countries in the eurozone. Yet, the fund acknowledges that the country has strong fundamentals, including manageable level of public debt, a comfortable external position and a resilient financial system, that will limit the vulnerability against these risks. The IMFs key recommendations are aimed at upgrading the fiscal framework by adopting a rule that ensures debt sustainability, continue focusing on fiscal consolidation, closely monitoring the relationship between local banks and their foreign parents and preserving the structural reforms to support economic growth.

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