Czech Republic: Staff Report for the 2006 Article IV Consultation—Informational Annexes
Author: International Monetary Fund
Publication Date:
28 Feb 2007
eISBN:
9781451810240
Language:
English
Keywords:
ISCR; CR; deficit; government; productivity gain; expenditure reform; exchange rate regime; budgetary funds; de facto exchange rate regime of the Czech Republic; Monetary statistics; Financial statistics; Exchange rates; Exchange rate arrangements
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This 2006 Article IV Consultation highlights that economic performance of the Czech Republic strengthened during 2005–06, supported by the expanding capacity of the export-oriented automotive sector and a cyclical recovery in the European Union. The momentum of growth has been underpinned by strong productivity gains, leading to a surge in exports and further investment in the tradable goods sector. The koruna strengthened, helping to keep inflation down. Growth is projected to remain robust in 2007–08, although its momentum will slow as the effects of the recent export capacity expansion unwind.

Abstract

This 2006 Article IV Consultation highlights that economic performance of the Czech Republic strengthened during 2005–06, supported by the expanding capacity of the export-oriented automotive sector and a cyclical recovery in the European Union. The momentum of growth has been underpinned by strong productivity gains, leading to a surge in exports and further investment in the tradable goods sector. The koruna strengthened, helping to keep inflation down. Growth is projected to remain robust in 2007–08, although its momentum will slow as the effects of the recent export capacity expansion unwind.

Appendix I: Czech Republic: Fund Relations

(As of December 31, 2006)

I. Membership Status: Joined 1/01/1993; Article VIII

II. General Resources Account

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III.SDR Department:

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IV. Outstanding Purchases and Loans: None

V. Financial Arrangements:

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VI. Projected Obligations to Fund: None

VII. Exchange Rate Arrangement:

The currency of the Czech Republic is the Czech koruna, created on February 8, 1993 upon the dissolution of the currency union with the Slovak Republic, which had used the Czechoslovak koruna as its currency. From May 3, 1993 to May 27, 1997, the exchange rate was pegged to a basket of two currencies: the deutsche mark (65 percent) and the U.S. dollar (35 percent). On February 28, 1996, the Czech National Bank widened the exchange rate band from ±0.5 percent to ±7.5 percent around the central rate. On May 27, 1997, managed floating was introduced. In the 2004 edition of the Annual Report on Exchange Arrangements and Exchange Restrictions, the de facto exchange rate regime of the Czech Republic was classified as managed floating with no pre-announced path for the exchange rate. Since 2002, the CNB has not engaged in direct interventions in the foreign exchange market. International reserves have been affected by the off-market purchases of large privatization receipts and EU transfers and the sales of the accumulated interest. On January 10, 2007, the exchange rate of the Czech koruna stood at CZK 21.35 per U.S. dollar.

The Czech Republic has accepted the obligations of Article VIII and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions. The Czech Republic maintains exchange restrictions for security reasons, which have been notified to the Fund for approval (see most recently, EBD/07/1, 01/08/2007) under the procedures set forth in Executive Board Decision No. 144-(52/51).

VIII. Last Article IV Consultation:

The last Article IV consultation with the Czech Republic was concluded on August 1, 2005. The staff report and PIN were published on August 6, 2005.

IX. Technical Assistance: See attached table.

X. Implementation of HIPC Initiative: Not Applicable

XI. Safeguards Assessments: Not Applicable

Czech Republic: Technical Assistance, 1991-2005

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Appendix II: Czech Republic: Statistical Issues

1. Data provision to the Fund is adequate for surveillance. The Czech Republic is in observance of the Special Data Dissemination Standard (SDDS) and meets the SDDS specifications. Statistical metadata are posted on the Fund’s Dissemination Standards Bulletin Board. While availability of economic data is timely, reporting to STA is less current, especially for foreign trade and the national accounts.

2. While data quality is generally adequate, the authorities are taking measures to improve data accuracy.

  • National accounts data are subject to certain weaknesses. Value added in the small-scale private sector is likely to be underestimated, as the mechanisms for data collection on this sector are not yet fully developed and a significant proportion of unrecorded activity stems from tax evasion. Discrepancies between GDP estimates based on the production method and the expenditure method are large and are subsumed under change in stocks. Quarterly estimates of national accounts are derived from quarterly reports of enterprises and surveys. The estimates are subject to bias because of nonresponse (while annual reporting of bookkeeping accounts is mandatory for enterprises, quarterly reporting is not) and lumping of several expenditure categories in particular quarters by respondents. Large swings in individual components of spending and the overall GDP from quarter to quarter also bring into question the reliability of the quarterly data.

  • Recently, revisions to procedures for processing export data have brought external trade statistics close to the practice in the EU. However, a continued weakness of foreign trade statistics is the unavailability of fixed base price indices for exports and imports; these indices are currently presented on the basis of the same month of the previous year.

  • Monetary survey data provided to the European Department are generally adequate for policy purposes. However, large variations in the interbank clearing account float, especially at the end of the year, require caution in interpreting monetary developments. The CNB has made a major effort to identify the causes of these variations and adjust the data. In 2002, to meet EU statistical conventions, the CNB implemented the European Central Bank’s (ECB) framework for collecting, compiling, and reporting monetary data. The data published in IFS is based on monetary accounts derived from the ECB’s framework. The same set of accounts also forms the basis for monetary statistics published in the CNB’s bulletins and on the website, which are thereby effectively harmonized with the monetary statistics published in IFS, although the presentation in IFS differs somewhat from the CNB’s.

  • Annual fiscal data on ESA-95 basis has been prepared by the Czech Statistical Office. Quarterly data for non-financial accounts have also been compiled and quarterly financial accounts are being prepared. The Ministry of Finance uses the ESA-95 methodology for the Convergence Program targets. The ESA-95 methodology differs from the national (fiscal targeting methodology) in terms of the coverage of the institutions (for example, the CKA is included in the central government under ESA definition) and basis of recording due to the inclusion of accrued financial transactions and other accrual items (for example, called guarantees). The Ministry of Finance is participating in the Fund’s pilot project to transition to GFSM 2001.

  • Annual data published in the Government Finance Statistics Yearbook cover operations of the general government, excluding “semibudgetary” organizations, which operate at both the central and local government levels, and it also excludes a number of state extrabudgetary institutions and special funds. The most important of these institutions are the Czech Consolidation Agency and its subsidiaries, the Czech Collection Company, the Railway Infrastructure administration, the Public-Private-Partnership Centre, and public universities. Monthly fiscal data published in International Financial Statistics (IFS) cover state budget accounts.

Czech Republic: Table of Common Indicators Required for Surveillance As of January 22, 2007

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. Data for the state budget are available with monthly frequency and timeliness, while data on some extra budgetary funds are available only on an annual basis.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

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Cover IMF Staff Country Reports
Czech Republic: Staff Report for the 2006 Article IV Consultation
Author: International Monetary Fund
Volume/Issue:
Volume 2007: Issue 084
Publisher:
International Monetary Fund
ISBN:
9781451810240
ISSN:
1934-7685
Pages:
48
DOI:
https://doi.org/10.5089/9781451810240.002