Czech Republic: Staff Report for the 2018 Article IV Consultation—Informational Annex

International Monetary Fund. European Dept.

doi:10.5089/9781484363669.002.A002

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Czech Republic: Staff Report for the 2018 Article IV Consultation—Informational Annex

Author: International Monetary Fund. European Dept.

Publication Date:: 26 Jun 2018

eISBN:: 9781484363669

Language:: English

Keywords:: ISCR; CR; koruna; core inflation; government; headline inflation; surplus; government transaction; de facto exchange rate arrangement; liability positions vis-à-vis nonresident; External sector statistics; Financial statistics; Exchange rate arrangements; Government finance statistics

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The economy has been doing very well, with high growth and the lowest unemployment rate in the EU. So far, there are no major macroeconomic imbalances.

Abstract

The economy has been doing very well, with high growth and the lowest unemployment rate in the EU. So far, there are no major macroeconomic imbalances.

Fund Relations

(As of April 30, 2018; unless specified otherwise)

Membership Status: Joined 01/01/1993; Article VIII

General Resources Account

SDR Department

Outstanding Purchases and Loans: None

Financial Arrangements

Projected Payments to Fund:

(SDR Million; based on existing use of resources and present holdings of SDRs):

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. The de jure exchange rate arrangement is floating. The external value of the koruna is determined by supply and demand in the interbank foreign exchange market, in which the Czech National Bank (CNB) participates. In November 7, 2013, with inflation below target and continued undershooting expected, the CNB announced, that it would (if needed) intervene in the foreign exchange market to weaken the koruna to bring its exchange rate against the euro close to CZK 27. Effective April 6, 2017, the CNB removed its 3-year cap on the koruna, allowing it to appreciate beyond CZK 27.0 to the euro. Accordingly, the de facto exchange rate arrangement was reclassified to floating from stabilized, effective April 6, 2017.

The Czech Republic has accepted the obligations of Article VIII and maintains an exchange system that is free of restrictions and multiple currency practices on the making of payments and transfers for current international transactions. The Czech Republic maintains exchange restrictions for security reasons, based on UN Security Council Resolutions and Council of the European Union Regulations that have been notified to the Fund for approval under the procedures set forth in Executive Board Decision No. 144-(52/51).

Last Article IV Consultation:

The last Article IV consultation with the Czech Republic was concluded on June 21, 2017. The staff report and the press release were published on June 26, 2017.

FSAP Participation and ROSCs:

An FSAP was carried out in late 2000/ early 2001. The Financial System Stability Assessment was considered by the Executive Board on July 16, 2001, concurrently with the staff report for the 2001 Article IV Consultation. An FSAP update was carried out in 2011. ROSCs on: banking supervision; data dissemination; fiscal transparency; securities market; and transparency of monetary and financial policies were published on the Fund’s external website on July 1, 2000.

Technical Assistance: See attached table.

Implementation of HIPC Initiative: Not Applicable.

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable.

Implementation of Post-Catastrophic Debt Relief (PCDR): Not Applicable.

Safeguards Assessments: Not Applicable.

Czech Republic: Technical Assistance, 1991–2017

Department	Timing	Purpose
FAD	December 1991– September 1993	Regular visits by FAD consultant on VAT administration
	March 1993	Public financial management
	September 1993	Follow-up visit on public financial management
	November 1993	Follow-up visit on public financial management
	January 1994	Follow-up visit on public financial management
	July 1994	Follow-up visit by FAD consultant on VAT administration
	May 1995	Follow-up visit on public financial management
	June 1995	Follow-up visit by FAD consultant on VAT administration
	June–July 1999	Medium-term fiscal framework
MCM	February 1992	Monetary management and research, foreign exchange operations, and banking supervision
	June 1992	Monetary research
	July 1992	Long-term resident expert assignment in the area of banking supervision (financed by EC-PHARE; supervised by the Fund)
	December 1992 and	Bond issuance and monetary management
	February 1993	Follow-up visit on bond issuance and monetary management and management of cash balances
	November 1993	Data management and monetary research
	April 1994	Foreign exchange laws (jointly with LEG) and external liberalization
	January 1995	Monetary operations
	May 1995	Banking system reform
	May 1995	Economic research
	May 1996	Banking legislation
	April 1997	Monetary research––inflation targeting
	February–June 1999	Integrated financial sector supervision (with WB)
RES	June 1999	Inflation targeting (financed by MFD)
	September 1999	Inflation targeting (financed by MFD)
	June–August 2000	Inflation targeting (financed by MFD)
STA	February–March 2005	Money and banking statistics
	May 1993	Balance of payments
	February 1994	Government finance
	April 1994	Money and banking statistics
	November 1994	Money and banking statistics
	January–February 1999	Monetary and financial statistics
	May 2002	Implementing GFSM 2001
	February 2003	GFSM 2001 Pilot Project
	November 2006	GFSM 2001 Implementation

Czech Republic: Technical Assistance, 1991–2017

Department	Timing	Purpose
FAD	December 1991– September 1993	Regular visits by FAD consultant on VAT administration
	March 1993	Public financial management
	September 1993	Follow-up visit on public financial management
	November 1993	Follow-up visit on public financial management
	January 1994	Follow-up visit on public financial management
	July 1994	Follow-up visit by FAD consultant on VAT administration
	May 1995	Follow-up visit on public financial management
	June 1995	Follow-up visit by FAD consultant on VAT administration
	June–July 1999	Medium-term fiscal framework
MCM	February 1992	Monetary management and research, foreign exchange operations, and banking supervision
	June 1992	Monetary research
	July 1992	Long-term resident expert assignment in the area of banking supervision (financed by EC-PHARE; supervised by the Fund)
	December 1992 and	Bond issuance and monetary management
	February 1993	Follow-up visit on bond issuance and monetary management and management of cash balances
	November 1993	Data management and monetary research
	April 1994	Foreign exchange laws (jointly with LEG) and external liberalization
	January 1995	Monetary operations
	May 1995	Banking system reform
	May 1995	Economic research
	May 1996	Banking legislation
	April 1997	Monetary research––inflation targeting
	February–June 1999	Integrated financial sector supervision (with WB)
RES	June 1999	Inflation targeting (financed by MFD)
	September 1999	Inflation targeting (financed by MFD)
	June–August 2000	Inflation targeting (financed by MFD)
STA	February–March 2005	Money and banking statistics
	May 1993	Balance of payments
	February 1994	Government finance
	April 1994	Money and banking statistics
	November 1994	Money and banking statistics
	January–February 1999	Monetary and financial statistics
	May 2002	Implementing GFSM 2001
	February 2003	GFSM 2001 Pilot Project
	November 2006	GFSM 2001 Implementation

Statistical Issues

Table of Common Indicators Required for Surveillance

(As of June 6, 2018)

^{^1/}Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

^{^2/}Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, Notes and bonds.

^{^3/}Foreign, domestic bank, and domestic nonbank financing.

^{^4/}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 extra budgetary funds are available only on an annual basis.

^{^5/}Including currency and maturity composition.

^{^6/}Includes external gross financial asset and liability positions vis-à-vis nonresidents.

^{^7/}Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Table of Common Indicators Required for Surveillance

(As of June 6, 2018)

	Date of Latest Observation	Date Received	Frequency of Data^7/	Frequency of Reporting^7/	Frequency of Publication^7/
Exchange Rates	current	current	D	D	D
International Reserve Assets and Reserve Liabilities of the Monetary Authorities^1/	Apr. 2018	May 2018	D	M	M
Reserve/Base Money	Apr. 2018	May 2018	M	M	M
Broad Money	Apr. 2018	May 2018	M	M	M
Central Bank Balance Sheet	May 2018	May 2018	M	M	M
Consolidated Balance Sheet of the Banking System	Mar. 2018	Apr. 2018	M	M	M
Interest Rates^2/	Current	Current	D	D	D
Consumer Price Index	Apr. 2018	May 2018	M	M	M
Revenue, Expenditure, Balance and Composition of Financing^3/ – General Government^4/	2017 Q4	May 2018	Q	Q	Q
Revenue, Expenditure, Balance and Composition of Financing^3/– Central Government	Mar 2018	Apr. 2018	M	M	M
Stocks of Central Government and Central Government-Guaranteed Debt^5/	2017 Q4	May 2018	Q	Q	Q
External Current Account Balance	Mar. 2018	May 2018	M	M	M
Exports and Imports of Goods and Services	Mar. 2018	May 2018	M	M	M
GDP/GNP	2018 Q1	May 2018	Q	Q	Q
Gross External Debt	2017 Q4	Mar. 2018	Q	Q	Q
International Investment Position^6/	2017 Q4	Mar. 2018	Q	Q	Q

^{^1/}Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

^{^2/}Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, Notes and bonds.

^{^3/}Foreign, domestic bank, and domestic nonbank financing.

^{^5/}Including currency and maturity composition.

^{^6/}Includes external gross financial asset and liability positions vis-à-vis nonresidents.

^{^7/}Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Table of Common Indicators Required for Surveillance

(As of June 6, 2018)

	Date of Latest Observation	Date Received	Frequency of Data^7/	Frequency of Reporting^7/	Frequency of Publication^7/
Exchange Rates	current	current	D	D	D
International Reserve Assets and Reserve Liabilities of the Monetary Authorities^1/	Apr. 2018	May 2018	D	M	M
Reserve/Base Money	Apr. 2018	May 2018	M	M	M
Broad Money	Apr. 2018	May 2018	M	M	M
Central Bank Balance Sheet	May 2018	May 2018	M	M	M
Consolidated Balance Sheet of the Banking System	Mar. 2018	Apr. 2018	M	M	M
Interest Rates^2/	Current	Current	D	D	D
Consumer Price Index	Apr. 2018	May 2018	M	M	M
Revenue, Expenditure, Balance and Composition of Financing^3/ – General Government^4/	2017 Q4	May 2018	Q	Q	Q
Revenue, Expenditure, Balance and Composition of Financing^3/– Central Government	Mar 2018	Apr. 2018	M	M	M
Stocks of Central Government and Central Government-Guaranteed Debt^5/	2017 Q4	May 2018	Q	Q	Q
External Current Account Balance	Mar. 2018	May 2018	M	M	M
Exports and Imports of Goods and Services	Mar. 2018	May 2018	M	M	M
GDP/GNP	2018 Q1	May 2018	Q	Q	Q
Gross External Debt	2017 Q4	Mar. 2018	Q	Q	Q
International Investment Position^6/	2017 Q4	Mar. 2018	Q	Q	Q

^{^1/}Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

^{^2/}Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, Notes and bonds.

^{^3/}Foreign, domestic bank, and domestic nonbank financing.

^{^5/}Including currency and maturity composition.

^{^6/}Includes external gross financial asset and liability positions vis-à-vis nonresidents.

^{^7/}Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

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Czech Republic: 2018 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for the Czech Republic

Author: International Monetary Fund. European Dept.

Volume/Issue:: Volume 2018: Issue 187

Publisher:: International Monetary Fund

ISBN:: 9781484363669

ISSN:: 1934-7685

Pages:: 67

DOI:: https://doi.org/10.5089/9781484363669.002

Keywords
Fund Relations
Statistical Issues

Table of Common Indicators Required for Surveillance

(As of June 6, 2018)

	Date of Latest Observation	Date Received	Frequency of Data^7/	Frequency of Reporting^7/	Frequency of Publication^7/
Exchange Rates	current	current	D	D	D
International Reserve Assets and Reserve Liabilities of the Monetary Authorities^1/	Apr. 2018	May 2018	D	M	M
Reserve/Base Money	Apr. 2018	May 2018	M	M	M
Broad Money	Apr. 2018	May 2018	M	M	M
Central Bank Balance Sheet	May 2018	May 2018	M	M	M
Consolidated Balance Sheet of the Banking System	Mar. 2018	Apr. 2018	M	M	M
Interest Rates^2/	Current	Current	D	D	D
Consumer Price Index	Apr. 2018	May 2018	M	M	M
Revenue, Expenditure, Balance and Composition of Financing^3/ – General Government^4/	2017 Q4	May 2018	Q	Q	Q
Revenue, Expenditure, Balance and Composition of Financing^3/– Central Government	Mar 2018	Apr. 2018	M	M	M
Stocks of Central Government and Central Government-Guaranteed Debt^5/	2017 Q4	May 2018	Q	Q	Q
External Current Account Balance	Mar. 2018	May 2018	M	M	M
Exports and Imports of Goods and Services	Mar. 2018	May 2018	M	M	M
GDP/GNP	2018 Q1	May 2018	Q	Q	Q
Gross External Debt	2017 Q4	Mar. 2018	Q	Q	Q
International Investment Position^6/	2017 Q4	Mar. 2018	Q	Q	Q

^{^1/}Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

^{^2/}Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, Notes and bonds.

^{^3/}Foreign, domestic bank, and domestic nonbank financing.

^{^5/}Including currency and maturity composition.

^{^6/}Includes external gross financial asset and liability positions vis-à-vis nonresidents.

^{^7/}Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

	SDR Million	Percent of Quota
Quota	2,180.20	100.00
IMF’s Holding of Currency (Holding Rate)	1,879.77	86.22
Reserve Tranche Position	300.43	13.78
Lending to the Fund

	SDR Million	Percent of Quota
Quota	2,180.20	100.00
IMF’s Holding of Currency (Holding Rate)	1,879.77	86.22
Reserve Tranche Position	300.43	13.78
Lending to the Fund

	SDR Million	Percent of Quota
Net Cumulative Allocation	780.20	100.00
Holdings	457.00	58.57

	SDR Million	Percent of Quota
Net Cumulative Allocation	780.20	100.00
Holdings	457.00	58.57

	Forthcoming
	2018	2019	2020	2021	2022
Principal
Charges/Interest	2.09	2.86	2.86	2.86	2.86
Total	2.09	2.86	2.86	2.86	2.86

I. Assessment of Data Adequacy for Surveillance
General: Data provision is adequate for surveillance.
National Accounts: The Czech Statistical Office (CSO) compiles and disseminates annual and quarterly national accounts on ESA2010 basis. The CSO compiles annual Supply-Use Tables (SUT) by 88 types of economic activities and 88 products, but there is room for improvements. For example, discrepancies between GDP estimates based on the production method and the expenditure method are subsumed under changes in inventories, which sometimes significantly changes the first estimates of inventories obtained directly from the surveys. In recent years, the share of non-observed economy in GDP varied from seven to eight percent.
Price Statistics: The CSO compiles and disseminates a monthly consumer price index (CPI) using a weighting structure based on expenditure data collected during 2014. A monthly Harmonized Index of Consumer Prices (HICP) is disseminated according to European regulations. The producer price index is released monthly with coverage including manufacturing, construction, agriculture, and select business services (business to business only). The CSO also compiles and releases monthly import and export price indexes based on data collected directly from establishments engaged in export and/or import activities.
Government Finance Statistics: Fiscal data in the GFSM 2014 framework is reported through the Eurostat convergence project with the IMF. Annual and quarterly fiscal data are compiled on ESA2010 basis by the Czech Statistical Office, including non-financial accounts, financial accounts, and financial balance sheets. The Ministry of Finance uses the ESA methodology for the Convergence Program targets. The ESA 2010 methodology includes a wider coverage of the general government sector, different classification of some government transactions, and impacts the calculation of GDP. Government transactions are recorded on an accrual basis.
Monetary and Financial Statistics: Monthly MFS data is sent to STA by ECB and is based on standardized report forms (SRFs). Monetary survey data is also provided to the European Department for policy purposes. MFS data covers the central bank (CNB) and the other depository corporations which comprises other monetary financial institutions which are defined under the European Union law to include deposit-taking corporations, electronic money institutions and other issuers of deposits and close substitutes of deposits. Data from the other financial corporations are currently not compiled.
Financial sector surveillance: CNB is reporting financial soundness indicators for Deposit Takers on a quarterly basis to STA.
External sector statistics: The CNB compiles and disseminates balance of payments and international investment position statistics in line with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) and in accordance with legal requirements of the ECB and Eurostat. CNB generally derives balance of payments financial account transactions from changes in position data adjusted by exchange rate, price, and other changes. The CNB monthly disseminates the data template on International Reserves and Foreign Currency Liquidity. Czech Republic also participates in the Coordinated Direct Investment Survey (CDIS) and the Coordinated Portfolio Investment Survey (CPIS), and reports quarterly external debt statistics to the World Bank’s Quarterly External Debt Statistics (QEDS) database.
II. Data Standards and Quality
The Czech Republic adheres to the SDDS Plus since April 2016.	Data ROSC was published on July 1, 2000.

I. Assessment of Data Adequacy for Surveillance
General: Data provision is adequate for surveillance.
National Accounts: The Czech Statistical Office (CSO) compiles and disseminates annual and quarterly national accounts on ESA2010 basis. The CSO compiles annual Supply-Use Tables (SUT) by 88 types of economic activities and 88 products, but there is room for improvements. For example, discrepancies between GDP estimates based on the production method and the expenditure method are subsumed under changes in inventories, which sometimes significantly changes the first estimates of inventories obtained directly from the surveys. In recent years, the share of non-observed economy in GDP varied from seven to eight percent.
Price Statistics: The CSO compiles and disseminates a monthly consumer price index (CPI) using a weighting structure based on expenditure data collected during 2014. A monthly Harmonized Index of Consumer Prices (HICP) is disseminated according to European regulations. The producer price index is released monthly with coverage including manufacturing, construction, agriculture, and select business services (business to business only). The CSO also compiles and releases monthly import and export price indexes based on data collected directly from establishments engaged in export and/or import activities.
Government Finance Statistics: Fiscal data in the GFSM 2014 framework is reported through the Eurostat convergence project with the IMF. Annual and quarterly fiscal data are compiled on ESA2010 basis by the Czech Statistical Office, including non-financial accounts, financial accounts, and financial balance sheets. The Ministry of Finance uses the ESA methodology for the Convergence Program targets. The ESA 2010 methodology includes a wider coverage of the general government sector, different classification of some government transactions, and impacts the calculation of GDP. Government transactions are recorded on an accrual basis.
Monetary and Financial Statistics: Monthly MFS data is sent to STA by ECB and is based on standardized report forms (SRFs). Monetary survey data is also provided to the European Department for policy purposes. MFS data covers the central bank (CNB) and the other depository corporations which comprises other monetary financial institutions which are defined under the European Union law to include deposit-taking corporations, electronic money institutions and other issuers of deposits and close substitutes of deposits. Data from the other financial corporations are currently not compiled.
Financial sector surveillance: CNB is reporting financial soundness indicators for Deposit Takers on a quarterly basis to STA.
External sector statistics: The CNB compiles and disseminates balance of payments and international investment position statistics in line with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) and in accordance with legal requirements of the ECB and Eurostat. CNB generally derives balance of payments financial account transactions from changes in position data adjusted by exchange rate, price, and other changes. The CNB monthly disseminates the data template on International Reserves and Foreign Currency Liquidity. Czech Republic also participates in the Coordinated Direct Investment Survey (CDIS) and the Coordinated Portfolio Investment Survey (CPIS), and reports quarterly external debt statistics to the World Bank’s Quarterly External Debt Statistics (QEDS) database.
II. Data Standards and Quality
The Czech Republic adheres to the SDDS Plus since April 2016.	Data ROSC was published on July 1, 2000.

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Fund Relations

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FSAP Participation and ROSCs:

Statistical Issues

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