Macroeconomic Forecast Czech Republic

June 2005 | Macroeconomic Forecasts

The vice-governor of the Czech National Bank, Miroslav Singer, has confirmed that 2010 remains the country's official euro entry target, a target recently endorsed by the IMF. However, Singer also noted that the current economic conditions of low interest rates and inflation, and high financial stability limit the direct benefits of joining the bloc. The opposition Civic Democrats, who hold a strong lead in opinion polls, have also hinted that it might be preferable to delay surrendering the crown. We currently forecast inflation rising gradually - due to increasing private consumption and a weakening currency - to 2.7% in 2006, which we expect will prompt a rise in interest rates. However, we see the fiscal deficit as the main threat to the 2010 entry target. This is set to overshoot this year's target, and risks not being reduced below the 3% limit if enthusiasm for euro adoption wanes

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