The annual mission of the International Monetary Fund to the Czech Republic was carried out between 30 April and 14 May 2019. Aiming to independently evaluate each IMF member state, the programme of the two-week visit included the first ever discussion with members of the Czech Fiscal Council. This was because in its concluding statement, the International Monetary Fund concentrates on budgetary and monetary policy and development of the evaluated country’s financial sector, which is within the purview of the Czech Fiscal Council.
In its concluding document, the IMF stated that under its mission, the Czech Republic continues to enjoy strong economic growth in the broader European scale, with increasing wages and an improving standard of living. It also noted the country’s extraordinarily low rate of unemployment, which is currently the lowest in the entire European Union, and also the low level of debt, which in terms of the debt-to-GDP ratio is one of the lowest in the EU.
Partially in response to the IMF reducing the estimate for this year’s growth from 2.9 (in April) to 2.5 %, the head of the mission, Alasdair Scott, stated that one issue for the Czech Republic in the future will be how to maintain growth. According to the IMF, the country should continue its improvements in labour productivity, as the number of people of working age will drop because of an ageing population. According to the IMF, the Czech economy from this aspect could be boosted by investment in infrastructure, where it is still inadequate, although the mission representative also mentioned education, childcare and investment in human capital.
In the area of taxation, the IMF called on the Czech Republic to exercise caution when introducing sectoral taxes. Based on experience from abroad, Scott stated that sectoral taxes lead to double taxation, and in such cases, people and companies tend to do all they can to avoid it. According to the IMF, a digital tax should be introduced through international cooperation. “If a country tries to do this alone, it could be detrimental,” said Scott.
You can read the IMF’s entire concluding statement here, which also covers the housing market, the state of the financial sector and the currency policy of the CNB. A video recording of the press conference at the conclusion of the IMF mission in the Czech Republic is available here.