Prague - Czech economic growth, now estimated at 3 percent for this year, is a result of forex interventions made by the central bank (CNB) last November and the subsequent weakening of the crown currency, CNB vice-governor Vladimir Tomsik said on Czech Television (CT) today.
The central bank will be watching the exchange rate also after 2016 when it wants to exit the intervention regime that keeps the crown beyond the Kc27 per euro, Tomsik said in the discussion programme Questions of Vaclav Moravec.
"If the currency is extremely volatile (after exit from the regime) we will step into the market and stabilise the exchange rate," Tomsik said.
The bank will also take action if the crown firms steeply, but the bank sees it as an unlikely scenario, said Tomsik.
Should this happen, there would be again a threat of deflation, and big gains of the crown would hurt domestic exporters, according to Tomsik.
The CNB´s action has long been criticised by trade unions. Josef Stredula, the head of the Bohemian and Moravian Confederation of Trade Unions (CMKOS), said the interventions harmed Czech employees as the bank´s promise that they will help create up to 30,000 jobs has not been fulfilled.
The first effects of the interventions have become visible as there was no increase of unemployment and the number of part-time jobs decreased in favour of full-time jobs, said Tomsik.
The CNB sees the first signs indicating a growth in nominal wages, he added.
Generally speaking, 1 percent growth in economic output raises employment by 2 percent, Tomsik said.
At the end of July the CNB improved its GDP development estimate for this year to 2.9 percent and cut the estimate to 3 percent for next year.
Czech jobless rate in July reached 7.4 percent, against 7.5 percent in July 2013.
Crown depreciation not related to euro adoption date -CNB´sTomsik
The crown´s depreciation caused by forex interventions has nothing to do with a date for the country´s joining the euro, Vladimir Tomsik, the vice-governor of the central bank (CNB), said in a discussion programme on the public broadcaster Czech Television (CT) today.
He was responding to a statement by President Milos Zeman who said the bank may have weakened the currency on purpose so as to delay the country´s entry into the euro area and extend the period over which it may regulate the exchange rate of the crown.
"The CNB´s monetary policy is no obstacle to the Czech Republic´s adoption of the euro in the long run. On the contrary, we had long-term problems with the fiscal policy - the budgets as the Czech Republic was within the framework of the so-called excessive deficit procedure," Tomsik said.
Big national budget deficits are the main hurdle for adoption of the euro, he said.
An incomplete pension reform and the low flexibility of the labour market are factors that may complicate the euro adoption process in the Czech Republic, according to Tomsik.
Switzerland intervened in the currency market with the aim to stabilise economic development three years ago, Tomsik said, adding that this country can hardly be suspected of the intention to put off adoption of the euro.
Last November the CNB depreciated the crown by 7 percent vis-a-vis the single currency so as to avert a threat of deflation, and the step has met with criticism.
The Bank Board said at the end of July that it will not end the intervention regime before 2016.
Bad results of foreign banks won´t affect Czech daughters-Tomsik
Possible bad results of European banks in stress tests will have no impacts on domestic banks as the Czech National Bank (CNB) has enough tools to secure stability of the domestic banking sector, CNB vice-governor Vladimir Tomsik said today.
Results of stress tests made to show how healthy banks in Europe are will be available in November.
The CNB wants commercial banks to have enough capital so as to avoid a situation in which an outflow of money from well-performing Czech banks to foreign parent companies might jeopardise the domestic banking system. Now the banking sector is healthy, said Tomsik.
"The credit union sector is riskier, and adequate measures need to be taken in order to strengthen its stability," Tomsik said.
As part of the recovery of the sector, credit unions should not be using a banking-based system, for instance, he said.
The central bank has recently come up with a proposal that credit unions might provide loans to their members only.
Stress tests of Czech banks showed in mid-June that the banking sector as a whole is resistant to even an adverse economic development.
The sector´s capital adequacy would stay well above the required 8 percent minimum under a scenario predicting a strong recession and deflation for the next three years, the CNB said.