The Macroeconomic context
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Transcript of The Macroeconomic context
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THEMACROECONOMIC CONTEXT
OECD Economic Survey of the Czech Republic 2014
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The Czech economy has double-dipped
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Credit financed domestic demand growth has ended
Credit expansion has slowedBank credits to resident in % of GDP
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Which together with the international crisis => a recession that is only ending
• Supporting the recovery:– Accommodative monetary stance until deflation
risks recede– Preserve neutral fiscal stance in the short term
• Secure fiscal sustainability– Higher effective retirement age– Lower pension indexation (avoid old-age poverty)– Diversifying pensioners’ income sources– Forwarding Accelerating increases in statutory
retirement age• Independent fiscal council with a broad remit
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Fiscal policy has room to postpone consolidation, but not for ever
Fiscal position, 2012
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The zero interest rate floor has been reached
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After a year of discussions CNB intervened on the exchange rate
Exchange rates vis-à-vis the Euro (National currency/EUR)
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The exchange rate intervention seems to have worked – although a unconventionally
• The exchange rate depreciated by a relatively small amount (less than 5%)
• Prices see to have reacted with some delay and not as strongly as hoped
• Quantities (exports, consumption) seem to react more or less immediately
• The overall environment in the euro are is characterised by low inflation
• Exit is well defined in theoretical terms but may become tricky in practical terms
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Growth has been based on manufacturing exports
• Bosting industry’s share of value added in the economy
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Via high integration in the global (German) value chain
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Income convergence has stalled, pointing to a need for new growth drivers
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Looking ahead [all the following slides are very good, but not macro, more an overview for what is in the Survey]
• Further income convergence cannot rely on manufacturing alone– Indeed, an implication of income
convergence is the loss of current cost advantages
• Benefiting more from global value chains:– Move up the value added chain:
• in final exports goods• in intermediate inputs
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Future income convergence must rely on:
• A stronger service sector– Boost value added in production– Stimulate innovation– Exploit domestic resources of growth
• Better skill use and school-to-work transitions– Moving up the value added chain requires
new set of skills– Growth depend on an education system that
adjusts to changes in labour market needs
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This survey points to:
• Strengthening the domestic economy via promotion of competition
• Strengthening skill use and school-to-work transitions
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