IMF downgrades Czech GDP growth prediction

The international monetary fund has downgraded its outlook for Czech economic growth in 2002 from 3.9 to 3.5 percent. Its estimate for this year remains at the level of 3.3 percent. The IMF has repeatedly warned against the growing deficit in public finance and recommended that the Czech government tighten its fiscal policy. However, the Czech ministry of finance has defended government policies, saying the high deficits have been caused by dealing with past debts.

On the other hand, the IMF suggests that the Czech National Bank's policies should be more relaxed, although it does not recommended an interest rate cut directly.

The finance ministry estimates that the public finance deficit will reach almost 8 percent of GDP and will widen to a record 9.5 percent in 2002. The IMF recommends that the public finance deficit be cut to 1 percent of GDP in the medium term.