A set of analyses for the assessment of the Czech economy’s alignment with the euro area has been discussed

At its meeting of 19 October, the CNB Bank Board discussed a set of analyses underlying the assessment of the Czech Republic's current economic alignment with the euro area. This assessment is based on the Czech Republic's Euro-area Accession Strategy and is included in the document submitted annually to the Government of the Czech Republic by the Minister of Finance together with the CNB Governor.

According to the analyses, some favourable as well as unfavourable partial changes have taken place since last year. The convergence of GDP and the price level in the Czech Republic towards the euro area, the shift in financial market characteristics closer to the euro area average and the slight improvement in the conditions for business can be regarded as positive developments. Favourable factors also include close economic links with the euro area, including the convergence of interest rates, exchange rate developments and stock market developments, as well as the very stable banking system. On the other hand, the cyclical development of Czech GDP differs considerably from that of euro area GDP. The still low price level creates room for appreciation of the real exchange rate, which could result in an inflation differential and low - probably negative - real interest rates after the adoption of the euro. Risks also derive from the insufficient consolidation of public finances, their deteriorating outlook and the persisting inflexibility of the labour market.

Following its completion, the set of analyses will be published on the CNB's website.

Pavlína Bolfová
CNB spokesperson