By Jana Mlčochová (Reuters 19.3.2013)
* Janacek: monetary conditions loose enough to enable rebound
* Revival of exports will lead recovery
* Says is satisfied with present crown rate
Czech monetary policy is loose enough to allow a gradual, export-led recovery but the central bank stands ready to knock the crown currency weaker if necessary, central banker Kamil Janacek said on Tuesday.
The Czech economy has been through its longest recession in two decades - deepened by the centre-right government's budget squeeze which hit household and corporate spending and prompted the central bank (CNB) to cut interest rates to near zero.
The economy shrank by 1.2 percent in 2012 and the central bank sees a further 0.3 percent dip this year.
The bank has said it will weaken the crown if it needs to ease further and Governor Miroslav Singer has said that need may come in the second half of this year.
Janacek told Reuters no further easing is needed for now because an expected pickup in exports to Germany, Austria, and Slovakia, the Czech Republic's main trading partners, should lead the country out of economic contraction.
"For now, it is not necessary to intervene, in my opinion," said Janacek, who markets consider a hawk on the seven-member governing board.
"I think at the present situation monetary conditions are set in such a way that there can be a smooth and gradual revival of the Czech economy and demand."
However, he said the central bank was ready to launch crown sales if needed. For him, triggers would be significant exchange rate fluctuations or "a serious risk to fulfilling the central bank's legal mandate of price stability."
His view mirrors comments by Vice-Governor Mojmir Hampl who said in a Bloomberg interview released on Tuesday that he saw no risk currently of a deflationary spiral that would justify interventions.
"Our monetary policy is very markedly relaxed. Interest rates on loans for both households and companies are at historical lows," Janacek said.
"From the monetary policy point of view, we have done the maximum."
Janacek said he was "satisfied for the moment" with the present crown level against the euro. The unit's average rate is at 25.5 in the first quarter, exactly in line with the bank's forecast.
EXPORTS TO LEAD RECOVERY
The highly open Czech economy, whose exports equal 75 percent of its total output, should start recovering on the back of a pick-up in sales of its industrial products, mainly cars, steel, and electronic devices abroad, Janacek said.
Volkswagen's Skoda, the Czech Republic's largest exporter, expects a rebound in the second half after poor demand abroad undermined unit sales which fell 6.9 percent in February.
Janacek said that trend should turn as euro zone countries which buy Czech exports perform better than earlier thought.
"We have positive signals the German economy will do better this year than it had seemed half a year ago," Janacek said. Germany bought 31.4 percent of all Czech exports in 2012.
Janacek said a revival in exports will eventually encourage companies to take on more staff, cutting record unemployment.
"I expect households to start spending more in the second half of the year," he said. "People will find that the situation will not worsen any more but rather it will improve and they will ... gradually return to normal consumer behaviour."