(Repeats story published late on Tuesday)
By Petra Vodstrcilova
PRAGUE, Sept 16 (Reuters) - The global economic slowdown may
affect the Czech Republic much more intensively than previously
thought, central bank Vice-Governor Mojmir Hampl said.
Hampl said he could not say now where interest rates should
go, a comment echoed by board member Vladimir Tomsik, while
Vice-Governor Miroslav Singer said policy easing would be an
option if a deeper economic slowdown cuts the inflation outlook.
The Czech economy, which had grown at rates over 6 percent
in a catch-up with richer western Europe in the past three
years, has already slowed to 4.6 percent in the second quarter
and the bank sees a mere 3.6 percent expansion next year.
Hampl told Reuters in an interview approved on Tuesday for
release that the country was not sliding as much as the United
States or western Europe, but a downturn was on the cards.
"Indirect impacts can occur; they can be significantly more
intensive than it had appeared," Hampl said.
"European growth forecasts are being permanently revised in
one direction, the bad one, and that is an important piece of
bad news for the Czech economy."
The Czech Republic tends to track the fortunes of big
European economies, because its exports amount to an
exceptionally high 70 percent of gross domestic product.
Companies have warned they planned to cut back investments
and lay off workers due to the worsening outlook, aggravated by
the strength of a crown currency <EURCZK=> <CZK=> that is seen
as a safe haven for investors fleeing a world financial crisis.
The crown soared as much as 19 percent against the euro to a
record high of 22.925 in July before sliding back toward 25, but
has jumped again to 24.03 on Tuesday as the collapse of Lehman
Brothers sparked a new flight to safety.
Hampl said spikes in risk aversion could bring new strength
to the crown.
"If bad news from the developed world proliferates and the
macroeconomic environment will not raise investors' appetite for
return into developed markets, it is not excluded that the story
from the first half of this year (when the crown firmed) will be
repeated to a certain extent," he said.
RATE PATH UNCLEAR
The bank cut its benchmark rate by 25 basis points to 3.50
percent in August, 75 basis points below the euro zone rate.
The economic outlook has since soured more due to both
external factors and weak domestic data, including
lower-then-expected July retail sales on Tuesday [].
Hampl, a hawk on the seven-member central bank board in
several votes earlier this year, said he was undecided on what
policy action to advocate at the Sept. 25 board meeting.
Speaking to Reuters separately at a conference in the
eastern city of Brno, board member Tomsik said leaving rates
flat could be a good option at times of high uncertainty, but he
could not predict now which way rates would go [].
He said however the bank would act if the crown departed
from a long-term appreciation trend, which he put at 3-4 percent
annually in real terms [].
Vice-Governor Miroslav Singer said on Czech Television the
bank could prop up the economy with a rate cut if it thinks
growth will cool more than expected and the inflation outlook
drops.
"We (would) help the economy, make money cheaper, most
likely also make the crown less attractive," he said.
(Additional reporting by Martin Dokoupil; Editing by Ruth
Pitchford)
