UPDATE 1-Czech pension, health costs must be curbed -IMF

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PRAGUE, Nov 21 (Reuters) - The Czech Republic must implement structural reforms to contain the rising costs of pensions and healthcare, an International Monetary Fund (IMF) mission said on Tuesday during a visit to Prague.

The IMF also said in a statement that the 2007 budget should not add demand stimulus to the already booming economy, and that a cautious pace of interest rate hikes by the central bank was appropriate.

"Structural reforms to contain rising pension and health-care costs in the face of population ageing are crucial," the statement said.

"Taking advantage of the current good times to advance fiscal consolidation would be desirable... A strong political commitment to fiscal consolidation is necessary to address looming fiscal pressures from social spending and age related expenditures."

Czech economic growth slowed in the second quarter to 6.2 percent year-on-year after a 7.1 percent rise in the first quarter.

Growth was driven by gross capital formation, including a 5.3 percent gain in fixed investment and a build-up of inventories, but household consumption also revived, rising 3.8 percent.

The IMF said it expected growth to remain robust in 2007, though it would slow from the current rapid pace.

"It is important that the budget for 2007 does not add a demand stimulus to an already booming economy. This could be done in part by targeting new social spending more efficiently to low-income households," the statement said. ((Reporting by Marek Petrus, Writing by Alan Crosby; Editing by Gerrard Raven; prague.newsroom@reuters.com; Reuters Messaging: alan.crosby.reuters.com@reuters.net; +420 224 190 477))

Keywords: ECONOMY CZECH IMF