By Michael Winfrey
LONDON, May 15 (Reuters) - Worse than expected first quarter
growth in the Czech Republic was "not so bad", and now the
contraction in the country's economy should begin to even out,
Czech central bank Governor Zdenek Tuma said on Friday.
In an interview with Reuters television, Tuma also said he
expected the government's fiscal deficit, which is expected to
nearly triple this year to 4.3 percent of gross domestic
product, would be reined in once the economic crisis abates.
In other comments at the European Bank for Reconstruction
and Development's annual meeting in London, he also said
adopting the euro was "not a panacea" and could see the Czech
Republic sticking with its own monetary policy for some time.
Data earlier in the day showed the Czech economy had
contracted by 3.4 percent -- much less than regional peers
Romania and Hungary, which dropped 6.4 percent, but still higher
than a forecast in a Reuters poll for a 2.4 percent decline.
"It's not so bad," Tuma told Reuters.
"When you look at our forecast, we expected the biggest hit
would be really into the first quarter and then on a quarterly
basis we expect some evening out of that recession. So I'm not
surprised."
Tuma also said that, thanks to several years of solid growth
and prudent monetary policy by governments, the Czech fiscal
position was better off than many other countries.
The government has said the fiscal deficit could expand to
4.5 percent of GDP this year, from around 1.5 percent in 2008
and could hit five percent next year.
"It's better to go from minus one to minus five than minus
five to minus 10," he said. "As soon as the economic situation
improves, then we can get out of those deficit levels."
Tuma said he had been concerned about volatility on the
Czech crown, but it appeared to have calmed in recent weeks.
EURO "NO PANACAEA"
In the past, he has said the Czechs did not have to rush
into adopting the euro like former federation partners Slovakia,
and on Friday he said he could see both scenarios of joining the
euro zone early and later.
"The euro is not a panacaea," he said.
"I don't think that (euro adoption) is a general
prescription for countries in the region... Speaking for
instance about the Baltic countries, the euro tomorrow would be
a solution. It would be the cheapest way to help those
countries."
He added that the caretaker government of interim Prime
Minister Jan Fischer, expected to lead the country to October
early elections, would leave the question of a euro adoption
date to the next government.
"We must wait for the next government," Tuma told Reuters.
"And they will deal with the issue."
The previous cabinet of ex-prime minister Mirek Topolanek
had been scheduled to choose a date this autumn.
"In the long run I believe we have some credibility and we
can afford to maintain independent monetary policy for some
time."
(Reporting by Michael Winfrey; editing by Patrick Graham)
