The centre-right ANO is likely to emerge as the single largest party in Friday’s parliamentary election in the Czech Republic, which may open the door to looser fiscal policy. That said, there are reasons to think that any fiscal stimulus would be more modest than the party’s pre-election pledges would suggest. Moreover, given that the economy is now operating at full employment, looser fiscal policy would be unlikely to boost growth significantly. Instead, it would present an upside risk to our inflation and interest rate forecasts.
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