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Country Report Slovakia

Publication Date June 2008
Publisher EIU
Product Type Report
Pages 23
ISBN Number not applicable
Product Code EIU00097
Price

£145.00
approximately: $271 | €184

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Summary

Outlook for 2008-09

  • The Economist Intelligence Unit's central forecast is that the government will survive throughout 2008-09. However, tensions between ruling parties pose a risk that the coalition will break up in the forecast period.
  • If the government were to break up, an early election would be the most likely outcome. This could allow Direction-Social Democracy (Smer-SD), the party of the prime minister, Robert Fico, to strengthen its position further.
  • Slovakia will adopt the euro in 2009. The government will henceforth focus on preserving Slovakia's external competitiveness within the euro area, which will include measures to restrain inflationary pressures.
  • We expect the current administration, or any that is centred on Smer-SD, to reverse some of the previous government's free-market reforms. However, the overall extent of the changes should be limited.
  • Real GDP growth will slow in 2008-09 from a record-high 10.4% in 2007, as domestic demand moderates and net foreign trade posts smaller positive contributions than in 2007.
  • Additional export capacity will improve the trade balance in 2008-09, and a further reduction in the current-account deficit as a share of GDP will reflect this.

Monthly review

  • Midway through its four-year term, the ruling coalition, led by Smer-SD, looks broadly stable and capable of overcoming disagreements.
  • Opposition parties have had trouble reconciling their diverging positions. The two Christian democratic parties struck a co-operation deal in May that excluded the Hungarian Coalition Party (SMK).
  • In early May the European Commission gave Slovakia approval to adopt the euro from January 2009.
  • On May 29th the National Bank of Slovakia (NBS, the central bank) revalued the central parity of the koruna within the EU's exchange-rate mechanism (ERM2), to Sk30.126:€1, the upper bound of the previously allowed range.
  • According to the Statistical Office of the Slovak Republic (SUSR), real GDP growth slowed to 8.7% year on year in the first quarter of 2008—which is still the fastest growth in the EU.
  • Inflation measured according EU-harmonised methodology (HICP) edged up to 3.7% year on year in April from 3.6% in March, reaching its highest rate since December 2006.

Content

  • Highlights
  • Outlook for 2008-09: Domestic politics
  • Outlook for 2008-09: International relations
  • Outlook for 2008-09: Policy trends
  • Outlook for 2008-09: Fiscal policy
  • Outlook for 2008-09: Monetary policy
  • Outlook for 2008-09: International assumptions
  • Outlook for 2008-09: Economic growth
  • Outlook for 2008-09: Inflation
  • Outlook for 2008-09: Exchange rates
  • Outlook for 2008-09: External sector
  • Outlook for 2008-09: Forecast summary
  • The political scene: The ruling coalition overcomes its disagreements
  • The political scene: The opposition is still divided
  • Economic policy: Slovakia receives approval to adopt the euro in 2009
  • Economic policy: The ECB still doubts Slovakia's readiness for the euro
  • Economic policy: The NBS again revalues the koruna's ERM2 central parity
  • Economic policy: Government tightens retail regulations
  • Economic policy: A private health insurer leaves the market
  • Economic performance: GDP growth slows in the first quarter, but is still strong
  • Economic performance: Price pressures gather gradually
  • Data and charts: Annual data and forecast
  • Data and charts: Quarterly data
  • Data and charts: Monthly data
  • Data and charts: Annual trends charts
  • Data and charts: Monthly trends charts
  • Political structure