Country Report Slovakia April 2009

Summary

The Economist Intelligence Unit's central forecast is that the government will survive throughout the forecast period. However, tension between the ruling parties could cause the coalition to break up during this time.
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.
In the short term the government is likely to focus on alleviating the impact of the economic slowdown.
Most of the previous government's free-market reforms should remain in place. However, a sharper economic slowdown and a drop in popularity could increase the government's incentives to reverse these reforms.
GDP growth is forecast to slow to 0.5% in 2009 as tighter lending conditions reduce domestic demand growth and as recession in parts of the EU reducesexports.
Growth should accelerate a little in 2010, as the outlook for exports remains comparatively subdued.
The current-account deficit is forecast to narrow as a share of GDP in 2009-10 compared with 2008 as energy prices fall and income debits moderate.

The incumbent, Ivan Gasparovic, won the first round of the presidential election held on March 21st, although he will have to face a run-off against the second-placed candidate, Iveta Radicova.
There still appears to be some confusion in the direction of economic policy under the current government, as Mr Fico has sounded both reassuring and threatening towards foreign investors.
Efforts to undermine the participation of the private sector in the pension system continue, with parliament in February approving a substantial lowering of fees that private pension managers can request.
Revised GDP data for the fourth quarter of 2008 confirmed that foreign trade exerted a net drag on overall growth, as recessionary conditions in Slovakia's main trading partners curbed exports.
Available economic and survey data suggest that in the first quarter of 2009 GDP may have contracted on an annual basis. Domestic demand indicators are now showing clearer signs of slowing.
After remaining stubbornly high for several months in the second half of 2008, consumer price inflation is now falling more rapidly.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;53
NAICS Code: 52;44