Country Report Slovakia March 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 1.5% in 2009, as tighter lending conditions reduce domestic demand growth, and as recession in parts of the EU curtails export expansion. 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 presidential campaign is entering a crucial phase. The main contenders are Ivan Gasparovic, the incumbent and favourite, and Iveta Radicova, the joint candidate of the three parliamentary opposition parties.
In February 2009 parliament adopted a wide set of measures to ease the impact of the global economic crisis. These measures are mainly focused on the labour market, but also aim to broaden access to state investment aid.
The government's aim for the consolidated deficit (on an EU-harmonised ESA 95 basis) not to exceed the EU-mandated limit of 3% of GDP in 2009 is looking increasingly at risk.
According to a preliminary estimate from the Statistical Office of the Slovak Republic (SUSR), GDP grew by 6.4% in 2008, although growth slowed to 2.7% in the fourth quarter.
The three main carmakers operating in Slovakia announced that their combined output could fall by 18-25% this year, owing to sharply lower global demand for new cars.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;37
NAICS Code: 212;336