Slovakia Freight Transport Report 2007

Slovakia's new government is not enthusiastic about privatisation. One move on this front in the freight industry has been to confirm that the planned sale of the rail company's cargo subsidiary, ZSSK Cargo Slovakia, is now definitely off the cards. Another step has been to push ahead with the re-purchase of 49% of pipeline company Transpetrol from bankrupt Yukos of Russia, while fending off a host of other suitors. In our view, these moves will have a small downward effect on freight carried forecasts, simply because there will be slightly less new investment funds available for these transport modes going forward. In our newly released Slovakia Freight Transport Report, BMI concludes that rail cargo carried will grow at an annual average rate of 3.8%, with pipeline throughput growing by 6.6% across the 2006- 2011 forecast period.

Underpinning this forecast is the country's good economic outlook. Since our last report, we have again raised our macroeconomic forecasts for Slovakia. We have boosted the outlook for 2006 GDP growth to 7.1% (from 5.7% earlier). In 2007, growth will accelerate to 7.5% (was 6.3%). Average annual growth across the 2006-2011 forecast period will be 5.5% (up from our earlier projection of 5.4%). We are now predicting average annual growth in total freight carried across all modes, measured in million tonne-km (mntkm), at 5.2% in the 2006-2011 period. Road haulage will experience growth at an annual average of 5.3% in 2006-2011, while airfreight will expand most of all, gaining 13.8% pa (although this is from a comparatively very small base). The recovery of rail freight, as mentioned, will be slower with the ZSSK Cargo divestment off the cards. Freight shipped on Slovakia's inland waterways will continue to fall until 2007 and will register average annual growth of 2.2% across the forecast period. We remain bullish over oil and gas pipeline throughput, as Slovakia enhances its role as an east-west transit route.

Slovakia's BMI freight transport business environment ranking totals a composite score of 41 out of a theoretical maximum of 70, placing it at the higher end of the range compared to its European peers. Areas of particular strength include the transport intensity index (a measure of the dynamism of foreign trade) and long-term political risk. The country also scores well across transport growth, infrastructure development and the regulatory environment. The competitive environment is a little less strong, but we expect improvements here over the next couple of years.

The total value of transport and communications GDP will rise to US$9.4bn in nominal terms by 2011, representing 11.2% of Slovakia's GDP. The transport and communications sector employed 149,700 people, or 6.9% of the labour force, in 2005. We see that figure staying constant to 2011, in both absolute and percentage terms.