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Analyst: Slovakia Over Worst of Crisis, But Not for Unemployment
Friday 01 January 2010 Zoom in | Print page
Bratislava, January 1 (TASR) - Although Slovakia is over the worst of the economic and financial crisis, 2010 will involve a great deal of suspense and will be affected by three key events, chief analyst of Austrian Volksbank's Slovak unit Vladimir Vano told TASR in an interview.
"The first will be developments overseas and in the eurozone once the effects of stimuli to stoke the economy such as the government scrapyard contributions have tapered off. A double-dip recession as well as associated threats to global stockmarkets rank among the main uncertainties of the outside world on which small and open economies such as Slovakia are existentially reliant," said Vano. Thanks to a recovery in foreign demand in the eurozone and the adoption of the euro, which have helped attract major investments, there are favourable prospects for a moderate pick-up in Slovakia's economic growth this year.
Another major and monitored indicator will be developments in the country's employment and unemployment rates. Vano expects a delay between developments in the real economy and the labour market. "When Slovakia experienced the most recent recession in 1999 the registered unemployment rate didn't culminate until January 2001, at nearly 20 percent. Although favourable macroeconomic figures can be expected, tensions in the labour market will not end this year," said Vano.
The third intensively monitored event in 2010 will be the performance of revenue in the state budget and plans to consolidate public finances at 5.5 percent of Gross Domestic Product (GDP). The examples of Hungary and Greece, with ballooning deficits, indicate the need to resume budgetary discipline in Slovakia's interests.
Unlike 2009, the budget gap projected at 5.5 percent of GDP will be seen as a tight budgetary ceiling. Were developments in public finances in 2010 to move away from the approved plan, early and effective measures will be required. "In such an event not even tax hikes are out of the question. Experience in several countries including neighbouring Hungary has revealed that the most effective and flexible income measures towards the recovery of public finances is indirect taxes, namely VAT and consumer taxes," said Vano.
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