THE INTERNATIONAL Monetary Fund (IMF) is more optimistic than the Slovak Finance Ministry in its forecasts for the country’s economic development. The fund, in a report from its mission to Slovakia conducted in October 2010, says it expects budget-tightening measures to have a rather moderate impact on the development of prices and predicts stronger economic growth and slower price increases in Slovakia. The IMF expects the Slovak economy to grow by over 4 percent this year.
The fund praised the authorities’ 2011 deficit target and called its financial consolidation package “appropriate”.
The report suggests that once the 2011 budget is approved at the end of 2010 the authorities can re-focus the fiscal policy debate on creating a new institutional framework that will include reforms such as introducing a formal expenditure rule and creating an independent fiscal council to monitor compliance with the rule, and with transparency standards.
“Nevertheless, uncertainty surrounding the outlook remains relatively high,” the IMF wrote in its report.
“The global economic environment remains clouded, facing risks associated with simultaneous fiscal consolidation efforts and possible loss of market confidence. Domestic demand and confidence are still lagging the recovery in the external sector. Furthermore, Slovak employment growth may be sluggish, reflecting the high uncertainty which could slow the rebound in domestic demand.”
