NOT EVEN the warmth of the approaching holiday season has been enough to melt the frost affecting economic forecasts for the upcoming months - or even years. Politicians have been moderating their rhetoric when it comes to talking about economic growth, and dropping the optimistic adjectives.
Slovakia’s Finance Ministry revised its macroeconomic prognosis for the forthcoming years on November 4, trimming the 6.5 percent prediction for growth in 2009 to 4.6 percent. A month later, the country’s central bank followed by trimming its forecast for real GDP growth for next year by 1.9 percentage points, to 4.7 percent.
The Slovak Statistics Office at around the same time scaled down its prediction of real economic growth for 2008 by 0.8 percentage points, predicting that it would stand at 7.1 percent. The Statistics Office expects the economy to grow by slightly more than 6 percent in the last quarter of 2008, while in the first three months of 2009 growth should slow to 4.3 percent, according to the authority.
Market watchers called the revisions for 2008 realistic, matching forecasts by the country’s major banks. The analysts agree that the first half of 2009 offers no room for rosy predictions.
“We expect the global crisis to have a negative impact on Slovakia’s economy mainly in the first half of the year,” Ľubomír Krošňák analyst with the UniCredit Bank told The Slovak Spectator.
According to Krošňák, year-on-year growth might even sink beneath 4.0 percent.
“This means that the Statistics Office’s prediction 2009 is mildly optimistic,” Krošňák said.
Silvia Čechovičová, senior analyst with the ČSOB bank considers both estimates by the Statistics Office realistic, being more or less in harmony with the estimates of her bank.
“We estimate the growth of economy this year at 7.5 percent, with the risk towards lower values, and the growth of economy in the first quarter of 2009 we estimate being at 4.5 percent,” Čechovičová told The Slovak Spectator.
Both, Krošňák and Čechovičová expect growth next year to be fuelled by domestic consumption.
The recession in Western Europe will have a negative impact on the economy, while domestic consumption could still propel GDP growth, said Krošňák.
“Export-oriented industry is now putting the brakes on and this will not change even during the next few months,” Čechovičová said. “That’s why the possibility cannot be excluded that net exports in the first quarter of 2009 might contribute negatively to economic growth. Its further development will depend on how fast the eurozone can get out of recession.
Juraj Valachy of Tatra Banka said that his bank’s GDP growth predictions stand at 7.0 percent for this year and 4.5 percent for next year.
“The fourth quarter of 2008 and the first quarter of 2009 will be the worst in terms of GDP growth and thus the Statistics Office estimate is realistic,” Valachy told The Slovak Spectator.
Despite the scaled-down predictions, Slovakia should still be among the fastest growing economies in the eurozone and the wider European Union.
The governor of the National Bank of Slovakia (NBS), Ivan Šramko, said that the impacts of the crisis on Slovakia’s economy are becoming evident.
“The Slovak economy is extremely open,” Šramko said, as quoted by the SITA newswire. “The belief that the recession in eurozone countries, which affects our key economic partners, might not concern us is rather naive.”
Šramko did not rule out the possibility of further revisions to the GDP growth numbers.
Not everywhere a leader
However, Slovakia is still among those EU countries in which GDP per capita, calculated based on purchasing power parity, is 30-50 percent below the EU average, according to Eurostat. Other members of this group include Hungary, Poland, Estonia, Latvia and Lithuania, SITA wrote.
Among other recent EU newcomers, the Czech Republic and Slovenia have joined Portugal and Malta in the group where GDP is 10 to 25 percent below the EU average. Romania and Bulgaria have GDPs per capita 60 percent below the EU average, according to Eurostat.
Luxembourg’s GDP per capita exceeds the EU average by more than 2.5 times, while Ireland and the Netherlands outperform the EU average by 30-50 percent; Austria, Sweden, Denmark, Great Britain, Belgium, Finland and Germany are 15-25 percent above the EU average in terms of GDP per capita.
However, Luxembourg's figures are partly inflated by the high number of workers who commute to work there from neighbouring countries but aren't included in its per capita calculation, SITA wrote.
