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Reader feedback: Pretty gloomy forecast

Re: Prices up 4.1 percent in January, Flash news briefs, February 27 - March 05, 2006

The Slovak inflation rate will have to stay around two percent above the EU15 average as incomes slowly rise in the direction of par with the EU15. In that context, the 4.1 percent for January seems quite OK. Unfortunately, January inflation is not comprised of natural inflation and gradual extra income growth, but of natural inflation and higher indirect energy costs. In many cases, the direct higher energy costs are still to be charged to the average consumer (most likely in April).

That's a pretty gloomy forecast, as many will get the fright of their lives then. Slovaks already pay far too much for energy and telephone service, which, by means of increased free marketeering, could offset higher earnings. That is, if this current government continues to fail to muster a meaningful challenge to the energy and telephone monopolies.

The next government will probably still be busy settling into office until October. With oil prices hovering around $ 60/65 pb and unlikely to fall substantially, or at all, this year, Slovak inflation for 2006 will be around 5 percent, not counting the 2 percent needed to gradually adjust average incomes. It is not going to be an easy year economically or politically!

Oscar,
Radošovce

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