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Slovak trade gains not enough - analysts

Despite better foreign trade data, Slovakia needs more exports and economic stimulation to meet the government's economic targets, analysts said on May 24.
The Slovak Statistical Bureau had said earlier in the day that Slovakia's trade gap in April reached 4.76 billion Slovak crowns ($136 million) compared with 8.01 billion crowns in April 1998. "These figures confirm the positive developments in the first two months of this year," said Ivan Chodák, an economic analyst at CA IB. "After a blip in March, it seems that foreign trade will evolve much more favourably this year."
But Miloš Božek, an analyst at J&T Securities, warned that adjusted to exchange rate changes, both imports and exports fell in April compared to the same month in 1998.

Despite better foreign trade data, Slovakia needs more exports and economic stimulation to meet the government's economic targets, analysts said on May 24.

The Slovak Statistical Bureau had said earlier in the day that Slovakia's trade gap in April reached 4.76 billion Slovak crowns ($136 million) compared with 8.01 billion crowns in April 1998. "These figures confirm the positive developments in the first two months of this year," said Ivan Chodák, an economic analyst at CA IB. "After a blip in March, it seems that foreign trade will evolve much more favourably this year."

But Miloš Božek, an analyst at J&T Securities, warned that adjusted to exchange rate changes, both imports and exports fell in April compared to the same month in 1998.

"At first sight it looks good, but given the weak crown, imports fell 17.5% while exports fell 8.8%... So the trend is, in fact, negative," he said.

"The trade balance really depends on what measures the government is going to employ... There are instruments which can help the trade balance, but they should be used soon," said one analyst at a foreign bank, who asked not to be identified.

The Slovak crown came under pressure last week, caused by political uncertainty about the upcoming second round of presidential elections and concerns at the government's lack of fiscal conservatism.

The Slovak government announced new measures to stabilise the economy and the currency, which together with central bank intervention, stopped the crown's decline. The government said it would levy an import surcharge and raise the lower limit of value added tax, but gave no specifics.

The import surcharge was seen as having a crucial impact on the government's ability to meet its foreign trade targets. "The import surcharge will be an important tool, but the government should be careful so that it does not affect import-sensitive exports," said Bozek.

The government's target is to cut the current account deficit in half from over 11% in 1998. The trade balance is the key component in the current account. "I would not be too optimistic about halving the current account deficit, given these developments... But the import surcharge, depending on the rate and duration, could help it significantly," said CA IB's Chodák.

Slovak Economy Minister Ľudovít Černák said earlier in May that he expected the trade deficit in 1999 to be about 30 to 35% lower than in 1998, when it was 80.793 billion crowns.

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