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MICRO ECONOMY

SME's are ready to grow in 2002

CHANGES are afoot in the micro economy thanks to the privatisation of state banks. It is hoped with a greater availability of loans to the corporate sector many small to medium sized enterprises (SMEs) will flourish with a fresh cash injection for growth and development.
"The former state banks will be more active in focusing on small and medium-sized enterprises after their new owners fully establish the policies some time in the second half of this year," said Ján Tóth, an analyst with ING Barings bank.

CHANGES are afoot in the micro economy thanks to the privatisation of state banks. It is hoped with a greater availability of loans to the corporate sector many small to medium sized enterprises (SMEs) will flourish with a fresh cash injection for growth and development.

"The former state banks will be more active in focusing on small and medium-sized enterprises after their new owners fully establish the policies some time in the second half of this year," said Ján Tóth, an analyst with ING Barings bank.

In the past, the dominant state banks, provided loans only to a few companies with a good track record to avoid the risk of losing their money to smaller companies struggling in the limping Slovak corporate sector.

But now the new owners have stepped with new policies for growth, however the sector has undergone partial restructuring and businesses are expected to be given a further boost with increasing purchasing power of Slovaks whose appetite for domestic products is growing thanks to lower inflation and growth in real wages.

The parliament also lowered taxes as of January this year, another helping hand for SMEs to revive and grow their businesses.

Tóth said that due to the huge tax burden in the past, many companies had artificially lowered their revenues to pay less taxes, and with such balance sheets they could not approach banks for loans.

But over the last two years the government has cut corporate income tax from 40 per cent down to 29 per cent and as of January has been cut by a further four per cent to 25 per cent.

Tóth said: "This will motivate more business to do transparent accounting and they will be eligible to ask for loans from banks."

Individuals are also set to benefit from the newly privatised bank sector with analysts expecting banks to focus more on sophisticated debt products such as credit cards and mortgage loans.

However, not all domestic businesses are expected to flourish. The recession on the EU markets, the final destination for 60 per cent of Slovak exports, may lower demand for some products.

Marek Gábriš, an analyst with ČSOB bank: "In the first half of 2002, the recession is expected to reach the crises point, something that will be experienced by some Slovak companies as they will report the drop in the production."

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