Central bank says no room for big monetary easing

The bank board of the National Bank of Slovakia (NBS) said on March 29 that developments in the public sector did not create the space for a significant monetary easing. The state of foreign exchange reserves also reflected the soundness of the bank's investment strategy, it said.

"Based on developments so far it is possible to say that developments in the public sector did not record any substantial changes. This does not create space for significant easing of monetary policy of the NBS," the bank said.

The central bank did not make clear which developments in the public sector it had in mind, but on March 26 parliament passed the 1999 state budget with a deficit of 15 billion Slovak crowns, or around two percent of gross domestic product. In 1998, the deficit represented more than five percent of GDP.

However, analysts have expressed concern that lower-than-expected economic growth figures may make it difficult for the government to meet the revenue side of the budget target. Economic growth in the last quarter of 1998 fell to 0.5% year-on-year from 5.1% in the third quarter.

The central bank's 1999 monetary programme targets net inflation at 5-7%, M2 money supply growth at 6.0% and calls for currency stability.

Interbank interest rates from overnights to six months ranged from 10 to 15% on March 29. Three days before, the NBS said its foreign exchange reserves rose in the week to March 24 to $2.843 billion from $2.830 billion on March 17.

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