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New import controls discussed by SDĽ

A senior member of Slovakia's Party of the Democratic Left (SDĽ) said on October 19 the new government, of which SDĽ will be a part, may impose import restrictions to deal with the current account deficit.
Slovakia's current account deficit represents around 11% of gross domestic product.
After the victory of the four party opposition in elections at the end of September, the Slovak crown was floated and has depreciated by some 5% against the mark and dollar.
The government of Vladimír Mečiar, which retains power until the reopening of parliament on October 29, viewed a strong crown as a matter of pride, but analysts had long predicted that any new government would be forced to devalue.

A senior member of Slovakia's Party of the Democratic Left (SDĽ) said on October 19 the new government, of which SDĽ will be a part, may impose import restrictions to deal with the current account deficit.

Slovakia's current account deficit represents around 11% of gross domestic product.

After the victory of the four party opposition in elections at the end of September, the Slovak crown was floated and has depreciated by some 5% against the mark and dollar.

The government of Vladimír Mečiar, which retains power until the reopening of parliament on October 29, viewed a strong crown as a matter of pride, but analysts had long predicted that any new government would be forced to devalue.

SDĽ vice-chairwoman Brigita Schmögnerová, who is widely tipped as a candidate for a top economic post in the new government, said that the crown's slide was unlikely to be enough to solve the trade imbalance.

"It may be too early to say how it (the depreciation) will affect the development of the deficit. In my estimate, the effect will not be very large," she said. "This will make it necessary to adopt measures... short term measures unfortunately will focus on certain import restrictions," she added without elaborating.

Jozef Makúch, Director of the National Bank of Slovakia's (NBS) Institute of Currency and Monetary Studies, told an audience at Managerial Forum '98, which took place on October 14 in Bratislava, that "devaluation alone, without taking adequate economic and political measures, will not improve the results of foreign trade in any country."

The four party opposition is holding talks on who will take which posts in the new government and it is also trying to hammer out an economic programme. Slovakia has macro-economic problems which economists have said need to be addressed whichever government comes to power.

The four party coalition spans the former communist SDĽ on the left to free market conservatives on the right. It has said little about economic policy and only made vague indications that its programme will focus on seeking closer ties with the West and revitalising democracy.

Under Mečiar, the Slovak economy achieved consistently high gross domestic product (GDP) growth and low inflation relative to other transition economies.

However, local economists said growth had been financed by heavy domestic and foreign borrowing and inflation kept low by slow price deregulation.

Slovakia's 1998 state budget deficit reached 8.4 billion Sk ($240 million) in the January to September period, as revenues fell short of forecasts. Some state institutions were unable to pay wages on time in September.

"Already in 1998, we will have to at least try to deal with the most sensitive issues, like (financial) problems in healthcare, education, heat supply," said Schmögnerová.

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