Spectator on facebook

Spectator on facebook

FOREX MARKETS

Current account deficit puts dangerous pressure on Sk

2nd week quiet
The second week in the market was a more tranquil time. We did not see any interest from foreign investors to open long-term positions, as the NBS held fast in its desire to hold money market rates at higher levels and capping crown index movement at higher levels.
The downward trend is limited by the parity's strong support level, where we see strong foreign investor interest in hard currency purchases.
The slovak currency's index fluctuated for the rest of the week in a narrow range from 1.0050 to 1.0100.

2nd week quiet

The second week in the market was a more tranquil time. We did not see any interest from foreign investors to open long-term positions, as the NBS held fast in its desire to hold money market rates at higher levels and capping crown index movement at higher levels. The downward trend is limited by the parity's strong support level, where we see strong foreign investor interest in hard currency purchases. The slovak currency's index fluctuated for the rest of the week in a narrow range from 1.0050 to 1.0100.

Money market

Money market rates remained high on the whole high. Short term spreads up to one month did not dip below 23 percent and longer spreads up to three months attained levels higher then 21 percent.

The lofty money market levels settled a bit on September 10 as a result of central bank hard currency selling. Developments in the September 16-19 period continued in more or less the same fashion as the previous week. Short-term rates up to one month traded at levels higher than 22 percent and longer-term deposits traded at well above 20 percent.

Economic data news

During the last two weeks, major statements on Slovak macroeconomic data were made. The national bank announced that the current account deficit for the first half of this year reached 33.2 billion Sk, an increase of 10.8 billion Sk compared to the same period last year.

Moreover, the trade deficit in 1997's first six months reached 32.6 billion Sk, which is 5.7 billion Sk more then in same period last year.

We estimate that the current account deficit will reach more then 11 percent of GDP, a frightening forecast because it creates a dangerous amount of pressure on the Slovak currency's stability. Slovak Finance Minister Sergej Kozlík sought to ease concerns by stating his confidence that the slovak currency will be stable and move in narrow ranges until the end of this year. Kozlík added that maintaining a stable currency rate is a key task for the Slovak government and the central bank.

In other macroeconomic news, signals of higher inflation could be seen in July's figures, such as retail sales numbers, which reached 4.9 percent.

The overall inflation rate rose by one percent in August, a year-on-year increase of 6.5 percent. The latest inflation numbers ignited doubts about whether the Slovak economy can realistically reach its 6 percent inflation target by the end of this year.

The country's statistical bureau announced that the nominal GDP rose 9.7 percent in the first half of 1997, and real GDP rose 6 percent. Average earnings rose 8.1 percent compared to the same period in 1996. Also, unemployment increased 0.05 percent in August compared to July, hitting 12.8 percent.


Prepared by Branislav Matušek from the dealing department at Slovenská Sporiteľňa, a.s. Bratislava.

Top stories

LGBTI people in the regions: We change people’s minds

Bratislava will dress up in rainbow colours this August again, for the seventh time. This will be for the Bratislava Dúhový Pride diversity festival. But the colours of the rainbow are less bright in the regions,…

Slovakia’s LGBTI community seeks to expand their rights.

Foreigners: Top 10 events in Bratislava Video

Tips for the top 10 events in the capital between August 18 and August 27, as well as regular services in different languages, training for foreigners in English and highlights of the year.

Pivobrana - Beer Festival

Have you ever climbed a via ferrata? Photo

In central Slovakia, there is one also suitable for beginners. Here are some of the views it offers.

Agrokomplex opens its gates Photo

This year’s exhibition has more discussions with experts and a family programme.