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Dole queue shrinks on foreign investment, reforms

SLOVAKIA's jobless rate, once the highest in central Europe, has fallen to its lowest level in five years, as already-established foreign investors expand their Slovak operations, new investors set up shop, and problematic domestic businesses continue restructuring.
The unemployment rate in April fell to 15.4 percent, the Labour Ministry reported on May 20, the best rate the country has seen since the end 1998. The spike in job creation means Slovakia is catching up with some EU states. Slovakia's jobless rate is now comparable to that of Spain.
Government officials and analysts said that companies active in Slovakia, particularly foreign-owned ones, were creating new jobs and strengthening the economy. In April, employers opened over 20,000 new positions, the highest inflow for that month since 1997. The trend is likely to continue throughout the year, they said.

SLOVAKIA's jobless rate, once the highest in central Europe, has fallen to its lowest level in five years, as already-established foreign investors expand their Slovak operations, new investors set up shop, and problematic domestic businesses continue restructuring.

The unemployment rate in April fell to 15.4 percent, the Labour Ministry reported on May 20, the best rate the country has seen since the end 1998. The spike in job creation means Slovakia is catching up with some EU states. Slovakia's jobless rate is now comparable to that of Spain.

Government officials and analysts said that companies active in Slovakia, particularly foreign-owned ones, were creating new jobs and strengthening the economy. In April, employers opened over 20,000 new positions, the highest inflow for that month since 1997. The trend is likely to continue throughout the year, they said.

"The number of new positions opened is increasing on both a monthly and annual basis. This confirms that the revival of the country's economy is contributing to a fall in the unemployment rate," said Labour Minister Ľudovít Kaník.

Analysts agree, saying that big producers, mainly in the car and electronic industries, as well as their suppliers, were growing their operations and therefore the number of new jobs available on the market in coming months will continue to grow.

"Positive developments in the unemployment rate were already evident in the second half of last year, so we expected some drops this year. But we were more cautious because although the economy was growing last year, the growth was too small to have a significant influence on the unemployment rate," said Róbert Prega, an analyst with Tatra Banka.

"At the same time, the great majority of troubled domestic companies have already been privatised, and their new owners have already gone through restructuring processes in those businesses and have stopped laying off large numbers of employees," Prega added.

Developments in the country's economy last year have also affected interest rates, making some companies in Slovakia more willing to borrow money to finance expansion, said Ján Tóth, an analyst with ING Bank.

"Current economic growth is pushing interest rates down, and the number of businesses taking loans to finance their expansion is increasing. This has also been contributing to [lower] unemployment figures," said Tóth.

While Slovakia's one-year interest rate averaged 7.7 percent last year, this year analysts expect the average to be 5.4 percent.

Positive developments in both foreign and domestic companies over the last 12 months have also led to an increase in industrial production.

According to the Slovak Statistics Office, industrial production in the country for the first quarter of 2003 increased by 10.9 percent year-on-year, while exports in the first quarter grew year-on-year from Sk143.7 billion (€3.49 billion) to Sk175.4 billion (€4.26 billion).

The largest share of export earnings came from carmaker Volkswagen Slovakia, the country's biggest industrial concern and one of the largest employers. Exports from Volkswagen brought Slovakia Sk108.2 billion (€2.63 billion) last year; analysts expect this number to increase to Sk153 billion (€3.71 billion) for 2003.

Volkswagen has also been steadily increasing employment in its Slovak facilities, from 8,029 people in April 2002 to 9,249 in April 2003. Dozens of Volkswagen suppliers that have been lured by the company to set up their businesses in Slovakia are following the same trend, expanding production and hiring new workers.

While most of Volkswagen's activity is in the western part of Slovakia - the area that traditionally has the strongest economy and lowest unemployment - industrial development is also kick-starting economies in other regions.

Home-appliance maker Whirlpool Slovakia recently announced it will be creating around 600 new jobs in the eastern city of Poprad, after receiving permission to expand its factory on municipal land.

In the second half of this year, construction will begin in the western city of Trnava on a new €700 million factory for French auto giant PSA Peugeot Citroen. In addition to the jobs the company will create - 3,500 jobs directly and 6,000 indirectly within three years - further boosting Slovakia's auto sector, the construction itself is expected to generate hundreds of new jobs.

Analysts expect Slovakia's unemployment rate to continue falling in the coming months as seasonal positions are created in the agriculture and construction sectors.

"The influence of the seasonal jobs on the jobless rate could be great even next month, and it could fall to around 14 percent. A similar trend will be seen throughout the summer and autumn," said ING's Tóth.

According to Tatra Banka's Prega, at the end of the year, when seasonal work has less of an influence on the unemployment rate, new jobs created by the Slovak corporate sector in the coming months are expected to keep the number of jobless at about 15.8 percent.

Prega also explained that the new administrative measures aimed at cutting the shadow economy will result in fewer people working illegally while on the dole.

The changes require registered jobless individuals to contact their district labour offices every two weeks, whereas the previous system required personal contact every four to eight weeks.

"Many of them simply can't be making money far away from home and show up at their labour office every two weeks," said Prega.

At the same time, analysts note that the changes in registration rules could result in some people choosing to continue their illegal work rather than sign on, leading to lower unemployment figures.

While administrative adjustments will have some effect on jobless figures, Prega sees signs of an improving economy in the country, and predicts the unemployment rate to continue showing a steady decline.

"I expect Slovakia to enter the EU [next May] with an unemployment rate of around 15 percent, which will gradually keep on decreasing," Prega said.

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