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Economic analysts now predict Slovak economy to shrink by 1% in 2009

The Slovak economy will shrink by 1 percent and the state budget deficit will grow to 4 percent of GDP this year. Unemployment will rise from 9.7 percent in February to 11.6 percent in December, remaining around this level to the end of 2010, according to the consensus estimates of 18 economic analysts assembled by the INEKO Institute at the end of March, the TASR newswire wrote.

The Slovak economy will shrink by 1 percent and the state budget deficit will grow to 4 percent of GDP this year. Unemployment will rise from 9.7 percent in February to 11.6 percent in December, remaining around this level to the end of 2010, according to the consensus estimates of 18 economic analysts assembled by the INEKO Institute at the end of March, the TASR newswire wrote.

In January, the same group of analysts had estimated that the economy would grow by 1.4 percent in 2009. Only three said that there would be a recession at that time while now 13 of the 18 analysts in the latest estimate expected that a slump will take place, TASR wrote.

The changed projection has been caused mainly by the worsening economic situation among Slovakia's main export partners. The European Central Bank, in its revised prognosis for this year, expects the EU economy to contract by between 3.2 and 2.2 percent, said Volksbank analyst Vladimír Vano.

According to the analysts, the government should try to keep the deficit under 4 percent, with the optimal level put at 2.6 percent. The first three months of this year indicate that state finances are developing in an undesirable way and that an increasing share of state expenditures are being financed by a growing deficit, said Juraj Kotian from Erste Group bank, adding that after ten years when the deficit was shrinking vis-a-vis GDP, it will most probably grow this year.

Slovenská Sporiteľňa bank analyst Michal Mušák said that it is important whether the deficit will grow in favour of investments and an improvement in economic competitiveness or due to the state providing money to people and companies without any sign of it being returned.

In 2010, the economy could grow by 1.2 percent and the deficit should reach 3.8 percent of GDP, stated the INEKO report. As for unemployment, a slight increase to 11.7 percent is expected by the end of 2010, while it should drop to 10.6 percent by the end of 2011. TASR

Compiled by Zuzana Vilikovská from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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