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Mixed EC forecast for Slovak economy

IN ITS autumn outlook report the European Commission forecasts a 5.8 percent contraction in Slovakia’s economy in 2009. However, Slovakia’s GDP is predicted to grow by 1.9 percent in 2010, rising to 2.6 percent in 2011, the SITA newswire reported.

IN ITS autumn outlook report the European Commission forecasts a 5.8 percent contraction in Slovakia’s economy in 2009. However, Slovakia’s GDP is predicted to grow by 1.9 percent in 2010, rising to 2.6 percent in 2011, the SITA newswire reported.

While positive, these figures are much lower than those recorded during the pre-crisis boom, reads the prognosis. This reflects the influence of several factors playing in various directions.

On the positive side, economic indicators have provided some signs of stabilisation in economic activity. Business confidence also appears to be recovering slowly, while exports have stopped falling, SITA wrote.

The EC wrote that one main challenge will be to ensure that the downturn does not affect the long-term potential growth of the Slovak economy. While subject to considerable uncertainties, the available estimates suggest that Slovakia’s potential growth will be at least temporarily affected by the crisis, mainly due to the slower accumulation of productive capital.

The commission does not rule out a further rise in the already high structural rate of unemployment. Slovakia’s jobless rate is expected to reach 12.3 percent in 2009 and rise to 12.8 percent in 2010. A modest drop is expected in 2011, to 12.6 percent.

In view of the shallow predicted recovery in 2010 and consolidation of the public finances announced by the government, a budget deficit of 6.3 percent of GDP is predicted by the EC for 2010. The commission’s forecast suggests it does place complete confidence in the figures of the Slovak government.

The latest state budget forecasts the budget gap narrowing from over 6 percent this year to 5.5 percent in 2010, 4.2 percent in 2011 and to within the Maastricht criteria’s 3 percent of GDP in 2012. However, the EC expects only a moderate decrease in the deficit to 6 percent of GDP in 2010 and to 5.5 percent in 2011, SITA reported.

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