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EC predicts lower growth, higher deficit for Slovakia in 2011-13

The European Commission has significantly cut its forecasts for Slovakia's economic growth in 2011 and 2012, the TASR newswire reported, citing the commission's European Economic Forecast for the 2011-13 period, which was drawn up in autumn 2011 and released on Thursday, November 10.

The European Commission has significantly cut its forecasts for Slovakia's economic growth in 2011 and 2012, the TASR newswire reported, citing the commission's European Economic Forecast for the 2011-13 period, which was drawn up in autumn 2011 and released on Thursday, November 10.

The EC now predicts that Slovakia's GDP will grow by 2.9 percent this year, only to slow to 1.1 percent in 2012. The commission was much more optimistic in its spring forecast issued in May, forecasting 3.5- and 4.4-percent growth in 2011 and 2012 respectively. A revival is projected for 2013, with the EC expecting the Slovak economy to gather pace again and grow by 2.9 percent.

According to the report, the expected developments are "chiefly on account of signs of a slowdown in external demand in the second half of the year, the short-term impact of fiscal consolidation, and sluggish private consumption recorded in the first half of 2011. As the economic outlook for 2012 among the main trading partners has recently significantly worsened, external demand and trade are likely to decelerate markedly. This is expected to put on hold private investment decisions, reducing inflationary pressures and exerting a drag on GDP growth, which in turn is expected to drop to about 1 percent," adds the report.

Meanwhile, inflation is projected to rise significantly after standing at 0.9 percent in 2009 and 0.7 percent in 2010. The figure for 2011 is predicted to reach 4 percent, although inflation should slow to 1.7 percent next year.

The EC's view of Slovak's public-finance deficit differs markedly from the government's projections. It says the deficit should drop from last year's 7.7 percent, but only to 5.8 percent in 2011, well above the 4.9 percent targeted by the Slovak government. Next year's deficit, the EC says, is set to reach 4.9 percent, compared to a government target of 3.8 percent. Then, the EC says, it will rise to 5 percent in 2013 – a figure at odds with the drop to below 3 percent in 2013 that the Slovak government has been predicting.

As a result, Slovakia's public debt is expected to continue rising sharply: from 41 percent of GDP in 2010 to 44.5 percent this year and 47.5 percent in 2012. The commission expects the trend to continue in 2013, when debt should reach 51.1 percent, far higher than the figure before the crisis erupted in 2008, when it stood at 27.8 percent.

Source: TASR

Compiled by Zuzana Vilikovská from press reports
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