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FinMin adds to rosy outlook

AFTER the Slovak central bank forecast that Slovakia’s economic growth would resume, the Finance Ministry offered its own prognosis on June 16 – although, neither of the prognoses account for the possibility of increased confrontation between Russia and Europe.

AFTER the Slovak central bank forecast that Slovakia’s economic growth would resume, the Finance Ministry offered its own prognosis on June 16 – although, neither of the prognoses account for the possibility of increased confrontation between Russia and Europe.

“We have definitively overcome the second peak of the crisis from 2013,” Finance Minister Peter Kažimír told the TA3 news channel. “Our economy is strengthening, the labour market is growing. Real wages, and also the standard of living will increase this year the fastest since 2008.”

The Financial Policy Institute (IFP), which is run by the Finance Ministry, predicts that Slovakia’s economy will grow 2.4 percent in 2014, after 0.9 percent growth in 2013. In 2015 and 2016 the growth should accelerate to 2.8 percent and 3.5 percent, respectively.

This prognosis is only moderately more pessimistic than that of the National Bank of Slovakia (NBS) introduced on June 10. The NBS predicts economic growth in 2014 at 2.4 percent, followed by growth of 3.2 percent in 2015 and 3.5 percent in 2016.

Based on the IFP’s prognosis, real wages should grow by 2.8 percent in 2014, also fuelled by low inflation. This would be the fastest growth in six years.

According to the Finance Ministry, economic growth, also propelled by the positive developments of trade partners like Germany, is more stable than in the past, and household consumption has been contributing more significantly since the beginning of 2014.

The Finance Ministry is less optimistic about the creation of new jobs than the central bank. While the ministry expects the jobless rate to decrease from 2013’s 14.2 percent to 13.7 percent in 2014, the central bank expects it to fall to 13.5 percent. For 2015, the ministry estimates the rate at 13.1 percent, while the central bank expects it to be lower by 0.3 percentage points. Such differences should continue into 2016, for which the ministry predicts 12.3 percent unemployment.

The ministry’s forecast for new jobs in 2014 is 10,000, which is one third (6,000) less than the NBS forecast. Since the start of the crisis, Slovakia has shed some 150,000 jobs, according to the public broadcaster RTVS.

“This year we are a bit less optimistic than the NBS,” Martin Filko, head of the IFP, told RTVS. “This is because of other realistic preconditions about consolidations, since we know how we plan to manage public finances.”

Andrej Arady, an analyst with VÚB bank, considers even the ministry’s jobless prognosis too optimistic.

“The reason is that the history shows that the prognosticated growth might not have been big enough for such a significant decline [of unemployment],” Arady told RTVS.

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