Slovakia, Poland, the Euro,

Slovakia is essentially a mini Poland but fiscally and currency-wise more like Finland, because Slovakia uses the euro, has lower state debt than Finland, and a population that generally has very little private debt. The banks lend money derived from local deposits and are healthier than their western counterparts.

Slovakia adopted the euro in 2009 did suffer a recession that year, but comparable to the one that hit the neighbouring Czech Republic, which kept its koruna independent currency. Large foreign investors such as Volkswagen, PSA, Kia, say they decided to expand operations in Slovakia because there was no currency risk with the destination markets.

Keeping an independent currency may be a desperate stabilisation tool for a country that is crisis hit and uncompetitive, but for Slovakia the currency union helps its exports and further economic integration with Austria and Germany.

In Poland the zloty’s sudden decline is putting economic growth at risk as it squeezes the 700,000 Poles – part of a nascent middle class – who took out mortgages denominated in foreign currencies, mostly Swiss francs. So far, people are making their payments, but as the zloty continues to fall against the franc there is a growing worry that it could choke off consumer spending.

Such a fear does not exist in Slovakia as there are no mortgages denominated in foreign currencies so this significant risk that is a problem for both Poland and Hungary does not exist in Slovakia...

The next election is unlikely to produce an anti-business government as even the left is committed to Slovakia's integration with the eurozone.

Slovakia Growth statistics Expenditure on GDP (% real change)

Slovakia Growth statistics
Expenditure on GDP (% real change)

light blue = 2011

darker blue = 2012

 

Private consumption

Government consumption

 

Gross fixed investment

 

Exports of goods & services

 

Imports of goods & services

Source: Economist Intelligence Unit

 

Origin of GDP (% real change)

light blue = 2011

darker blue = 2012

 

Agriculture

 

Industry

 

Services

Source: Economist Intelligence Unit

 

 

Who is doing well in the Eurozone and who is stagnating

Slovak GDP is accelerating still further edging towards 5% growth next year from 3.4% currently

The February revision of the 2011 growth forecast to 3.4 percent from an originally projected 3.3 percent will boost tax revenue by 9 million euros ($12.3 million), representing less than 0.1 percent of gross domestic product, the ministry said today in a statement from Bratislava, Slovakia.

Tax revenue next year is set to exceed the original projection by 36 million euros, while in 2013 the government will probably collect 85 million euros less than planned, the ministry said. The 2012 and 2013 growth forecast was revised to 4.8 percent for each year, from 4.5 percent and 4.7 percent, respectively.

Slovakia and the crisis as compared with other Central european countries and balkan countries

The graphs speak for themselves

The Slovak economy was affected by the global crisis but has shown one of the best rates of recovery. Only Poland has fared better, but its huge size makes it both less prone to downturns and more sluggish in upticks. Slovakia is projected to regain a 4% GDP pace this year and next, which is fairly goldilocks.

Wall Street Journal interviews Slovak Prime Minister Iveta Radicova on the reasons why Slovakia refuses to bail out Greece with further loans

Wall Street Journal interviews Iveta Radicova on the reasons why Slovakia refuses to bail out Greece with further loans




http://online.wsj.com/video/slovak-pm-wants-rules-on-defaults-for-euro-area/27574DAA-D4C6-4FE8-B835-89E4A58BDE29.html 

Iveta Radicova is clearly an intelligent leader, and she explained that Slovakia is participating in an Eurozone insurance policy for the protection of the euro due to unforseen and unavoidable future circumstances.

However she politely suggested that the greek situation is not justifiable as a bailout, because it was hardly an unavoidable situation and that the indirect beneficieries of such bail-outs (often rich investors and banks) need to accept the risk of their investments and the tax payer cannot be there to pick up the pieces if the investor does not do their due dilligence. This is a point made by several economists over the years when bailouts started with Asia & Mexico under Clinton.

In other words the PM of Slovakia noted her and her country's aversion to a development model largely based on ever increasing borrowing. She expressed her solidarity with the greek people but not with the practices of their governments in the last 20-30 years in relation to debt.

This is not just words, Slovakia has a tiny national debt as a % of GDP which is even smaller than Finland and about half that of Germany at around 35%, moreover this is likely to decline further. One cound say that Slovakia is a very debt averse country culturally, and seems to be baffled by the prevalence of the credit card and other forms of indebtedness in the anglosaxon world.

The Slovak Prime Minister called for stronger regulation of euro-zone financial markets and for allowing overly-indebted countries to undergo and orderly default rather than throwing them new credit lifelines.

Earlier this year Slovakia, the newest and poorest of the 16-rich-nation currency group, caused a stir around Europe when it refused to be part of a EUR110 billion bailout for Greece, agreed on in May by euro-zone member countries and the International Monetary Fund. However it should remembered that Slovakia's share is fairly small as it is a small country of only 5 million people.

5% GDP - 2nd quarter of 2010 - Slovakia’s economy has best GDP growth among all countries in the European Union

In the second quarter of 2010 Slovakia’s economy is posted the best GDP growth among all countries in the European Union.


The growth is spiking but it is not yet the stellar numbers achieved in the past given the international situation. Still Slovak growth looks set to remain strong for the rest of the year. Germany energising economy is a very big trade partner for Slovak business, and it certainly helped to generate the nearly 5-percent pro rata jump in Slovakia’s GDP.


In the second quarter, the country’s GDP grew by 4.6 percent year-on-year, following just slightly stronger growth of 4.8 percent in the first quarter, according to a flash estimate released by Slovakia’s Statistics Office on August 13. Total GDP in the second quarter reached €16.340 billion.


“The ongoing strength of the growth in the second quarter real GDP in Slovakia was, overall, more of a positive surprise,” Vladimír Vaňo, chief analyst with Volksbank.

In the first half of 2010, Slovak exports increased on average by 20.7 percent year-on-year, accounting for a similarly stellar recovery in Slovakia’s annual industrial production by an average of 22 percent in the first six months, Vaňo noted.

“Compared with expectations of other market watchers of around 4 percent year-on-year and our estimate of 4.3 percent, the year-on-year growth of GDP was faster than expected,” Martin Lenko, senior analyst with VÚB Banka, said.


Though the detailed structure of the growth in Slovakia’s GDP is not fully known yet, Lenko said that household consumption in Slovakia probably recorded only a moderate increase in the second quarter, similar to its performance in the first quarter, due to the country’s still high unemployment rate (mostly in the east of the country) which is falling only very slowly.

“Slovak quarterly expansion of 1.2 percent quarter-on-quarter runs ahead of results of similarly open economies of the Czech Republic or Hungary,” Vaňo said. “However, the overall eurozone economy, a destination for roughly half of Slovak exports, recorded a quarterly real growth of 1.0 percent in the second quarter. In other words, recovery of the export markets alone does not suffice in explaining the resilience of the Slovak economy.”


According to Vaňo, gauging from these comparisons as well as from the strength of the recovery in industrial production in the first half-year together point to Slovakia continuing to reap the benefits of euro introduction via a more resilient economic recovery. He believes this is explained by a competitive edge brought to Slovak exporters by the euro through lower interest rates but more importantly because of exchange rate stability and significant savings in the administrative costs of foreign trade.


“The faster than expected growth of GDP in Slovakia, and also in Germany, in the first half of the year is forcing us to revise the estimate of annual growth of GDP in 2010,” Lenko said. “We estimate that growth in real GDP will reach an average of 4.2 percent year-on-year in 2010 as opposed to our original estimate of 3 percent.”

The rosier growth numbers for Slovakia’s GDP have not yet been reflected in significant job growth in the country’s labour market.

The incoming conservative government

The conservatives are coming...

Bela Bugar ----- Jan Figel-----Iveta Radicova--Richard Sulik


Generally a fairly centrist lot, the christian party (KDH) is the most left wing of the coalition, Then its the hungarian/slovak party of Most HID. Jan Figel of the christian party, Iveta Radicova of the SDKU which is the largest party of the coalition and which will be ruling, and finally Richard Sulik the inventor of the 19% tax in Slovakia when he was working for SDKU in the 90s and 00s.

I feel that this government needs to be aware of how many of the certainties of the 90es in economics are being challenged and have changed. They need to show that they have understood that the broad based employee-class prosperity must not be hurt because that underpins the country's economy.

Tight and conservative regulation of the banks is also vital.

Slovakia GDP likely to be 4.1% in 2010 & 4.5% or more in 2011

Economies in the CEE region are expected to grow 2.8 % in 2010 and 3.4 % next year, reads the latest World EconomicOutlook drawn up by the International Monetary Fund. (IMF)

Similarly to western economies, the prognoses for individual countries in the CEE region vary in dependence on the impact of the economic crisis but the GDP in Slovakia is supposed to rise the most, namely 4.1 % this year (which is the most within central Europe and the euro zone) and 4.5 % in 2011.

This is obviously a fantastic prospect when despite the difficult times Slovakia and Bratislava in particular are recovering strongly. This wconfirms our long-term view that the durability of Slovakia's policies are helping the small nation converge with the living standards of Germany and other open and competitive economies in the eurozone.