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Slovakia Business Forecast Report Q2 2011
Description:
Economy To Outperform Eurozone Growth Over Medium Term
In this Q211 Slovakia Business Forecast we caution that 2011 will be a difficult year for the ruling centre-right
coalition government. We highlight the potential for continued ructions within the administration that could
undermine the cohesion of the coalition and, in turn, the government’s fiscal austerity drive. That said, we
continue to believe that the fractious centre-right coalition will be able to reduce the deficit from an
estimated 7.8% of GDP in 2010 to 5.6% of GDP in 2011 and below the Maastricht-defined 3.0% of GDP limit
by 2013.
Moreover, we remain relatively positive on Slovakia’s economic outlook and see real GDP growth of 3.2% in
2011, down from an estimated 4.0% in 2010. We attribute the slowdown to the centreright coalition
government’s fiscal consolidation measures and less accommodative base effects.
The publisher forecasts Slovakia’s current account deficit will widen in 2011 to EUR 2.3bn (2.9% of GDP) from
an estimated EUR 1.8bn (2.5% of GDP) in 2010. This will be driven in large part by a growing income account
deficit as a result of rising dividend and interest payments repatriated to foreign-parent companies, and a
narrowing merchandise trade surplus, as import growth outpaces export growth. Both of these dynamics
are predicated on our view for Slovakia’s economic recovery to firm, with the country set to post 3.2% real
GDP growth in 2011.
The publisher forecasts Slovak industrial production growth to continue its impressive ascent in 2011,
averaging 12.0% y-o-y, after having averaged 19.1% in 2010. This view is predicated on our assumption that
demand in Slovakia’s key export markets will remain buoyant. This bodes well for the country’s economic
growth outlook, which we are forecasting to be 3.2% in 2011.
Our overall outlook for the Slovak banking sector remains positive, despite our view that credit extension
will not reach pre-crisis highs. Indeed, banks are starting to show strong signs of recovery, posting an 105.4%
y-o-y increase in profits in 2010. We expect that client loans and deposits will experience a sustained
recovery, though do not expect that they will reach pre-crisis highs in the forecast period, and we are
forecasting 6.0% and 6.8% growth respectively in 2011.
Contents:
Executive Summary
Economy To Outperform Eurozone Growth Over Medium Term
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Key Challenges For Government In 2011
Slovakia’s centre-right coalition faces a tough year in 2011, with a number of key challenges on the horizon
Table: Political Overview
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Industrial Production To Remain Strong In 2011
We forecast Slovak industrial production growth to continue its impressive ascent in 2011, averaging 12.0% y
-o-y on the back of sustained domestic demand in Germany and the wider eurozone
TABLE: ECONOMIC ACTIVITY
Fiscal Policy
Fiscal Consolidation Under Way
News that Slovakia’s 2010 state budget deficit has come in below target, at EUR 4.44bn, is a promising sign
that the government will be able to narrow the fiscal deficit from an estimated 7.8% of GDP in 2010 to our
5.6% of GDP forecast in 2011
TABLE: FISCAL POLICY
Monetary Policy
Higher Commodity Prices Drive Inflation in 2011
Building inflationary pressures in Slovakia will push the average consumer price inflation to 1.8% y-o-y in
2011, up from 0.7% in 2010
TABLE: MONETARY POLICY
Balance Of Payments
2011 Recovery To Widen C/A Deficit
We forecast Slovakia’s current account deficit to widen in 2011 to EUR 2.3bn, representing 2.9% of GDP, from
an estimated EUR 1.8bn, or 2.5% of GDP, in 2010
TABLE: BALANCE OF PA YMENTS (Euro)
Banking Sector
Banking: Slow Recovery On Track
Our overall outlook for the Slovak banking sector remains positive, despite our view that credit extension
will not reach pre-crisis highs
Chapter 3: 10-Year Forecast
The Slovak Economy To 2020
TABLE: SLOVAKIA – LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Table: BMI Business And Operation Risk Ratings
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Outlook
Table: Emerging Europe – Annual FDI Inflows
Table: Trade And Investment Ratings
Operational Risk
TABLE: TOP EXPORT DESTINATIONS
Chapter 5: Key Sectors
Oil & Gas
Table: CEE Oil Consumption (000b/d)
Table: CEE Oil Production (000b/d)
Petrochemicals
Table: Sl ovakia Petrochemicals Sector Data & Forecasts 2007-2015
Chapter 6: BMI Global Assumptions
Global Outlook
Growth Solidifies, But Inflation Poses A Threat
Table: Global Assumptions
TABLE: GLOBAL & REGIONAL REAL GDP GROWTH % CHG Y-O-Y
TABLE: CONSENSUS FORECASTS
Chapter 7: Sector Forecast Appendix
Table: Autos Sector Key Indicators
Table: Food and Drink Sector Key Indicators
Table: Infrastructure Sector Key Indicators
Table: Oil and Gas Sector Key Indicators
Table: Ph arma Sector Key Indicators
Table: Telecoms Sector Key Indicators
Table: Defence and Security Sector Key Indicators
Table: Freigh t Key Indicators
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