% of GDP
In 1918 the Slovaks joined the closely related Czechs to form Czechoslovakia. Following the chaos of World War II, Czechoslovakia became a communist nation within Soviet-ruled Eastern Europe. Soviet influence collapsed in 1989 and Czechoslovakia once more became free. The Slovaks and the Czechs agreed to separate peacefully on 1 January 1993. Historic, political, and geographic factors have caused Slovakia to experience more difficulty in developing a modern market economy than some of its Central European neighbours.
Update No: 076 - (28/08/03)
The Slovak premier, Mikulas Dzurinda, is leading a reform government which surprised everyone by being re-elected last year. The fact that the opposition leader was Vladimir Meciar, the former premier (1993-98) renowned for his authoritarian and thuggish style, doubtless had much to do with it.
Dzurinda is pushing ahead with reforms, to the great satisfaction of the international community, that is the US and the EU. Pension reform is on the agenda and there are plans for a single 19% income and corporation tax next year. The idea is to simplify the system on a flat rate basis, thereby cutting red tape and complex allowance schemes. Poland is due to follow suit in 2005.
That Slovakia should now be leading the way is novel, but appropriate. As a far smaller country than Poland, without its complex agriculture or rust-belt coalmining regions, it is able to implement reforms slightly more easily.
The state sector is less oppressive in Slovakia, with a smaller public budget deficit at 5.55 of GDP in 2002, and prospectively about the same this year.
But there is one big test-case ahead, reform of the state railways, the largest employer in the country. Innumerable categories are eligible for exemptions or reduced fares, pensioners, students, families, hikers and civil servants. It is the last two categories which are revealing. The Slovaks by and large see themselves still as a nation of country pursuits, such as hiking. The sophisticated professional people and intellectuals in Bratislava would naturally be different. But a home-spun philosophy of healthy outdoor living fits in with a tradition of peasant ways and folksy customs. Such, indeed, was the basis of Meciar's fatal appeal.
The civil servants are privileged for less exalted and rather more prosaic reasons. There are still huge vested interests in Slovakia that need to be curbed. It will probably require a boom to enable them to be tackled. That for tiny Slovakia depends on forces outside its direct control, such as EU growth. The augurs domestically are still quite good.
Slovak farmers request EU financial aid over drought
The Slovak Council of Agricultural Administrations has written to European Agriculture Commissioner Franz Fischer to request financial aid to overcome consequences of this year's drought, TASR web site has reported.
The EU could help Slovak farmers cope with the damage, estimated at 2.35bn korunas (56m euros), by releasing part of the pre-accession SAPARD [Special Accession Programme for Agriculture and Rural Development] funds, reads the letter. It points out that Czech farmers received similar aid last year to deal with flood damage.
Meanwhile, the Slovak government has said it will decide on compensation for farmers in September after the damage to each individual farm has been assessed.
The letter also urges Fischer to oppose a recent recommendation of Luis Riera Figueras, of the EC Regional Policy Directorate, that EU funds to Slovakia should be directed less at agriculture and more at infrastructure development. "Slovak farmers urgently need help and Mr Riera has played into the hands of some Slovak politicians opposed to any subsidies, not only in Slovakia but also in the union," it says.
The government last month approved a division of EU funds under which Slovakia should draw over 352m euros between 2004-2006 for both agriculture and rural development.
IMF warns Slovakia over growing foreign debt
The International Monetary Fund (IMF) continues to view Slovakia's development as positive in the short term but worries about the country's growing foreign debt, it says in its 2003-2006 economic outlook for Slovakia released on 7th August, TASR web site has reported.
Whereas the Slovak government sees the current account deficit for this year coming in below 5 per cent of annual GDP, the IMF expects it between 6-6.5 per cent.
Slovakia is urged to pay more attention to its fiscal policies and reform public spending in order to offset the impact of tax reforms - in particular the introduction of flat 19-per-cent direct taxes from January.
The flat taxes should have been introduced in stages rather than at the same time in order not to destabilise economic developments, according to the IMF.
It praised the central bank NBS for cutting interest rates by 150 basis points, saying the move was appropriate and not a threat to the steadily firming [Slovak] koruna. The NBS, however, should focus more on its medium-term inflation plans and stable exchange rate.
Slovakia's adoption of the euro in 2006 is seen as realistic, if the country first increases economic flexibility.
The IMF notes risks in real economic growth, estimated to fall to 4 per cent due to August excise hikes and related declines in real wages. But the biggest cause for concern is joblessness and insufficient structural changes, the IMF adds.
Trade balance surplus reaches 93m crowns
Slovakia reported a trade balance of 93m Slovak crowns in June, against a surplus of 2.01bn crowns in May and a trade deficit of 5.83bn crowns in June 2002 Interfax News Agency reported, quoting figures published by the Slovak Statistical Office.
Exports climbed 20.4 per cent year-on-year in June, against a 31.9 per cent jump the previous month. Slovakia exported goods worth 69.23bn crowns, a record in the first six months. In the first half of 2002 exports were 7.8 per cent year-on-year higher to 57.51bn crowns. Slovakia imported goods worth 69.14bn crowns in June, up 9.2 per cent. Imports to Slovakia totalled 63.33bn crowns in June 2002, up 2.8 per cent. The balance improved significantly because of exports of cars, metals and machines, Ceskoslovenski obchodni banka's, Marek Gabris, said. First half foreign trade deficit fell 76.7 per cent year-on-year to 9.7bn crowns.
FOREIGN ECONOMIC RELATIONS
Slovak trade mission to Iraq highlights opportunities in health, energy sectors
Slovak Investment and Trade Development Agency (SARIO) officially ended its eight-day business mission to Iraq on 8th August where it sought new possibilities for Slovak companies to participate in the country's reconstruction, TASR web site has reported.
SARIO project manager, Marianna Basistova, said good possibilities are opening in the areas of civil construction, energy and health sectors.
The mission included businessmen from the companies Martimex Alfa, SES Tlmace, Inzinierske Stavby, Regula and BP Trading as well as two SARIO representatives and Slovak trade deputy to Damascus, Peter Molnar.
Slovak companies might get road construction contracts in Iraq
Chances to participate in reconstruction of the post-war Iraq can be used mainly by strong Slovak companies with previous experiences from the region, Slovak Economic Minister, Robert Nemcsics, said on 13th August, TASR web site has reported.
Good business opportunities for Slovak firms are mainly in road construction and demolishing of war-damaged buildings, as well as supplying boilers to Iraqi power plants, minister told journalists.
But Nemcsics stressed that the initiative in negotiations with the US contractors and local firms must be taken by Slovak applicants themselves. "This is not on the interstate level," he pointed out.
FOREIGN LOANS & AID
EC approves projects during meeting of Phare programme
At a meeting of the Phare programme's steering committee in Bratislava on July 11th, the European Commission approved projects worth US$57m, RFE/RL reported. The aid - the last tranche under the current Phare system for distributing pre-accession funding - is intended to strengthen the country's administration and judiciary ahead of entry into the European Union in May 2004.
World Bank, Slovakia sign loan agreement
Slovak embassy representative in the United States, Peter Kmec, and World Bank (WB) Vice-President, Shigeo Katsu, signed on 4th August a loan agreement for the project of public finance management, TASR web site has reported.
The project worth 5m Euro will boost the Slovak government's efforts at implementation of the public funds reform. The reform is a key element in the fiscal consolidation required by the European Union's Maastricht criteria, a crucial criterion for Slovakia's entry to the EU, slated for May 2004.
According to WB's Sandra Bloemenkamp, quality of public services and sustainable public finance sector need adequate institutions and quality in decision-making. The project should be completed in 2006 and the loan has been provided for five years.
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