NYT Coverage on Slovakia

"Neighbor’s Shadow Still Large in Slovakia". I am not sure the title is really capturing the main issue in the country, but the article provides ample important insights into the happenings in Slovakia.

Top 10 Slovak Companies in 2008

Rank, Name, Industry, Sales in 2008 (individual)

1. Volkswagen Slovakia, automotive, €5.37 billion
2. Slovnaft, oil refining, €4.03 billion
3. Samsung Electronics, electronics, €3.52 billion
4. U.S. Steel Košice, metallurgy, €2.93 billion
5. SPP, gas distribution, €2.90 billion
6. Kia Motors, automotive, €2.23 billion,
7. Slovenské elektrárne, energy, €1.96 billion
8. PCA Slovakia, automotive, €1.74 billion
9. Sony Slovakia, electronics, €1.40 billion
10. Západoslovenská energetika, energy, €1.11 billion

Source: TREND Top 200. Last year's results can be found in our earlier post.

V4 Wages Suffering from Currencies' Depreciation

Currency depreciations pulled down the Euro purchasing power of V4 wages in the first quarter of this year, with the exception of Slovakia, which had a fixed exchange rate to Euro de facto from May 28, 2008. For the first time, thus, average gross salary in Slovakia is not the lowest in Central Europe. Note: the 1q09 value for the Czech Republic is an estimate.

Higher Deficits Don't Help Much

A recent study of the National Bank of Slovakia (NBS) finds fiscal stimuli relatively ineffective.

"An increase of deficit by one percentage point of GDP permanently would increase GDP growth only in the short-term - by 0.4% in the first year, and 0.2% in the following periods. After six quarters, the GDP dynamic would return to its original level. The major effect of such permanent deficit increase would be lasting increase in real interest rates."

The paper by Michal Benčík can be found at the NBS's website (in Slovak).

V4 Currencies: SKK Gone Strong, PLN and HUF Down

This is a graph depicting the purchasing power of Visegrád Four currencies vis-à-vis Euro since November 2005, when Slovak Koruna entered the ERM II system. The figure shows that the Slovak currency has been fixed to Euro at the time when all V4 currencies registered their several-year highs (summer 2008). After criris-related depreciation of CZK, PLN and HUF, this strong conversion rate made Slovakia relatively more expensive to its neighbors, which hampers exports but tames inflation. More information can be found in TREND Analyses' macropresentation.

1Q 2009: Economies Shrank Considerably

Country 1Q real y/y GDP growth NSA / SA
Czech Republic -3.2% / -3.4%
Hungary -6.4% / -4.7%
Poland n.a.* / n.a.* (seen at 1.0-1.3% by MinFin, 1.0% by Bloomberg)
Slovakia -5.4% / -6.0%

NSA - non-seasonally adjusted, SA - seasonally adjusted
* - will be published on May 29

5 Years of Central Europe in the EU

The European Commission published a study summarizing the economic effects of the historic 2004 EU enlargement. The main findings say that:

• the accession process has contributed to significantly improve living standards in the new Member States, [...]
• rapid trade integration has fostered a more efficient division of labor and strengthened competitiveness in the EU
• investments from old Member States have been a key driver of economic transformation in the new Member States
• new investment opportunities created by enlargement helped enterprises in the old Member States to strengthen their global competitiveness [...]
  
• workers in the new Member States have profited from improved employment opportunities at home and abroad, [...]
  
• in old Member States, concerns raised about massive labor migration prior to enlargement have not materialized
  

During the five years, Central Europe has proceeded to gain freedom in labor movement, typical for full EU membership. Restrictions to free movement of labor now remain only in Germany and Austria. The countries acceded to the Schengen area of free borders and won visa waiver for traveling to the United States. In addition, Slovakia joined the Eurozone in January this year.
Local economies experienced a swift growth in 2004-8. Regional average GDP per capita increased from 61.5% of the EU average in 2004 to 67.7% four years later (arithmetic average of V4 countries). Population in V4 stayed stagnant - at 63.9-64.0 million. The number of inhabitants grew noticebly only in the Czech Republic (from 10.2 to current 10.5 million). The EU27's total population is expected to reach 500 million sometime later this year.

Bratislava Public Transportation in Three Countries

From September on, Bratislava system of public transportation will span three countries. Apart from Slovakia, local buses operate a line to Austrian town of Hainburg an der Donau and a border village Wolfsthal. Later this year, the EU funds will pay for most of the costs of another line to Hunagrian village of Rajka, where many Slovaks moved during the last year or two. This development owes to the Schengen system of free movement across most of EU borders. Apart from Bratislava, only Swiss Basel public transportation is known to the author to service two other countries (France and Germany) apart from its homeland.

Czecho-Slovakia's Revival at the IMF, WB

The Czech Republic and Slovakia signed an agreement on joint representation at the International Monetary Fund (IMF) and the World Bank. Sixteen years after the two republics peacefully split, the two states will have only one representative in the IMF (a Slovak), and one (a Czech) at the World Bank. After four years, this composition will switch. The agreement aiming at cost saving has been signed by the Czech and Slovak representatives in Washington, D.C. (read ČTK's report)

Falling By How Much?

Revisions of macroeconomic forecasts bring worse and worse predictions for the V4 economies. The latest prediction of the National Bank of Slovakia expects local GDP to shrink by 2.4%. Last year, Slovak economy expanded by 6.4%.
Hungarian authorities already calculate with a recession of 5.5-6.0% in this most-hit Central-European country (majority of analysts expected 4-5% decline).
An older (February) forecast of the Czech National Bank counts with an economic decline of only 0.3% in the Czech Republic. IMF expects -1.3%.
By the end of March, Polish central bank expected a 1.1% growth for Poland, which would make the country the only economy in the EU to grow. Similar estimate was released by The Economist Intelligence Unit (+0.9%).
A good portrayal of the current state in the local automotive sector, one of the leading and most-hit industries, can be found at businessnewseurope.