Summary of major economic happennings of the week
MONDAY, August 28
Industrial Producer Prices in Slovakia Up 1.3 Pct. over July
Industrial producer prices in Slovakia increased by 1.3 percent over July. Prices of products of industrial producers for the local market rose 0.6 percent in a month. Their development was influenced by a 2.4-percent increase in prices of mineral raw materials, 0.8-percent growth in prices of products of industrial manufacturing and a 0.3-percent rise of prices of electricity, gas, steam, and heated water, the Slovak Statistics Office informed SITA on Monday. In July prices of farm products posted a year-on-year growth for the first time this year. Compared with July 2005 they rose 1 percent. Since the beginning of the year prices of farm products went up 0.9 percent y/y. Prices of construction works in July increased 0.3 percent from June, and by 3.8 percent compared to July 2005. On average since the beginning of this year they also rose 3.8 percent y/y.
Slovakia's Midyear Current Account Deficit was SKK 64 Bln.
According to preliminary data of the National Bank of Slovakia (NBS), the deficit on the current account of the balance of payments was SKK 64 billion at the end of June 2006. The c/a deficit thus widened by SKK 13.5 billion compared with the same period of last year. In June alone the c/a deficit was SKK 8.7 billion, while in June 2005 the current account of the balance of payments reported an SKK 13 billion deficit. Behind this result was in particular the deficit of the trade balance and the balance of receipts. On the other hand the balance of services and the balance of current transfers showed a moderate surplus, the NBS informed SITA on Monday.
ArvinMeritor Will Produce Components for Kia Motors in Slovakia
US producer of car components ArvinMeritor will assemble in Slovakia door modules for the local production plant of South-Korean car maker Kia. As the company informs on its web page, its Light Vehicle Systems (LVS) business group has formed a joint venture with Pyeong Hwa Automotive (PHA) for the final assembly of fully integrated door modules delivered just-in-time and sequenced for Kia Motors Corporation's new plant in Slovakia. The new plant should be located just 20 kilometers from Kia's plant in Teplicka nad Vahom close to Zilina. ArvinMeritor has not disclosed more details.
PSA Investment May Require Additional Stimuli of SKK 153.3 Mln.
Investments of French automaker PSA Peugeot Citroen in Trnava, western Slovakia, will probably require an increase in investment incentives by SKK 153.3 million. The Economy Ministry writes this a proposal for allocation of funds to secure financial coverage of additional support of the state in connection with this major investment of PSA Peugeot-Citroen. The proposal is undergoing interdepartmental review. The French automaker's investment enjoys the status of a significant investment in Slovakia and thus it is entitled for state assistance.
Galanta Mayor Confirms Samsung's Interest in Building a New Plant
Slovak government negotiated last week with representatives of the Korean company Samsung Electronics Slovakia on an over SKK 15 billion investment in a new plant in Slovakia that would create 1,500 new jobs. Mayor of the south-western Slovak town of Galanta, Alexander Mezes informed of the talks at the ceremonial opening of a new logistics center that the company Samsung Electronics Slovakia recently completed there. Samsung is planning to invest approximately EUR 400 million equal to about SKK 15.2 billion in Slovakia before 2010, according to information that SITA obtained from a source close to the cabinet's office.
Samsung Electronics Slovakia Opens a Logistics Center in Galanta
Samsung Electronics Slovakia officially opened on Monday its new logistics and distribution center for central and western Europe in Galanta, western Slovakia. The South-Korean company invested SKK 750 million to build the center where three hundred people will find a job. "This is exactly the kind of investment that the new government wants to support in the future, i.e., an investment with higher added value," Prime Minister Robert Fico said at the opening ceremony. The President of Digital Media Business of Samsung company, GeeSung Choi said that the main goal of the logistics center's opening is to increase efficiency and speed up distribution of Samsung products on the European Union (EU) market and the central and eastern European markets.
Health Ministry Tells Patients to Stop Paying SKK 20 Fees to Doctors
The Health Ministry calls on citizens not to pay marginal fees to doctors, which the cabinet had decreased to zero as of September 1. These include the SKK 20 fee for an appointment with a doctor and the SKK 50 fee for a stay in a hospital per day. If doctors require from patients these payments, the patients should turn to the Healthcare Supervision Office (UDZS). On August 27, the association of doctors-specialists unveiled their plan to continue collecting the SKK 20 fees from patients. They argue that this fee is for providing services only linked with health care and thus health insurance companies cannot refund them to doctors from public health insurance funds.
WEDNESDAY, August 30
Railways Employed Biggest Work Force in the Transport Sector
The segment of transportation reported a preliminary average number of employees of 84,115 for 2005, the Slovak Transport Ministry informed. Compared with 2004 this means a drop by almost 2 percent, i.e. by 1,677 people. The average monthly wage of a worker in transportation stood at 17,080, a year-on-year increase from SKK 15,919 reported for 2004. This translates into an annual increase by 7.3 percent.
Social Welfare Benefits will be Higher from September
Basic welfare benefits for persons in material need as well as all other benefits related to this contribution will rise as of next month. The cabinet regulation that stipulates the increase comes into force Friday, September 1. Activation contribution will be increased from current SKK 1,700 to SKK 1,900 per month. Protective contribution granted to, for example, retired or physically challenged people as compensation for activation contribution will also increase from SKK 1,700 to SKK 1,900. Contributions for health care for a person in material need will rise by SKK 50 to SKK 60 per month.
Industry Leaders Oppose Re-introduction of Price Regulation
One of two representative organizations of employers, the National Employers' Association (RUZ) does not agree with the intention of the new Slovak government to re-install state regulation of prices of some goods and services. It also disagrees with the state interference in the form of regulating profitability of companies. RUZ considers competition to be the best price regulator and thus it supports across-the-board liberalization of Slovakia's economy. For example, it thinks that an artificial reduction of motor fuel prices, especially those of petrol and diesel, might result in their shortage on the Slovak market. Patching up this hole by imports from neighboring countries might worsen Slovakia's trade balance and tighten pressure on the currency. Simultaneously, RUZ expresses disagreement with intentions of the Slovak government to introduce elements of state price regulation also in fields where a competitive environment has not been created yet, in particular in the energy sector.
Minimum Wage to Rise to SKK 7,500 as of October
The minimum wage should increase from current SKK 6,900 to SKK 7,500 from October 1, 2006. The minimum wage per hour should be at SKK 43.10 as of that date. These figures result from the draft regulation of the Slovak cabinet on the minimum wage, which the Slovak Ministry of Labor, Social Affairs and Family submitted for interdepartmental review.
THURSDAY, August 31
J&T Finance Group Buys 51 % Stake in SES Tlmace
The company Segfield Investments, a member of the J&T Finance Group has acquired a 51-percent stake in the power engineering company Slovenske Energeticke Strojarne, a.s. (SES) Tlmace. J&T partner Daniel Kretinsky said that they want to develop long-term activities in SES that should not miss new opportunities in association with the huge renovation of production capacities in the energy sector. Head of the SES Tlmace board of directors Pavol Bobok perceives the investor's arrival positively expecting from it strong financial support and cooperation and synergies in commercial activities.
Average Loan Interest Rate in Slovakia in July at 6.65 Pct.
Interest rates on loans provided by commercial banks in Slovakia grew in July to 6.65 percent on average, up 0.16 percentage points from June. Compared with January it was an increase by 0.69 points. Interest rates on loans for non-financial companies reached 5.71 percent on average in the seventh month of this year, which is 0.24 percentage points more than in June. The average interest rate on household loans was 8.08 percent in July, which represents a 0.04 point increase from May, according to National Bank of Slovakia (NBS) statistics drawn up in line with harmonized EU methodology.
Banks Generated Seven Month Net Profit of SKK 9.844 Bln.
Slovakia's banking sector closed the first seven months of this year with a taxed profit of SKK 9.844 billion according to international accounting standards. Net interest income represented SKK 18.717 billion, reads information released by the National Bank of Slovakia (NBS). Net income from fees and commissions reached SKK 6.482 billion. The banks' balance sheet total amounted to SKK 1.361 billion.
Slovakia's FOREX Reserves Dropped to USD 16.2742 Bln. this Week
Slovakia's foreign exchange (FOREX) reserves fell by USD 237.3 million over the past week to USD 16.2742 billion as of August 28. A week-on-week drop of commercial banks' reserve assets of USD 171 million to USD 3.0782 billion was behind this fall. Also the central bank reserve assets posted a drop, going down by USD 66.3 million to USD 13.196 billion, informed the National Bank of Slovakia (NBS) on Thursday.
Standard & Poor's Improves Rating Outlook of Tatra Banka
International rating agency Standard & Poor's Ratings Services revised its outlook on Slovakia's Tatra Banka, a.s. to positive from stable. The agency explained the outlook revision by the bank's improved financial performance, stated Standard & Poor's. "We expect that maintenance of Tatra's improved stand-alone credit profile, supported by the positive dynamics of its core corporate business, and the rapid development of retail and small and midsize enterprise activities, together with ongoing integration with RZB, could lead to a rating upgrade," stated the rating agency. At the same time, the A- long-term and A-2 short-term counterparty credit ratings on the bank were affirmed.
SUNDAY, September 3
VSE Suggests Increasing Electricity Distribution Fees by 1.7 Pct.
Regional power distributor Vychodoslovenska Energetika, a.s. (VSE) Kosice delivered a proposal for electricity distribution prices in 2007 to the Regulatory Office for Network Industries (URSO) on Thursday, August 31. The proposal counts with their growth by mere 1.7 percent next year. Distribution fees take in account the price for access to a distribution network and for electricity distribution without cost of electricity transmission. Boris Pesko of VSE's communication department informed SITA that the price growth corresponds with the year-on-year core inflation. Distribution fees set in this way will secure a stable level of sales and enable VSE to make necessary huge investments in renewal and building of electricity network in the future, he said.