Summary of major economic happennings of the week
MONDAY, October 16
Agriculture Ministry's Spending up 4.68% in 2007
In the draft state budget for next year, the Finance Ministry projects the Agriculture Ministry's total revenues at SKK 12.1 billion. Of this, state budget revenues should be SKK 219 million while total expenditures should be SKK 23.4 million. Of this, SKK 12 billion should be from European Union budgetary funds. Co-financing from the state budget should be SKK 7.7 billion. Thus, the ministry's expenditures will increase 4.68 percent y/y. Subsidies flowing into agriculture will increase from SKK 18.722 billion in 2006 to SKK 19.543 billion in 2007, i.e., 4.39 percent. In the draft state budget, the Finance Ministry budgets total direct payments to farmers at SKK 10.9 billion. This accounts for 70 percent of the average direct payments to farmers in the 15 old-member EU countries.
Private Founders of Schools Oppose Plans of Local-Governments
Private founders schools feel threatened by a recent legislative initiative that suggests shifting the state's responsibility for financing of private, after-school arts schools and school facilities and shifting the regulatory responsibilities to local governments. At a Monday press conference, Gabriel Rovnak, chairman of the section of elementary art schools and school facilities of the Association of Managerial Workers of Private Schools of Slovakia, voice the complaint. Earlier this month the Association of Towns and Villages of Slovakia (ZMOS) expressed its objections towards the plans of the central government to transfer to them the financing of private, after-school arts schools and school facilities without allocating enough money. Moreover, they called for a right to be able to determine the number of these schools and the facilities to which they should provide funds.
ADSS Appreciates Social Insurer Socialna Poistovna's 2007 Budget
The Association of Pension-Fund-Management Companies (ADSS) appreciates the approval of the 2007 budget of the social insurer Socialna Poistovna, which includes the coverage of the deficit caused by implementation the second pillar of pension reform. State financial assets should cover the aforementioned deficit until 2010. "It is good news for one and half million of policy-holders that we've found sources to finance the deficit of Socialna Poistovna until 2010, while the second-pillar contributions remain at 9 percent [of gross income of policy holders -- editor's note]. The policyholders mainly expect stability and maintaining the basic parameters of the system, which they trust," ADSS stated.
TUESDAY, October 17
Jobless Rate in Slovakia Drops to 9.75 Percent in September
The registered jobless rate in Slovakia reached 9.75 percent at the end of September, down 0.10 percentage points, announced the National Labor, Social Affairs and Family Office on Tuesday. The registered unemployment rate has been on the decrease since January this year, when this figure was 11.82 percent. Compared with September 2005, the jobless rate went down by 1.45 points.
Slovakia's HICP Measured Inflation Rate Slows to 4.5 Pct. in September
In September, Slovakia's y/y inflation rate, measured by the European Union's harmonized index of consumer prices (HICP), was 4.5 percent. The y/y consumer price-growth decelerated 0.5 percent from August. Measured by EU methodology, consumer prices in Slovakia dropped 0.2 percent in September from August, following a monthly decrease of 0.1 percent in August, the Slovak Statistics Office announced. Slovak methodology shows the inflation rate at 4.6 percent in September, down 0.5 percentage points from August.
Petrol Prices Down by More Than 0.20 SKK/Liter as of October 10
As of October 10, the average retail price of 95-octane petrol decreased SKK 0.22 to SKK 37.46 per liter compared with October 2, the Slovak Statistics Office reported on Tuesday. The average retail price of 98-octane petrol was SKK 40.02 per liter, down SKK 0.23. The average retail price of one liter of diesel was SKK 38.32, down SKK 0.10. The average retail price of LPG fell SKK 0.01 to SKK 21.74, spokeswoman for the Slovak Statistics Office Eva Kelemenova informed.
AWD German Financial Consulting Firm Enters Slovak Market
The German company AWD, providing independent financial consulting to private individuals, is officially entering the Slovak market. AWD currently operates in ten European countries, and Slovakia is the next central-European country (after the Czech Republic and Hungary), where the company will launch its network. The company representatives informed SITA that the AWD network in Slovakia at the moment comprises three branches and a forty-member team of advisors. The company's ambitions are fast growth and reaching the number-one position on the Slovak market. "AWD's entry into the Slovak market is a part of the holding's strategy to focus on emerging markets in central and eastern Europe," said Michal Pysik, AWD director general for the Czech and Slovak Republics.
Prime Minister Fico Tells Farmers to Reduce High Trade Deficit
At his meeting with farmers in Nitra, Prime Minister Robert Fico said they should seek all possible tools to reduce the high foreign-trade deficit in farm commodities. He said that the results of the agriculture policy performed over the last ten years are an SKK 21 billion trade gap in agricultural products. He suggested that during this period such commodities that are normally produced here were imported to Slovakia. Mr. Fico said that his government would do its utmost to stop the unfavorable trend.
Czech Holding Agel Declares Interest in Slovak Hospitals
The Czech holding Agel plans to enter the Slovak market for healthcare providers. The director of the company's board of directors Oldrich Subrt said that the group would like to cooperate with counties and towns and that operation on the Slovak territory along the border with the Czech Republic would be the most logical. "We prefer long-term lease to a purchase of hospitals," added Mr. Subrt. Agel has not yet shown interest in a concrete hospital. For the time being, it is just "looking around."
Moody's Upgrades Slovakia's Government Bond Ratings to A1
International rating agency Moody's Investors Service raised Slovakia's foreign and local currency government bond ratings to A1 from A2 in light of the country's solid record of structural reforms and the ongoing dynamism of the economy. Simultaneously, Moody's upgraded the foreign-currency bank deposit ceiling to A1 from A2, while the short term foreign-currency ceilings remained at P-1. The outlook for all the ratings is stable.
WEDNESDAY, October 18
Ministry Presents Changes in Housing Support to Favor Young People
The Construction Ministry proposes amending provisions about types and amounts of housing subsidies provided by the State Housing Development Fund (SFRB). The ministry submitted for interdepartmental review a draft regulation that sets out details on providing loans, as well as the range of housing support in the form of non-returnable grants. The material should help young people with acquiring their own housing, as well as encourage reconstruction and construction activities on the Slovak housing market. The draft regulation should come into effect as of the beginning of next year.
Trade Unions Confederation Elects a New President
The Trade Unions Confederation of (KOZ) elected Miroslav Gazdik its new president on Wednesday. The current mineworkers' trade union chairman will take up his post as of December 1. He received 86 out of 96 votes at the KOZ congress; eight delegates were against the only candidate. Current KOZ president Ivan Saktor officially resigned and will leave his post on November 30.
Regulator Names Slovak Telecom a Major Operator on Another Market
Telecommunications regulator the Telecommunications Office stated on October 16 that Slovak Telekom is a company with a significant influence on the retail market for providing a minimal set of hired circuits with a capacity of up to 2 Mb/s. Consequently, the regulator defined for the company duties aimed at the support of effective competition and the development of the internal market. The decision has yet to come into effect. The company has 15 days to appeal it. Slovak Telecom said they are analyzing the decision and will decide whether to appeal the decision within the set deadline.
State will Ensure Development of Bratislava Airport, Says Cabinet
Prime Minister Robert Fico considers the Bratislava airport to be attractive, and that is why he does not see any problem developing it with the help of funds other than those that should have been acquired through its privatization. "The state will make sure that the airport is developing, external resources, loans are available," added Transport Minister Lubomir Vazny. He thinks that the airport is in good financial condition, its annual sales reach around SKK 1 billion, and the expansion of the airport by 10 to 15 percent annually is expected. "Without the help of the state, the airport is able to get a loan from SKK 2 billion to SKK 2.5 billion. It will not be any problem for a bank to provide a loan of this volume to the airport," stressed Mr. Vazny.
Slovak Central Bank Perceives Currency Strengthening Positively
The National Bank of Slovakia (NBS) perceived the strengthening of the Slovak crown positively, which improved its high against the euro in several waves last week. The central bank certainly considers the crown's strengthening as a positive step, the NBS Governor Ivan Sramko commented after the Cabinet session on Wednesday. According Mr. Sramko, it is, nevertheless, difficult to tell whether the crown's strengthening is sufficient for fighting inflation. Concerning inflation, mainly the development of regulated prices has a decisive role. "These prices have influenced inflation growth the most. However, a shift in the exchange rate also is important," the governor added. The central bank even expected a further strengthening of the Slovak currency because of the favorable development of Slovakia's economy.
Finance Minister Got Authorization to Attend NBS Bank Board Meetings
Finance Minister Jan Pociatek obtained authorization from the Cabinet on Wednesday to participate in meetings of the Bank Board of the central bank, the National Bank of Slovakia (NBS). Finance Ministry spokesman Miroslav Smal informed that this is only a formal process that is connected to the fact that since elections there is a new finance minister. The meeting of the NBS Bank Board is not open to the public. An appointed member of the Cabinet has the right to participate on the basis of the NBS Act.
THURSDAY, October 19
Last Year's General Government Deficit was 3.13 Percent of GDP
Revised data of the Slovak Statistics Office show the general government deficit last year at 3.13 percent of GDP, which represents SKK 45.995 billion. General government debt achieved SKK 507.428 billion, representing 34.49 percent of GDP. This year the general government deficit should be 3.35 percent of GDP and the general government debt should achieve 33.12 percent of GDP.
Former Minister Simon Calls on State Secretary Zahumensky to Resign
Former minister of agriculture Zsolt Simon says that the Agriculture Ministry state secretary Marian Zahumensky should step down. Mr. Simon claims that the ministry, at the initiative of Mr. Zahumensky, has revised its own subsidy rules and thus enabled an increase in subsidies to some companies. These include also Agrocontract Mikulas, a.s., in which the state secretary is a shareholder. Moreover, his wife Olga Zahumenska sits on its supervisory board. The tobacco producing company has received additional subsidies of SKK 4.4 million based on the revised rules. Mr. Simon claims that the change was purposive with a goal to help concrete individuals. "I'm convinced that the state secretary is in this case in a conflict of interest," said Mr. Simon.
Slovakia Plans 20-Year Eurobond Issue Next Year
Slovakia plans to try to sell a 20-year eurobond next year as part of its foreign borrowing strategy aimed at preparing for euro adoption, the head of the Finance Ministry's Debt and Liquidity Management Agency (ARDAL), Daniel Bytcanek informed SITA on Thursday. Slovakia sold a benchmark 15-year eurobond worth EUR 1 billion in March, and by securing an interest rate of 4 percent, achieved the cheapest foreign financing ever for a new European Union member from ex-communist Europe. Mr. Bytcanek said that Slovakia plans to continue tapping foreign markets next year. "We want to do a eurobond again next year. If the conditions are good, we might try to do a 20-year issue, but this will depend on several factors. If we find out there is not enough demand for a 20-year bond, we would consider returning to the traditional maturity of 10 years," said Mr. Bytcanek.
GGP Launches Production in Poprad Industrial Park
Global Garden Products (GGP) Slovakia, s.r.o., launched on Thursday the production of garden lawn mowers in the new production premises in the Poprad-Matejovce industrial park. Construction of the new plant on the area of 10,000 square meters took nearly six months. The cost of the new hall's construction reached EUR 10 million, GGP Slovakia director general Errico Biondi told a news conference held on the occasion of the plant's opening. GGP, a Poprad-based plant, is one of the four production units run by GGP in Europe.
Transport Minister Considers Selling Stake in T-Mobile Slovensko
The Minister of Transport, Posts, and Telecommunications, Lubomir Vazny, is considering the sale of the government's equity-stake in T-Mobile Slovensko, a.s. The state controls it indirectly through its 49-percent stake in T-Mobile's 100-percent holder, company Slovak Telekom, a.s., (ST). "Since the third mobile operator, Telefonica O2 Slovakia, should launch operations on the Slovak telecommunications market next year, competition on the market will increase and the state role there thus will no longer be that necessary. Therefore, I would like to present this idea to representatives of Slovak Telekom's majority shareholder, Deutsche Telekom, as well as to the Slovak government," Mr. Vazny told a news conference on Thursday. He said that Deutsche Telekom has an option to the T-Mobile's stake and that the state would thus offer its equity stake to the German firm at first.
PSA Peugeot Citroen Officially Opens its Plant in Trnava
French carmaker PSA Peugeot Citroen officially opened its production plant in Trnava, western Slovakia, on Thursday. "We have reached all our goals. We needed less than two and a half years to successfully complete the whole project," the chairman of the PSA Peugeot Citroen board of directors, Jean-Martin Folz, told a news conference on Thursday. The main reason why the concern decided to build a plant specifically in Trnava was the advantageous geographic position of the region. "Trnava is an important transport junction that is situated close to several big automotive markets, such as Germany," explained Mr. Folz.
Telefonica O2 Slovakia Starts Staff Recruitment
The third mobile operator on the Slovak market, Telefonica O2 Slovakia, already has started recruiting employees. The firm plans to employ 150 to 200 people in the first phase. "Our ambition is to win the best experts from the start to come up with the offer of our products to our customers as soon as possible," said Telefonica O2 Slovakia's director general Juraj Sedivy. Other experts from Telefonica O2 Czech Republic also will be involved in the project. Mr. Sedivy further stated that Telefonica O2 Slovakia started cooperating with the consulting firm Mercer in the initial phase of launching operations. Mercer has experience in the telecommunications sector consulting. Telefonica O2 Slovakia's spokesperson Hana Hejskova informed that Zuzana Reznickova became sales director. Juraj Kodydek will serve as the IT director.
FRIDAY, October 20
Statistics Office Estimates Last Year's GDP Growth at 6 Percent
An updated estimate of the Statistics Office shows that the Slovak economy grew by 6 percent in fixed prices last year when the country's GDP reached SKK 1,178 billion. According to revised data, in 2004, GDP growth was 5.4 percent and the volume of GDP was SKK 1,111 billion. In 2003, GDP growth was 4.2 percent and the volume of GDP was SKK 1,054 billion, the Statistics Office reported on Friday.
Slovak Crown Breaks Another Record Strengthening Below 36.500 SKK/EUR
On Friday, the Slovak crown continued to break its so-far records. VUB dealer Ladislav Benedek said that after the currency opened at 36.560/580 SKK/EUR, it firmed to 36.470/490 SKK/EUR. "The strong demand of investors, which propelled apart from the Slovak crown also other currencies in the region, was behind the crown's appreciation," said the dealer, adding that later the crown bounced a bit back to 36.520 SKK/EUR. Mr. Benedek expects that the Slovak crown would move in a band between 36.500 SKK/EUR and SKK 36.600 SKK/EUR on Friday. "If it again breaks through 36.500 SKK/EUR, the exchange rate of the crown and the euro might even strengthen to 36.400 SKK/EUR," added Mr. Benedek.
New Director Appointed of Investment and Trade Agency SARIO
The Slovak Investment and Trade Development Agency (SARIO) has a new director general. SARIO spokesperson Sona Junasova informed SITA that the Economy Ministry installed Peter Hajas in the position of the SARIO director general on Friday, October 20. He replaced Milan Juraska, whom the ministry recalled from the post in early October after less than one year in office.
Radicova Wants Christmas Benefits also For Early Pensioners
Pensioners who had retired before they reached their retirement age should have a right to Christmas benefits. Parliamentary deputy for the Slovak Democratic and Christian Union-Democratic Party (SDKU-DS) and former Minister of Social Affairs and Labor Iveta Radicova believes this. Thus, she has submitted to parliament an amendment to the draft bill for providing a one-off Christmas contribution to pensioners so that also these "early" pensioners can get this benefit. Deputies will deal with the bill in the second reading. Ms. Radicova stressed that when keeping the upper limit for pensions enabling pensioners to get the Christmas benefits, this change would affect 24,000 pensioners and cost the state about SKK 4 million. She submitted such an amendment at the session of the Parliamentary Committee for Social Affairs last week. Ms. Radicova argues that this is a category of pensioners who mostly lost their jobs shortly before they reached the ordinary retirement age. However, the amendment did not make it through when committee members for the ruling coalition did not vote for it.
Transport Minister Talks about Liberalization of Postal Market
Transport Minister Lubomir Vazny will not have any objections towards the liberalization of the postal market in Slovakia. "I want that Slovakia fulfills EU directives; however, the liberalization should be done gradually so that it does not hurt so much," he explained. He wants to allow liberalization while protecting the market. He fears total liberalization of the market. As a result of such liberalization, Slovenske Posta would no longer report sales of SKK 8 billion, but SKK 2 billion in two year's time, and 17,000 employees would be reduced to 3,000.
Slovakia's FOREX Reserves Down USD 324.8 Mln. This Week
Slovakia's foreign exchange (FOREX) reserves decreased by USD 324.8 million over the past week to USD 15.3829 billion as of October 18. The drop was largely caused by decline in reserve assets of Slovakia's commercial banks, going down USD 304.5 million in a week to USD 2.3214 billion. Reserves of the National Bank of Slovakia (NBS) decreased by mere USD 20.3 million to USD 13.0615 billion the NBS press department informed SITA on Friday.
Prospects for Meeting Maastricht Criteria for Euro Adoption Good
The prospects for meeting the Maastricht criteria inevitable for the adoption of the European single currency, the euro, in Slovakia is good. Governor of the National Bank of Slovakia (NBS) Ivan Sramko said at a discussion forum HNClub on Friday, October 20, that inflation remains the most risky criterion. But the central bank believes that Slovakia is able to meet this criterion.