OECD Economic Outlook 69 - Biblioteca Hegoa

124 - OECD Economic Outlook 69
Strong export growth continued to support GDP throughout 2000 despite falling domestic demand. Export competitiveness
was supported by real wage moderation, but unemployment increased. The government was able to meet its fiscal
targets and pushed ahead with reforms, inducing a significant increase in foreign direct investment. However, structural
changes are taking longer than expected to work through the economy. Nevertheless, domestic demand is expected to
increase in 2001, and GDP growth to strengthen despite a sharply reduced contribution of net exports.
Some deterioration in the budget position is expected this year, largely accounted for by the one-off costs of bank restructuring.
But with the fiscal room for manoeuvre extremely limited, the authorities will have to guard against any lapse of
discipline on current expenditure.
Per cent
40
Weak growth was a result of
structural adjustment
Price and wage increases
remained moderate
Increasing consumption is
expected to lead to a further
pick up in growth...
30
20
10
0
-10
-20
-30
Exports
Imports
Slovak Republic
Two years of structural reforms have begun to enforce budgetary discipline on
both public and private sector enterprises. This has initially reduced growth: domestic
demand fell by 1.3 per cent in 2000 (following a 4.6 per cent fall in 1999), though
household and government consumption revived somewhat in the last quarter. By
contrast, export demand was exceptionally strong, supported in the second half by
improving price competitiveness. Overall, GDP grew by over 2 per cent despite a
strong rebound in imports. The current account deficit narrowed further, to around
3½ per cent of GDP.
Core inflation remains subdued, though the exchange rate depreciated, both in
nominal and real effective terms, during the second half of 2000. Real wages recovered
slightly in the second half of 2000, though they still fell by nearly 5 per cent for
the year as a whole. Registered unemployment rose, reaching 17.9 per cent at the end
of the year, as government measures to alleviate long term unemployment expired.
After two years of decline, private consumption is likely to strengthen this year.
As structural changes begin to increase productivity, real wages should rise; the
recent fall in net employment creation should also begin to reverse; and repayment of
government privatisation bonds issued in 1995 will add to household income.
Government investment is also expected to recover, though this is partially contin-
Slovak Republic
Exports have grown strongly1 strongly1 strongly1 Export price competitiveness has improved2 improved2 improved2
1999 2000 01 1999 2000
1. Year-on-year percentage changes.
2. Real effective exchange rate.
Sources: Slovak Statistical Office, IMF and OECD.
1995 = 100
115
110
105
100
95
90