ANNUAL REPORT 2008 - Polymer Bank Notes of the World

Table 13 Main economic indicators for Slovakia(annual percentage changes, unless otherwise indicated)1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Real GDP growth 0.0 1.4 3.4 4.8 4.7 5.2 6.5 8.5 10.4 6.4Contribution to real GDP growth(in percentage points)Domestic demand excluding stocks -6.7 -0.6 7.5 4.0 1.1 3.3 8.7 7.6 6.0 5.8Net exports 6.9 0.3 -5.0 0.4 5.7 -0.8 -2.2 2.2 4.6 0.0HICP inflation 1) 10.5 12.3 7.2 3.5 8.4 7.5 2.8 4.3 1.9 3.9Compensation per employee 6.9 13.3 5.8 8.7 8.2 8.4 9.7 7.7 8.8 9.0Nominal unit labour costs(whole economy) 4.1 9.6 2.9 3.9 4.4 2.9 4.3 1.5 0.6 5.2Import deflator (goods and services) 0.3 14.1 6.0 1.0 1.9 2.1 1.7 3.6 1.6 3.0Current and capital account balance(% of GDP) .. .. -1.8 -5.3 -4.1 -5.7 -6.7 -6.3 -4.2 -4.8Total employment -2.5 -2.0 0.6 0.1 1.1 -0.2 1.4 2.3 2.1 2.8Unemployment rate(% of labour force) 16.4 18.8 19.3 18.7 17.6 18.2 16.3 13.4 11.1 9.6General government surplus (+)/deficit (-) -7.4 -12.3 -6.5 -8.2 -2.7 -2.3 -2.8 -3.5 -1.9 -2.3General government gross debt 47.8 50.3 48.9 43.4 42.4 41.4 34.2 30.4 29.4 28.8Three-month interest rate(% per annum) 1) 15.7 8.6 7.8 7.8 6.2 4.7 2.9 4.3 4.3 4.2Long-term ten-year government bond yield(% per annum) 1) .. .. 8.0 6.9 5.0 5.0 3.5 4.4 4.5 4.7Exchange rate against the euro 1), 2) 44.1 42.6 43.3 42.7 41.5 40.0 38.6 37.2 33.8 31.3Sources: ECB and Eurostat.1) Average of period values.2) Slovak koruna per euro.Fiscal policy has become more supportive of theachievement of price stability over recent yearsin Slovakia. Starting from very high levels, thegeneral government deficit-to-GDP ratio fellfrom 12.3% of GDP in 2000 to 2.3% of GDP in2008. The excessive deficit procedure that hadbeen initiated upon Slovakia’s entry into the EUin 2004 was abrogated in June 2008. The generalgovernment debt-to-GDP ratio has also declinedin recent years, falling from 50.3% of GDP in2000 to 28.8% of GDP in 2008. However, fiscaldeficits in Slovakia are high considering thevery strong economic growth recorded in recentyears. Looking ahead, Slovakia must ensure thatits budget deficit is kept below 3% of GDP ina sustainable manner by implementing credibleand sustainable consolidation measures, whichwould also allow the country to reach itsmedium-term budgetary objective.Monetary policy played an important role instabilising the Slovak economy. In autumn 1998the exchange rate regime of the Slovak korunawas set to managed floating with the euro asthe reference currency from January 1999, andNárodná banka Slovenska adopted an implicitinflation-targeting monetary policy strategy. On1 January 2005 the monetary policy strategyof Národná banka Slovenska was modified tobecome an “inflation-targeting regime underthe conditions of ERM II”. The Slovak korunaentered ERM II on 28 November 2005 and itscentral rate against the euro was initially set atSKK 38.4550. The standard fluctuation bandof ±15% was applied. Reflecting improvingmacroeconomic fundamentals, the Slovakkoruna appreciated significantly and its centralparity was revalued twice against the euroduring its participation in ERM II.In the context of the inflation-targetingframework in effect between 2005 and 2008, themonetary policy of Národná banka Slovenskawas geared towards maintaining price stability.As a consequence, the mounting inflationarypressures that started to emerge towards theend of 2005 initiated a period of monetarytightening. Národná banka Slovenska increasedECBAnnual Report2008139