Slovakia hikes 2010 growth forecast to 4.0 percent

14th September 2010, Comments 0 comments

Slovakia on Tuesday upped its 2010 output forecast from 3.2 percent to 4.0 percent as key trade partners Germany and France clocked a faster-than-expected recovery, the Slovak finance ministry said.

"Positive development in 2010 has been influenced by a faster recovery of Slovakia's business partners in the second quarter of 2010, which has had a positive impact on industry and exports," the ministry said in a statement.

But the government belt-tightening measures aimed at cutting the budget deficit will curb economic growth next year, the ministry added, slashing the outlook to 3.3 percent from the originally expected 3.8 percent.

"Without fiscal consolidation, the economy would grow by 3.8 percent in 2011 but the outlook for stable growth in upcoming years would be endangered," the ministry added.

Slovakia's austerity-minded centre-right cabinet, in power since July, expects to cut the public finance gap from an estimated 7.8 percent of gross domestic product (GDP) in 2010 to under 3.0 percent by 2013 as required by the European Union.

The government's austerity package, including a temporary hike in the value-added sales tax (VAT), higher excise tax on alcohol and cigarettes and 10-percent cuts in ministers' and lawmakers' salaries, aims to cut the budget gap by almost three percentage points -- amounting to 1.7 billion euros (2.17 billion dollars) -- next year.

Slovakia, which joined the eurozone last year, faced its first-ever economic contraction in 2009, 16 years after becoming an independent state when the former Czechoslovakia split in two.

It was battered by the global economic slump which curbed car and electronics production -- two main sectors of the Slovak economy.

Slovakia enjoyed GDP growth of 6.2 percent in 2008 after a record 10.6-percent in 2007.

© 2010 AFP

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