(Repeats story from late Tuesday)
By Peter Laca
BRATISLAVA, March 31 (Reuters) - The Slovak economy may post
its first ever annual contraction this year, officials said on
Tuesday, signaling the euro zone newcomer has been hit by the
global financial crisis more than previously expected.
Slovak Prime Minister Robert Fico said the contraction could
be as deep as 1 percent, while central bank governor Ivan Sramko
said he could not rule out negative growth this year.
"In the euro zone, the decline in economic growth is
expected at minus 3 percent, on average," Fico told journalists
after the meeting of the government's anti-crisis council.
"Even the most pessimistic predictions say Slovakia is at
least 2, maybe 3 percentage points above the euro zone average,"
he said.
It was the first time officials admitted economic
contraction was possible in the country that has posted one of
the highest growth rates in the EU and was expected to continue
outperforming many of its peers in the bloc this year.
The country's official statistics office said Slovakia has
not had negative economic growth since it emerged as an
independent state in 1993 following the peaceful break-up of
Czechoslovakia.
The central bank now expects real gross domestic product
growth of 2.1 percent, and the Finance Ministry has forecast a
2.4 percent rise, but both institutions have pointed to downside
risks to these predictions.
The bank later said the latest data confirmed a deepening
economic slowdown in January. The bank was expected to release
the quarterly update of its economic forecasts on Tuesday, but
said more time was needed.
Slovakia has not had to bail out any of its banks because
they have engaged mainly in domestic financing covered by
deposits.
But the 80-billion-euro economy has been hit by weakening
demand for its key exports, mainly cars and electronics goods,
as consumers in the West curtail spending.
Slovak growth slowed last year to 6.4 percent from a record
high of 10.4 percent in 2007.
BUDGET HIT
Like in many of its Eastern European peers, slowing growth
in Slovakia will curb state budget revenues and may push the
fiscal gap above the targeted 2.1 percent of GDP unless the
government cuts spending.
The cabinet has so far taken a cautious approach to
stimulating the economy through increased state spending, saying
it did not want to push the fiscal deficit above the 3 percent
of GDP limit as set in the EU's Stability and Growth Pact.
Analysts, however, expect a bigger fiscal hit from slowing
growth. UniCredit Bank in Slovakia, which predicts 0.5 percent
contraction this year, sees the public finance deficit at 4.1
percent of GDP.
Fico, whose anti-crisis measures have focused mainly on
preserving employment, reiterated on Tuesday his intention was
not to widen the fiscal gap too much.
"If there is an increase in the deficit, it must be a
temporary phenomenon. The council for economic crisis recommends
to the government to take such measures that would not increase
the deficit excessively," Fico said.
