RPT-UPDATE 1-Slovak growth down to 2 pct, but no recession -OECD

                                
 (Repeats story from late Monday)
                                
 By Peter Laca
                                
 BRATISLAVA, Feb 9 (Reuters) - The euro zone's newest member
Slovakia will slow much faster than previously expected in 2009
but will still manage growth of 2 percent and safely avoid the
recession hitting its contempories, the Organisation for
Economic Cooperation and Development said on Monday.
                                
 "We expected growth of 4 percent (in 2009). Now we are
looking at perhaps 2 percent," OECD Secretary General Angel
Gurria told a business seminar after presenting the report.
                                
 "Two percent may look low for Slovakia, but it's a fantastic
figure when compared with the negative figures forecast for
others, so everything is relative."
                                
 Adoption of the euro last month would partially shelter
Slovakia from disturbances on currency markets, the Paris-based
economics forum said in report on Slovakia. 
                                
 But it added that the country needed to raise flexibility in
its labour and product markets, improve fiscal policy and reform
housing policies to avoid a boom-bust scenario.
                                
 "Being a catch-up country adds to the challenge of euro area
membership, above all because income differentials are larger
for the Slovak Republic than for any other country that has
adopted the euro," the OECD said.
                                
 Slovakia avoided the direct impact of the financial market
turmoil on its banks because of their limited exposure to toxic
assets. But the small economy, which relies on exports of cars
and TVs, will be hit by slowing demand for such goods in the
West.
                                
 The ex-communist country of 5.4 million people needs more
fiscal flexibility to adjust to cyclical shocks which euro zone
monetary policy cannot deal with, the OECD said.
                                
 But at the same time, the government must ensure continued
fiscal consolidation to reach the medium-term goal of a small
structural deficit, and aim for long-term fiscal sustainability
while dealing with ageing population.
                                
 "Given these challenges, a deficit rule consistent with the
(EU's) Stability and Growth Pact could be embedded into the
constitution to demonstrate that the government is firmly
committed to fiscal consolidation," the OECD said.
                                
 It also pointed to specialisation on car manufacturing,
which had contributed to Slovakia's high growth in the past, as
a downside risk for future growth.
                                
 "There are already signs that the automobile industry will
be particularly badly hit by the global slowdown," it said.
 (Reporting by Peter Laca; editing by David Stamp/Patrick
Graham)