Feb 19 (Reuters) - Slovakia will elect a new parliament on
June 12, and Prime Minister Robert Fico's leftist Smer party
looks set to beat right-wing opponents and form a new cabinet.
The election will be watched for signs of how the new euro
zone member will tackle its budget deficit, and improve investor
confidence in law enforcement and strained relations with
neighbouring Hungary.
The following are key facts about Slovakia and the
challenges the next government will face.
ECONOMIC RECOVERY
* Slovakia's economy, a euro zone member since 2009, has
been picking up speed after a deep downturn and the new
government will need to strive to protect the fragile recovery,
highly exposed to demand in western Europe.
* The 67-billion-euro a year economy contracted by 4.7
percent last year, according to preliminary data. The fourth
quarter showed quarterly growth of 2 percent.
* The central bank expects Slovakia to be among the European
Union's fastest growing members this year, rising by almost 3
percent, thanks to rebounding foreign demand and investment.
* Analysts say the country needs new foreign direct
investment projects to help the job market.
* Slovakia has 5.4 million people, GDP of 16,900 euros per
head when adjusted for purchasing power differences, 67.7
percent of the EU average. Neighbouring Czech Republic has per
capita GDP of 19,900 euros, Hungary's is 15,600 euros and Poland
13,600 euros.
* Exports, mainly from newly built automotive and
electronics plants, account for an exceptionally high 83 percent
of GDP.
FISCAL CONSOLIDATION
* The government aims to cut the fiscal deficit to 5.5
percent of the gross domestic product (GDP) this year, down from
about 6.3 percent in 2009. It plans to bring the gap back below
the European Union's limit of 3 percent of GDP in 2012.
* The Finance Ministry forecasts the economy will grow by
2.8 percent or more this year, after a preliminary 4.7 percent
contraction in 2009. That is a far cry from the record 10.6
percent rise in 2007 and 6.2 percent growth in 2008.
* The government has floated the possibility of new legal
instruments to secure fiscal tightening -- such as an
introduction of a cap for public debt by a constitutional law.
* Government debt was 27.6 percent of GDP in 2008,
relatively low for the euro zone, but has been growing fast.
* The spread between Slovak 10-year fixed-rate bonds and
euro zone benchmark German Bunds was 103.7 basis points on
Friday, compared with Portugal's 124.8 basis points or Greece's
321.9 basis points.
* Slovakia's sovereign ratings are:
- A+ by Standard & Poor's, outlook stable
- A1 by Moody's, outlook stable
- A+ by FITCH, outlook stable
HUNGARY RELATIONS
* Analysts say Fico's leftist Smer party and the far-right
Slovak National Party (SNS) will play to nationalist sentiment
towards the country's half-million strong Hungarian minority in
the election campaign.
* Fico has warned a victory in the April Hungarian election
by right-wing Fidesz, led by Viktor Orban, could raise tensions.
* The two countries' relations have never been rosy, due to
the inclusion of a Hungarian minority in the newly formed
Czechoslovakia in 1918. EU entry by both Slovakia and Hungary in
2004 did little to alleviate the ill feeling.
JUDICIAL SYSTEM, BUSINESS CLIMATE
* Investors have raised worries about corruption and weak
law enforcement, citing this as a major obstacle for doing
business in Slovakia.
* Employers urged the government to work on improving the
business environment and to introduce further market reforms to
maintain Slovakia's attractiveness among foreign investors.
(Reporting by Martin Santa; Editing by Jan Lopatka)
