SLOVAKIA: BASIC INFORMATION

Transcription

1 SLOVAKIA: BASIC INFORMATION Area: 49,035 km 2 Population: 5.4 million Capital: Bratislava (430 thousand) Rating: Moody s: A1 S&P: A Fitch: A GDP per capita: 52% of the EU in PPP average in 2004 % of GDP created by 90,1% private sector November

2 MACROECONOMIC INDICATORS growth in % F 2007 F 2008 F 2009 F GDP Real wage Employment Unemployment rate Inflation Balance of current account (% of GDP) November

3 INFLATION DEVELOPMENT 12.0 (in %) CPI inflation 8.5 Regulated prices contribution F2007F2008F2009F Drop in inflation in 2005: exchange rate appreciation, food and beverages November

4 FOREIGN TRADE 4.0 (in %) Trade balance Balance of income Current account balance Balance of services Current transfers F 2006F 2007F 2008F 2009F November

5 REAL WAGES - LABOUR PRODUCTIVITY (in %) Growth of real wages Labour productivity growth November

6 Labor costs, 2006 (% of EU average) LABOR FORCE Highly skilled and inexpensive EU Germany Czech Republic Slovakia Labor costs Source: Mercer, Eurostat Productivity adjusted labor costs Highly skilled labor nearly 95% of the population has secondary or university education: 5 th highest rate in the world 13% of Slovak population holds a university degree Very low degree of labor unrest negligent power of labor unions compares highly favorably with most EU countries November

7 REFORMS to maintain & improve Slovakia's competitiveness in a global economy BUSINESS ENVIRONMENT REFORM More efficient judiciary and simplification of legislation Easier and faster dealing with Commercial and Property Registrars More flexible labor relations legislation PUBLIC ADMINISTRATION REFORM Fiscal decentralization Decentralization of competencies Change in territorial division - 3-level model of public administration PUBLIC FINANCE MANAGEMENT REFORM Installation of hard budget constrains & introduction of ESA95 methodology Introduction of State Treasury and Debt and Liquidity Management Agency Introduction of multiyear fiscal planning Built-up of analytical capacity at MoF TAX REFORM Simple & transparent Tax Code Flat-income tax Shift for indirect taxation Many exceptions and distortions abolished DEEP STRUCTURAL REFORMS & INSTITUTION BUILDING EDUCATION SYSTEM REFORM New financing system of primary & secondary schools New university law Some progress in the content of education reform PENSION REFORM Introduction of the 2 nd capitalization pillar of the system Increased link between contribution and pension in the 1 st PAYG pillar Put public finance on a sound footing HEALTH-CARE REFORM Introduction of hard budget constrains for all subjects in the health-care system Elimination of debt in the system Transformation of the health insurance system Introduction of fees in the system SOCIAL WELFARE SYSTEM & LABOR MARKET REFORMS New flexible Labour Code Reform of the social welfare payments system Introduction of modern tools of labour market policy November

8 TAX RATES FACED BY INVESTORS Slovakia Estonia Finland Hungary Poland Czech Republic Germany Japan UK Ireland France USA (New York) 0% 10% 20% 30% 40% 50% 60% Effective tax rate on investment income faced by a private investor (combined corporate tax and dividend tax) Corporate tax rate November

9 FISCAL INDICATORS % of GDP B 2008B 2009B DEFICIT GROSS DEBT DEFICIT (excluding PAYG pillar shortfall) Source: Convergence Programme, Draft Budget , MoF, 2005 November

10 KEY POLICY PRIORITY FISCAL OBJECTIVES Medium term Fiscal Consolidation Reduction of the deficit to 3% of GDP in 2007 (including costs of launching 2nd pillar of pension reform) meet Maastricht criterion adopt euro in 2009 Meet the ultimate SGP goal in 2010 (close to balance or in surplus position) Long term Ensure Fiscal Sustainability Inter-temporal fiscal constraint of public debt under 60% of GDP Ageing issue Contingent liabilities November

11 MAASTRICHT CRITERIA [% of GDP] Gross public debt Maastricht criterion on debt Deficit (rhs) Maastricht criterion on deficit (rhs) [% of GDP] B 2008B 2009B November

12 EMU ENTRY IN SIGHT Inflation targeting under ERM II conditions to continue 16% Fulfilment of Maastricht Criteria 70% Fiscal criterion to be met also next year 14% 12% 65% 60% Long-term yields under reference value of Maastricht criteria Public debt level stay below Maastricht threshold EMU Entry Target in 2009 % 10% 8% 6% 4% 2% 0% Inflation Fiscal deficit Interest rate FX volatility Public debt Maastricht Slovakia Source: Ministry of Finance, European Commission, NBS, SUSR Note: FX volatility is defined as the monthly deviation from a 2-yr moving average of the SKK/ rate as a proxy 55% 50% 45% 40% 35% 30% November

13 GENERAL GOVERNMENT BALANCE (in % of GDP) E 2007B 2008B 2009B TOTAL REVENUES Tax revenues Social security contributions Non-tax revenues Grants and transfers of which, from the EU TOTAL EXPENDITURES Current expenditure Gross wages Goods & Services Subsidies and transfers Interest Capital spending Balance pillar Balance including 2. pillar Source: Ministry of Finance November

14 FDI IS GROWING STEADILY Preliminary data as of June 2006 FDI Stock by Country of Origin France Cyprus Other 2,3% 6,9% Netherlands USA 3,1% 25,0% 4,2% Czech Republic 5,2% UK 6,3% Hungary Germ any 6,5% Austria 18,5% 14,2% Italy 7,7% Data are updated to the end of June 2006, but only small part of automotive industry investment is included in data PSA investment will cover almost 10% of all FDI Whole automotive investment together with induced investment will cover more than 25% November

15 RATING DEVELOPMENT Slovakia Poland Czech Rep. Hungary November

16 CURRENT RATING OF SLOVAKIA Sound macroeconomic policies and structural reforms rewarded by rating agencies Rating Agency Year Month Rating Outlook Standard & Poor's 2005 December A Stable Moody's 2006 October A1 Stable FITCH 2005 October A Stable R & I 2006 October A- Stable JCR 2006 September A Stable November

17 HIGHEST S&P RATING IN THE REGION A+ S&P Rating of Slovakia A A A A- BBB BBB BBB+ 9.0 BBB- BBB BB+ BB+ BB+ BBB- BB BB 4.0 A A S&P Rating of V4 countries in A+ A 11.0 A A- BBB A- BBB+ BBB+ 9.0 BBB 8.0 BBB- 7.0 BB+ 6.0 BB SK CZ PL HU Note: rating as at the end of the year Source: S&P Source: S&P Slovakia improved its S&P rating from BB+ in 1998 to A in Dec 2005 S&P consider Slovak sovereign risk as lowest in the region November

18 INDEBTEDNESS OF SLOVAKIA Central government debt - EUR 14 bln. tradable debt - EUR 12 bln. Annual financing needs lower than EUR 3 bln. debt roll-over lower than EUR 2 bln. budget deficit and temporary shortcomings up to EUR 1 bln. Instruments Market Non-market T-Bonds T-Bills MM Loans State Treasury sources via refinancing system November

19 INTERNATIONAL ISSUANCE Year 1998 realization of first foreign state bond issues with maturities from 3 to 5 years Further foreign issues issued in 1999, 2000, 2003, 2004 and 2006 with maturities 10, 2, 10 and 15 years respectively 3 outstanding issues (maturity 2010, 2014 and 2021) Plans: Increase portion of EUR denominated bonds Commencing 2006 to issue every year Slovak Eurobond (benchmark size and maturity) November

20 ADDITIONAL DETAILS Debt and Liquidity Management Agency - ARDAL Radlinskeho Bratislava Slovak Republic Telephone Fax ardal@ardal.sk web: Reuters code and pages: DLMA November

21 ADDITIONAL DETAILS All available data of the state debt on the website: State Treasury: National bank of Slovakia: Ministry of Finance: Statistical Office of the Slovak Republic: Convergence program: November