1. Market Research
  2. > Financial Services
  3. > Banking Market Trends
  4. > Slovakia Country Risk Report Q1 2017

Slovakia Country Risk Report Q1 2017

  • October 2016
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views

Export growth led growth of the previous years has translated to a visible pick-up in domestic demand. We expect domestic demand growth to remain robust, driving growth in the coming years. The current account will return to deficit, but eurozone membership and a stable, long-term external funding structure minimise associated risks and ensure a stable balance of payments position. We believe Slovakia is on a sustainable fiscal trajectory with few immediate risks to its solid sovereign credit profile. Long-term demographic challenges are prominent, however, posing long-term risks. While the ruling Smer-SD party lost its sole parliamentary majority after the March 2016 general election, we continue to expect broad policy continuity in terms of its conservative fiscal policy stance. The success of far-right parties is a medium term risk, especially if the growing backlash against the EU project continues. Major Forecast Changes We have revised down our forecasts for the euro exchange rate, and now project the currency to continue its multi-year depreciation towards parity against the US dollar.

Table Of Contents

Slovakia Country Risk Report Q1 2017
Executive Summary.................................................................................................................................. 5
Core Views.......................................................................................................................................................................................5
Major Forecast Changes.................................................................................................................................................................5
Key Risks.........................................................................................................................................................................................5
Chapter 1: Economic Outlook.................................................................................................................. 7
SWOT Analysis........................................................................................................................................................... 7
BMI Economic Risk Index.......................................................................................................................................... 7
Economic Growth Outlook........................................................................................................................................ 8
Growth Will Decelerate Amid Weaker External Demand.............................................................................................................8
Economic growth in Slovakia will decelerate over the coming years due to falling external demand and lingering risks associated with
the future of the eurozone.
GDP By Expenditure Outlook.................................................................................................................................... 9
TABLE: GDP GROWTH FORECASTS......................................................................................................................................................................9
TABLE: PRIVATE CONSUMPTION FORECASTS....................................................................................................................................................9
TABLE: PUBLIC CONSUMPTION FORECASTS....................................................................................................................................................10
TABLE: FIXED INVESTMENT FORECAST.............................................................................................................................................................10
TABLE: NET EXPORT FORECASTS......................................................................................................................................................................10
Fiscal Policy And Public Debt Outlook.................................................................................................................. 11
Growth And Low Interest Rates To Support Fiscal Consolidation...........................................................................................11
Slovakia's relatively conservative fiscal policy will continue in the coming years, while robust growth and falling government borrowing
costs will favour a further narrowing of debt and deficit levels as percentage of GDP.
Structural Fiscal Position........................................................................................................................................ 12
Public Finances On Strong Footing, Despite Long-Term Challenges.....................................................................................12
With public debt and deficit ratios comparing favourably to peers, strong growth and low borrowing costs will facilitate fiscal
consolidation in the coming years.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES.............................................................................................................................12
TABLE: FISCAL AND PUBLIC DEBT FORECASTS...............................................................................................................................................13
Outlook On External Position.................................................................................................................................. 14
External Position Not A Major Source Of Risk...........................................................................................................................14
Slovakia's current account deficit will remain at small, manageable levels in the coming years. The automotive sector will be a major
source of export growth and deficit financing, via foreign direct investment inflows.
TABLE: CURRENT ACCOUNT BALANCE FORECASTS.......................................................................................................................................14
TABLE: TOP 5 GOODS IMPORTS..........................................................................................................................................................................15
TABLE: TOP 5 GOODS EXPORTS.........................................................................................................................................................................15
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE.........................................................................................................................................15
Monetary Policy........................................................................................................................................................ 16
ECB Policy: Looser For Longer...................................................................................................................................................16
The economic slowdown caused in part by the UK's vote to leave the European Union in June has increased the chances that monetary
policy tightening in the eurozone will be pushed back even further.
TABLE: ECB REFINANCING RATE FORECASTS (%)...........................................................................................................................................16
Currency Forecast.................................................................................................................................................... 19
EUR: Heading To Parity As Fiscal Woes Take Their Toll..........................................................................................................19
We have revised down our forecast for the euro, now seeing the currency weaken ing gradually over the coming years. The euro is
caught between the risk of rising inflation expectations on the one hand and a rising risk premium over the future of the eurozone on the
other.
TABLE: BMI EUROZONE CURRENCY FORECASTS............................................................................................................................................20
TABLE: DOWNWARD REVISIONS.........................................................................................................................................................................20
Chapter 2: 10-Year Forecast................................................................................................................... 23
The Slovak Economy To 2025................................................................................................................................. 23
Growth Outpacing Eurozone Averages.......................................................................................................................................23
Macroeconomic stability and institutional convergence with Western norms will be bolstered in the long term by Slovakia's eurozone
membership. However, we believe the drawbacks of having the euro will outweigh the benefits, limiting potential growth in the next
decade. Nevertheless, we expect real GDP to average 2.6 % over our 10-year forecast period, well above eurozone averages.
TABLE: LONG-TERM MACROECONOMIC FORECASTS.....................................................................................................................................23
Chapter 3: Political Outlook................................................................................................................... 25
SWOT Analysis......................................................................................................................................................... 25
BMI Political Risk Index........................................................................................................................................... 25
Domestic Politics..................................................................................................................................................... 26
Immigration Concerns
Driving Rightward Shift...........................................................................................................................................................26
Prime Minister Robert Fico will increasingly give in to growing right-wing and populist pressures to preserve his fragile majority in
parliament. The government will continue to champion nationalist causes during the remainder of its presidency of the EU to December
2016, thus prompting criticism from Brussels.
TABLE: POLITICAL OVERVIEW.............................................................................................................................................................................26
Long-Term Political Outlook................................................................................................................................... 28
Slow Convergence With West Remains Core View...................................................................................................................28
We expect Slovakia to continue to converge with Western European policies and standards of living over the next 10 years as the small
economy has benefitted greatly from inclusion in the bloc. However, we stress that the country will face a number of challenges to
political stability including corruption, relations with the eurozone, ethnic tensions and population decline.
Chapter 4: Operational Risk................................................................................................................... 29
SWOT Analysis......................................................................................................................................................... 29
Operational Risk Index............................................................................................................................................ 29
Operational Risk....................................................................................................................................................... 30
TABLE: OPERATIONAL RISK.................................................................................................................................................................................30
Business Crime........................................................................................................................................................ 31
TABLE: BUSINESS RESPONSE TO RISKS...........................................................................................................................................................31
Government Intervention......................................................................................................................................... 33
TABLE: BUSINESS TAXES.....................................................................................................................................................................................34
TABLE: PERSONAL INCOME TAX.........................................................................................................................................................................34
Chapter 5: BMI Global Macro Outlook................................................................................................... 37
Global Macro Outlook.............................................................................................................................................. 37
Broad Recovery But Three Notes Of Caution.............................................................................................................................37
TABLE: GLOBAL FORECASTS, 2015-2020...........................................................................................................................................................37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %....................................................................................................................................38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %...................................................................................................................................39
TABLE: MACROECONOMIC DATA and FORECASTS..............................................................................................................................................41

View This Report »

Get Industry Insights. Simply.

  • Latest reports & slideshows with insights from top research analysts
  • 24 Million searchable statistics with tables, figures & datasets
  • More than 10,000 trusted sources
24/7 Customer Support

Talk to Amrita

+1 718 303 2019

Purchase Reports From Reputable Market Research Publishers
China Banking IT Solutions Market Shares, 2015: Market Maintains Stable Growth

China Banking IT Solutions Market Shares, 2015: Market Maintains Stable Growth

  • $ 7500
  • Industry report
  • October 2016
  • by IDC

"China's banking industry is facing three major challenges -- economic slowdown, interest rate liberalization reform, and internet finance, accompanied by dramatic changes in the banking business environment," ...

Blockchain Technology Market by Provider, Application, Organization Size, Vertical, and Region - Global Forecast to 2021

Blockchain Technology Market by Provider, Application, Organization Size, Vertical, and Region - Global Forecast to 2021

  • $ 5650
  • Industry report
  • October 2016
  • by MarketsandMarkets

“Need for transparency and immutability is driving the growth of the blockchain technology market” MarketsandMarkets estimates the global blockchain technology market to grow from USD 210.2 million ...

China Banking Industry IT Solutions Forecast, 2016-2020

China Banking Industry IT Solutions Forecast, 2016-2020

  • $ 5500
  • Industry report
  • September 2016
  • by IDC

"China's banking industry is facing three major challenges -- economic slowdown, interest rate liberalization reform, and internet finance, accompanied by dramatic changes in the banking business environment. ...

Uk Wealth Report 2016

September 2016 $ 4995

Italy Wealth Report 2016

September 2016 $ 4995

ref:plp2016

Reportlinker.com © Copyright 2016. All rights reserved.

ReportLinker simplifies how Analysts and Decision Makers get industry data for their business.