Economy to contract by 4.5%,deficit over 5% in ‘09 - IMF

June 17, 2009

THE INTERNATIONAL Monetary Fund expects the Slovak economy to shrink by 4.5 percent this year, while the public finance deficit is estimated to exceed five percent of GDP, according to an IMF mission that visited Slovakia in mid-May and released its results on Tuesday.

The mission focused on evaluating Slovakia's macro-economic outlook, fiscal policy and the financial sector.

According to IMF, the economic situation should improve in 2010, when GDP should grow at two percent, followed by expected growth of 4-5 percent in 2011. However, the unemployment rate, currently at more than 11 percent and steadily rising month-on-month this year, will not begin to drop below 12 percent until 2011.

IMF has also warned that unless changes to fiscal policy are undertaken, the public finance deficit could continue to stand at five percent in 2010 and 2011. The IMF therefore recommends that public finances are consolidated gradually by one percentage point per year.

According to IMF, it is necessary to continue to cut public expenditures, to support social programmes, to make public procurement more efficient and to secure mergers within the public administration.

IMF also recommends that, in view of rising debts of Slovakia's healthcare sector and inefficiency of hospitals, the Slovak cabinet carry out structural changes in the sector.