UPDATE 1-Slovak central bank cuts growth outlook

Fri Dec 7, 2012 10:03am EST

Related Topics

* Slovak cbank follows euro zone peers with grim outlook

* Waning foreign demand joins anemic domestic, jobs hit

* Risk to 2013/14 on downside, austerity not helping

BRATISLAVA, Dec 7 (Reuters) - The Slovak central bank cut its growth outlook for this year and next on Friday, saying failing demand from abroad has started to drag on the economy alongside anaemic household and weak government spending.

The grimmer outlook for the euro zone country comes a day after the European Central Bank cut growth outlook for the entire bloc.

The small Slovak economy, now fueled by record output of Germany's Volkswagen and Kia Motors, should slow its expansion to 1.6 percent in 2013 from 2.4 percent in 2012 and rebound to 3.5 percent in 2014, the bank said.

Slovakia grew between July and September at its slowest pace since the euro zone crisis erupted three years ago, data showed on Thursday.

Germany, Slovaks' key business partner, was expected to grow by just 0.4 percent next year, according to the Bundesbank's outlook presented on Friday.

"The Slovak economy shows some resilience to developments in the euro zone. Domestic demand, however, remains subdued," Jozef Makuch, the Slovak central bank governor, told reporters.

"Risks to the growth are on the downside, stemming from possible worsening of foreign demand and further fiscal consolidation measures," added Makuch, who is also member of the ECB's Governing Council.

The centre-left government decided to raise taxes for rich Slovaks and companies next year, impose special corporate levies, put spending cuts and public sector wage limits in place to keep austerity drive on track.

Weaker than originally projected corporate and value added tax collection, amounting for over 500 million euros in the 2012-2013 period, is a serious threat to the government's pledge to cut the deficit below EU's threshold of 3 percent next year.

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