Slovak central banker sees cut in 2009 growth forecast

By Peter Laca

VIENNA (Reuters) - Slovakia's economy will slow more than expected next year because of the global financial crisis, but the future euro zone member should still expand by at least 5 percent, central bank Vice-Governor Martin Barto said on Wednesday.

Slovak consumer prices should not rise sharply after euro zone entry in 2009, and the central bank has so far not discussed revisions of its inflation goals, Barto also said.

The National Bank of Slovakia (NBS) is now working on a regular update of its economic forecasts, which Barto said would be probably published together with those from other members of the single currency bloc early in December. Speaking at the Reuters Central European Investment Summit in Vienna, Barto said the 2009 growth forecast would come down from the bank's current prediction of 6.6 percent.

"I would expect that the proposal would be somewhere between 5 and 5 1/2 percent of growth for next year," Barto said.

"This is my personal estimate based on the first forecasts of euro zone countries, European Union countries, neighboring countries, which are our main trading partners."

Growth of 7.6 percent is expected in 2008.

Slovakia has been largely shielded from the full brunt of the financial crisis. But the small and open economy, heavily dependent on exports of cars and electronics goods, could see an indirect impact if demand in its main trading partners slows and tighter financing prompts consumers to curtail spending.

Apart from the automobile and electronics sectors, Barto said the Slovak construction sector may also be hit because of a higher cost of funding.

Governments and central banks across Europe have slashed growth forecasts, but Slovakia is expected to remain one of the fastest growing economies in the EU, and Barto said euro zone entry could add up to 0.5 percentage points of growth per year to the economy and help attract new investments.

"With the euro zone membership, Slovakia might escape a drastic decline in growth," he said.

Lower GDP growth might also undercut 2009 budget revenues.

The fiscal plan is based on economic growth of 6.5 percent, but Barto said the government had enough tools to react if that were the case and he expected the cabinet to cut spending if state revenues fall short of projections.

He also dismissed suggestions of a few analysts that the credit crisis might somehow endanger Slovakia's euro zone entry.

"There is no doubt about Slovakia's euro zone membership as of January 1, 2009. There is nothing that could prevent Slovakia from joining," Barto said.

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