GDP shrinks, jobless rate rises

 

The volume of Gross Domestic Product in the first quarter of 2009 according to flash estimate procedure reached EUR 14,678.4 million. In comparison with the first quarter of 2008, the volume decreased in constant prices by 5.4% (at current prices by 5.9%). The statistical office did not release GDP details and it will publish a final report on 3rd June.

 

Latest record in April’s unemployment rate: 10.92 percent, the highest figure since April 2006, and up from 10.33 percent in March 2009.

 

 

Analysis and forecast (↑ increasing risk)

 


The recession has hit the country more seriously than expected. A few months ago Slovakia was said to be the only potential country to avoid the economic shrink, now the Q1 2009 GDP data is worse than Hungary’s (the neighbouring country, which is one of the most crisis-affected economies in the whole continent; see chart at the Czech Republic). Now it is clear that even the Finance Ministry’s revised GDP-forecast (2.6 percent contraction for 2009) is underestimated. In the last few months all released economic data has been worse than even the pessimistic analysts had expected, and the tendency seems to be reluctant to stop: the FDI is shrinking, further automotive factories are leaving the country, thus increasing the number of jobless people from month to month.


Though the popularity of the PM and the leading governing party (Smer) fell only by a few percentage points according to latest public poll data, it is not out of the question that the deteriorating economy’s effects will appear in the political sphere sooner than expected: if the Smer gains fewer votes in the European Parliamentary elections than it is widely expected, a chain reaction can undermine the party’s popularity as quickly as is happening with the economy.

 

 

 

 

Source: Median Agency

 

SNS scandals weaken the coalition

 

 

The Slovak National Party (SNS), a junior member of the governing coalition, has seen two of its three ministerial nominees fired in the last few weeks; one of its replacement ministers remains under constant media pressure over a dubious tender deal; and PM Robert Fico sacked Jan Slota’s nominee as head of the country’s investment development agency, SARIO. (The scandal series started with the so-called “bulletin board tender”, see details in Issue 6/2009.

 

“The coalition is stable,” Mr Fico said, adding that he consulted Slota over all the personnel changes in advance. “If I recall a minister, it does not mean that the ruling coalition has internal problems.”

 

Ján Slota himself has also been attracting a lot of media attention after he was photographed driving around in a Mercedes SLR McLaren 722 Edition, a car which carries a €650,000 price tag. The party leader said the car belonged to his son.

 

 

Analysis and forecast (↑ increasing risk)

 


Though scandals make the relationship between the coalition partners tense, and the PM is forced to explain himself because of these, the stability of the government does not seem to be in danger in the short term. The Slovak media started speculating about early elections, and although they seem to be in Smer’s interest, it has a low chance to be risked.

 

The two smaller governing parties are hardly expected to enter parliament, but even if they do (SNS has a higher chance), they do not enjoy any guarantee of returning to government. On the other hand, it is only in Robert Fico’s interest to risk an early election, if a one-party majority in the parliament seems quite certain.

 

The opposition is not ready to early elections either, and the challenger of the PM in SDKU has not even been named: At the same time the Hungarian Coalition Party is simply falling apart. The economic crisis is likely to significantly weaken Smer (see item above), so the European Parliamentary elections will function as a test, and the benefits and drawbacks of an early election will be calculated in the party only afterwards; in the campaign only calming announcements (just like the one already cited) are expected.