Boston, MA -- (SBWIRE) -- 08/30/2012 -- With the Slovakian parliament voting in favour of new austerity measures in mid-May 2012 under the administration of newly elected Prime Minister Robert Fico, the second half of 2012 could prove tough for the country's auto industry. The move, intended to reduce the Slovak budget deficit from 4.8% to 3% of GDP by 2013, is expected to produce savings of EUR1.5bn (US$1.9bn) and see tax increases on banks, high earning companies and the wealthy. These will include a financial transaction tax and, perhaps most pertinently, a tax on luxury cars. This latter point could hinder auto sales, at least at the more expensive end of the market, which in turn will impact production if demand weakens. Given that the Slovakian economy is also heavily reliant on exports, the inevitable decline in consumer spending throughout the rest of the eurozone as the sovereign debt crisis continues will play a major part in the country's immediate fortunes. However, China's emergence as the top importer of Slovak cars in 2011, taking 14.9% of exports, means that the country is not as subject to the problems of the eurozone as it once was and could open itself to new markets in Asia as a result of this recent success. We are still expecting economic growth in Slovakia in 2012, however, although not as much as we initially predicted in late 2011, given that unemployment has now risen to affect 14% of the population.
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A recent positive indicator was the 2.1% y-o-y rise in new vehicle registrations seen in April 2012, hitting 5,794 passenger cars according to the Association of Slovak Automotive Industry. The big three foreign auto manufacturers operating in Slovakia, Volkswagen (VW), PSA Peugeot Citroen and Kia, will be watching developments keenly and unafraid to make bold moves in response to the country's changing political and economic climate if conditions become unfavourable.
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