Boston, MA -- (SBWIRE) -- 11/25/2013 -- Prime Minister Robert Fico will continue to benefit from his party's outright majority in parliament, which has eased the policy formation and implementation process. While this is positive for political stability in the short term, it does not provide much space for consensus politics, with Fico's tax and welfare reforms likely to keep investors cautious.

The short-term economic picture has brightened in recent months, as export growth remained solid amid a slowdown and household spending showed the first signs of a recovery.

The government will continue with its fiscal consolidation plan, as a shrinking deficit likely to buoy market sentiment. That said, creeping public debt will remain a concern for the authorities.

Major Forecast Changes

We have adjusted our forecast for real GDP growth in 2013 to 0.8%, from 0.6%, as the regional picture has improved, and the slowdown at the start of the year was not as pronounced as originally feared.

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Given the ongoing absence of any strong demand-pull pressure and relatively stable commodity markets, we have lowered our forecast for inflation to average 1.8% in 2013, from 2.0% previously. We maintain our forecast for inflation to average 2.2% in 2014.

We have adjusted our fiscal deficit forecast to 3.2% in 2013, from 3.5% previously, as spending remains limited, and improved economic activity and tax collection is likely to provide a mild boost to revenues.

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