Boston, MA -- (SBWIRE) -- 05/26/2014 -- 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.
Fico's failed bid for the presidency in March 2014 is a sign of growing voter wariness of single-party rule and mainstream political parties, with general elections in 2016 unlikely to give the ruling party another outright parliamentary majority.
The government will continue with its fiscal consolidation plan, with a shrinking deficit likely to buoy market sentiment. Creeping public debt will remain a concern for the authorities, however.
The short-term economic outlook has brightened as export growth led growth of the previous years is beginning to translate to a visible pick-up in domestic demand.
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The current account will remain in surplus over the medium term, even as economic growth becomes increasingly weighted towards domestic demand.
Major Forecast Changes
We have revised up our real GDP growth forecast for 2014 and 2015 to 2.4% and 3.0% respectively, from 2.2% and 2.8% previously. This is based on robust strength of high frequency economic indicators in Q413 and early 2014 that point to a more broad based economic recovery taking hold.
Key Risks To Outlook
The risks to our short-term growth forecast are well balanced, and largely based on ongoing uncertainty over the regional economy. With exports in 2013 representing approximately 102.2% of GDP, Slovakia's economy is vulnerable to any shifts in external demand.
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