Slovakia: Monthly forecast

March 2008

Fri, Mar 7 2008, 09:27 GMT
by Mária Valachyová

Erste Bank der oesterreichischen Sparkassen AG


Price development

We expect annual inflation to stagnate at January levels (CPI at 3.8% and HICP at 3.2% y/y, respectively). On the monthly base, we expect only very mild increase in prices of non-energy industrial goods and services. The inflation should stay below the Maastricht limit with a wide margin of around one percentage point at least until April, when the inflation criterion will be officially evaluated.

Real economy

January brought an acceleration of retail sales growth. While we expected quickening from 5% in December to 8.3% due to favourable base effect, the Eurostat suggested that the actual figure was even higher, at 15.6% y/y. The shifting sale season from the Christmas time towards the beginning of the year could also partially explain the strong January growth. Industrial production reached in January around 6% in our view. The trade balance should significantly improve as compared to December, as the imports of consumer goods likely slowed down.

Implications for koruna and monetary policy

Released data will have only limited impact on the market, which currently pays attention mostly to the statements of the government and NBS officials regarding the preferences for the EURSKK conversion rate. Volatility might persist as the NBS officials are split on how strong the conversion rate should be. We expect the koruna to end the month at around 32.50 SKK/EUR, while we stick to the expectations of the conversion rate at around 32.5-33.0 SKK/EUR, depending on where the spot rate will be in the time of ERM-2 parity revaluation or the setting of the conversion rate. We would expect the ERM-2 parity revaluation to happen already this month.

Published on  Fri, Mar 7 2008, 09:40 GMT

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This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.

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