Summary-Report on Economic Development in April 2010

The year-on-year inflation rate in the euro area as measured by the harmonised index of the consumer price index reached 1.5% in April (1.4% in March). In accordance with the preliminary data, the gross domestic product of the euro area in the first quarter of 2010 increased year-on-year by 0.5%, and quarter-on-quarter by 0.2%. The euro exchange rate against the American dollar once again depreciated in the course of April. During its May meeting, the Governing Council of the ECB decided that the interest rate for the main refinancing transactions as well as the interest rates for overnight refinancing and overnight sterilisation transactions would remain unchanged at the level of 1.00%, (1.75% and 0.25% respectively).

The economy of the Czech Republic recorded an acceleration in its year-on-year increase in price levels when compared to the previous month to 0.9%; in Poland the year-on-year price dynamics decreased to 2.7%; and in Hungary it remained unchanged at 5.7%. According to a flash Eurostat estimate, gross domestic product in the Czech Republic increased in the first quarter of 2010 on a year-on-year basis by 1.2%. The year-on-year negative GDP dynamics in Hungary decreased to 0.8%. The exchange rate of the Czech koruna, the Polish zloty, and the Hungarian forint depreciated in April. The Magyar Nemzeti Bank repeatedly decreased its basic interest rate by 0.25 of a percentage point to 5.25% in April. At the beginning of May, Česká národní banka also decreased its referential interest rate by 0.25 of a percentage point (to 0.75%). The key interest rates in Poland remained unchanged.

The year-on-year inflation rate in Slovakia when compared to the previous month increased to the level of 0.7% in April (0.3% in March). This was a result of a year-on-year acceleration in the growth rate of foodstuff and energy prices, and particularly fuel prices. Industrial goods – excluding energy prices – recorded a slight acceleration of negative year-on-year dynamics. Prices for services continued to stagnate on a year-on-year basis. Prices of industrial producers recorded a deceleration of negative dynamics in March as a result of all input factors. Equally, the year-on-year decrease in prices of manufacturing goods and agricultural products was lower when compared to the previous month. In contrast, the year-on-year dynamics of the cost of construction works recorded a slight increase.

According to a flash estimate of the Statistical Office of the Slovak Republic, gross domestic product in Slovakia increased in the first quarter of 2010 in fixed prices on a year-on-year basis by 4.6% (not seasonally adjusted), while seasonally-adjusted GDP increased on a month-on-month basis by 0.8%. The overall employment rate decreased when compared to the same period last year by 3.0%, while when compared to the previous quarter it was 0.6% lower. GDP development was slightly more positive than had been anticipated, with the decrease in the employment rate being stronger.

The current account deficit recorded a slight increase in March when compared to the previous month. This increase was a result of a deterioration in the current transfer balance development, the positive balance of which became negative in March. In contrast, an increase in the surplus of the trade balance and to a certain extent also a lower deficit of the service balance positively impacted the current account balance.

The industrial production index continued to grow again in March year-on-year, influenced by the gradual production level recovery of European business partners of the Slovak Republic, as well as an overall favourable economic climate. The April cyclical industry survey suggests expected lower production growth, with a deterioration in the current demand indicator. The year-on-year decrease in industrial production slowed in March, while the April cyclical survey again suggested a possible stabilisation at a lower level of construction production. The revenues in selected sectors jointly reached moderate acceleration on a year-on-year dynamics in March, primarily owing to the year-on-year increase in the growth rate of industry and wholesale revenues. Revenues in the retail, transport and storage industries recorded a positive development, with previously negative year-on-year dynamics becoming positive.

After almost a year of positive development, the overall indicator of economic outlook decreased again in April in comparison to the previous month. The development of this indicator was negatively influenced by decreased confidence in industry, primarily related to expected lower growth of industrial production. Confidence in services also decreased as a result of an expected decrease in demand. The indicator of both consumer confidence and that of retail and construction improved. Compared to the previous month, consumer confidence increased when taking into account the expected financial situation of households, anticipated household savings, and the expected development of unemployment.

The year-on-year dynamics of both average nominal and real wages accelerated in certain sectors in March compared with the previous month. In March, the year-on-year decrease in the employment rate for selected sectors mitigated on average primarily as a result of a lower decrease in employment in the industry, accommodation, restaurant and catering services, as well as transport and storage. The rate of registered unemployment reached 12.9% in March, a moderate decrease when compared to the previous month.

The development of deposits by sectors was different in March, with the deposits of non-financial corporations increasing and that of households slightly decreasing when compared to the previous month. The trend of the previous month continued with the non-financial corporation sector accumulating funds in the most liquid deposits, and the household sector also slightly increasing the volume of deposits in current accounts, however, the year-on-year dynamics of household deposits remained slightly negative, while deposits of non-financial corporations recorded an increase on a year-on-year basis after almost one year. Loans to the private sector increased month-on-month in March, primarily due to a more significant increase in the volume of household loans. Loans to non-financial corporations and other financial mediators recorded in March showed a slight decrease when compared to the previous month, with the negative year-on-year dynamics deepening. Client interest rates on loans to non-financial corporations slightly increased in March. Interest on loans to households developed differently for citizens and sole traders, however, for the most part it had a slightly decreasing trend. Client interest rates on the deposits of non-financial corporations and households did not change significantly in March.

Jana Kováčová
Spokesperson of the NBS

National Bank of Slovakia
Press and Editorial Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2168,+421-2-5865 2168, +421-2-5787 2169, 421-2-5865 2169
Internet: http://www.nbs.sk

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