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Report on Economic Development in March 2011 - Summary

The year-on-year rate of euro area inflation, as measured by the Harmonised Index of Consumer Prices, increased to 2.7% in the same month. The exchange rate of the euro against the US dollar appreciated during March. The ECB’s Governing Council decided at its April meeting to raise the key interest rates on Eurosystem monetary policy operations by 25 basis points with effect from 13 April 2011. Thus the main refinancing rate was set at 1.25%, the marginal lending rate at 2.00%, and the marginal deposit rate at 0.50%.

The annual rate of HICP inflation in March remained unchanged in the Czech Republic, at 1.9%, rose in Hungary, to 4.6%, and also accelerated in Poland, to 4.0%. The Czech koruna and Polish zloty depreciated against the euro over March, while the Hungarian forint continued to appreciate. Key interest rates in Poland, the Czech Republic and Hungary remained unchanged in January.

In Slovakia, the annual rate of HICP inflation in February increased in month-on-month terms, to 3.8%. This development was driven mainly by annual increases in prices of food, services and energy. The year-on-year rise in industrial producer prices in Slovakia continued in February due in large part to a base effect, namely the substantial reduction in business energy prices that occurred at the beginning of 2010. Prices of agricultural products recorded a higher annual increase in February, reflecting sharper rises in prices of plant products, especially cereals.

The current account balance for February showed an improvement on the previous month. Its surplus was accounted for mainly by the current transfers balance, which recorded an increased surplus as a result of higher utilisation of EU funds. The industrial production index grew in year-on-year terms at a substantially slower pace in February. This was attributable to the decline in output in the manufacturing sector, reflecting mainly the fall in the manufacture of transport equipment. Output in the energy sector increased in comparison with the previous month. As for construction production in February, it fell in comparison with the same month of the previous year. Sales recorded slower year-on-year growth in February, mainly due to developments in the sectors of industry, construction, and sales of motor vehicles. The overall economic sentiment indicator rose in March in comparison with the previous month. It was adversely affected by deterioration in the confidence indicators for industry and construction. Compared to the previous month, the consumer confidence indicator declined as well.

Nominal wages and real wages recorded a higher year-on-year increase in February than in the previous month. The sectors in which annual wage growth increased were the construction sector and the transport and storage sector, while the largest wage growth was recorded in the information and communication sector. Turning to employment, its year-on-year growth continued in February. Employment in the information and communication sector maintained its rising trend, and employment in both the selected markets services sector and the transport and storage sector also rose. The rate of registered unemployment reached 13.2 % in February, representing an increase compared with the previous month.

In the area of deposits, the household and non-financial corporation sectors reported different developments in February. The amount of deposits of non-financial corporations fell in month-on-month terms owing to the decline in deposits with an agreed maturity of up to two years. Household deposits increased, with the most pronounced rise recorded by long-term fixed deposits. The deposits of each sector continued to rise in year-on-year terms. Lending to both sectors developed positively in February. In the case of non-financial corporations, lending was boosted mainly by demand for long-term loans, indicating an increase in investment activity among firms. As for borrowing in the household sector, the strongest demand continued to be for house purchase loans and consumption loans. Annual lending growth in both sectors remained positive. Retail lending rates to non-financial corporations continued to decline moderately in February. Households, on the other hand, were subjected to a relatively substantially rise in lending rates, particularly on house purchase loans. Deposit rates for non-financial corporations declined, reflecting lower remuneration on demand deposits. As for interest rates on longer-term deposits, they increased slightly in both sectors.

Petra Pauerová
Spokesperson of the NBS

National Bank of Slovakia
Press and Editorial Section
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2142, +421-2-5865 2142, +421-2-5787 2169, +421-2-5865 2169

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