Summary-Report on Economic Development in February 2010

In the fourth quarter of 2009, the economic recovery in the euro area continued, however, its rate slowed down. The economic growth in the last quarter represented 0.1% in comparison with 0.4% in the third quarter of 2009. The year-on-year decline in gross domestic product, however, reduced to 1.6% in the fourth quarter of 2009, when compared with 3.6% in the third quarter of 2009. The year-on-year inflation rate in the euro area measured by the harmonised index of consumer prices was 0.9% (1.0% in January). The euro exchange rate against the American dollar continued to depreciate also in February. At its meeting in March, the Governing Council of the ECB decided that the interest rate for the main refinancing operations and interest rates for overnight refinancing and overnight sterilisation transactions would remain unchanged at the levels of 1.00%, or 1.75% and 0.25% respectively.

The economic development in the Central European Region countries was again significantly influenced by the global economic crisis in the fourth quarter of 2009. The only country retaining a positive year-on-year economic growth was Poland, where the economy increased by 2.8% in the last quarter. The year-on-year negative dynamics of the gross domestic product in the Czech Republic reached a level of 3.1% and the decline of the Hungarian economy decelarated to 5.3%. The year-on-year rate of inflation measured by the harmonized index of consumer prices in Poland decelerated to 3.4% and in Hungary to 5.6% while in the Czech Republic it remained at the level of 0.4%. The exchange rates of the Czech koruna and the Polish zloty, as well as of the Hungarian forint appreciated against the euro in February. In February, interest rates changed only in Hungary, as the Hungarian Nemzeti Bank continued to loosen its monetary policy conditions and decreased the basic interest rate by 0.25 of a percentage point.

The Slovak economy again continued to grow in the last quarter of 2009, when in comparison with the previous quarter after having been seasonally adjusted, the volume of GDP in constant prices increased by 2% (by 1.6% in the third quarter on a quarter-on-quarter basis). This development resulted in a slowdown of the year-on-year decline while the gross domestic product on a year-on-year basis according to the revised data of the Statistical Office of the Slovak Republic decreased by 2.6% in constant prices, when compared to the decline of 4.9% in the third quarter. As a result, the ongoing economic growth in the fourth quarter of 2009 confirms a gradual recovery of economic activity. In summary, the Slovak economy decreased on a year-on-year basis by 4.7% in 2009.

In terms of production, the GDP development in the last quarter was related to the decline of added value particularly in agriculture, building industry and business services sectors, while the added value in industry sector stagnated. On the expenditure side of the GDP, the year-on-year economic decline was influenced by both domestic and foreign demand. With regards to the components of domestic demand, all its parts except for the final consumption of Public administratio and the significant drop in investments at the beginning of the year decelarated. Net export contributed positively to GDP growth which was linked with the mitigation of decline in exports and persisting low imports. Concurrently with the economic recovery, labour productivity increased in the last quarter of 2009. At the same time, the relation between the real labour productivity growth and real wages improved as the labour productivity over the last quarters of 2009 outstripped the growth of wages for the first time.

However, although unit labour costs slightly increased on a year-on-year basis, however, its dynamics as a result of growing labour productivity and more moderate growth of compensations per employee decelerated in comparison with the third quarter. Despite the recovery in economic activity, employment in the third quarter declined and the unemployment rate simultaneously continued to grow, a positive economic result of non-financial corporations fell on a year-on-year basis at the end of the fourth quarter of 2009.

The year-on-year inflation rate in Slovakia measured by the harmonized index of consumer prices, when compared to the previous month, did not change in February and remained at the slightly negative level of 0.2%. Decelaration of the year-on-year dynamics of energy prices affected by the lowering of excise duty on fuel was partially compensated by the year-on-year acceleration in food price dynamics as well as prices for industrial goods excluding energy.

Current data on the balance of payment development confirmed that a negative current account balance, when compared to the previous month, decelarated in January. The improvement in current account deficit was linked particularly with the improvement in trade balance at the beginning of the year, which reached a slight surplus in comparison with the deficit recorded in December.

A gradual recovery of export activity was also related to the year-on-year increase in the industrial production index. Since April 2008, the steepest growth of industrial production occurred in January. This was particularly influenced by the increase in industrial production dynamics. On the other hand, construction industry recorded unfavourable development, the year-on-year decline of which mitigated when compared to the previous month. In total, revenues for selected sectors reached a positive year-on-year dynamics when compared with the previous decline in December, particularly due to the positive development of revenues in industry. Total indicator of economic sentiment as compared to the previous month grew again in February. The development of the indicator was positively influenced primarily by an increase in consumer confidence, confidence in the building, retail trade and services sectors. A decline in confidence in industry was mainly affected by the increase in finished industrial products in stock.

The year-on-year dynamics of both nominal and real wages when compared to the previous month increased moderately. The negative year-on-year dynamics of employment increased slightly in January on average for selected sectors. The rate of registered employment reached a level of 12.9% in January and slightly increased in comparison to the previous month.

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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