Summary-Report on Economic Development in January 2010

The year-on-year rate of inflation in the euro area measured by the harmonised index of consumer prices reached 1.0% in January (in December 0.9%) according to the flash estimate of Eurostat. According to the preliminary data, GDP in the fourth quarter of 2009 decreased on a year-on-year basis by 2.1% and on a quarter-on-quarter basis increased by 0.1%. The GDP of Eurosystem decreased by 4.0% for the whole year. The euro exchange rate vis-à-vis the US dollar depreciated in January. At its February meeting, 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 year-on-year rate of inflation measured by the harmonised index of consumer prices according to the preliminary data slowed down in the Czech Republic to 0.4% and in Hungary accelerated to 6.2%. According to a flash estimate of Eurostat, in the fourth quarter the year-on-year decrease of the GDP in the Czech Republic slightly deepened to 4.2%. On the contrary, the negative dynamics of the GDP in Hungary was alleviated on a year-on-year basis to 5.3%. The exchange rates of the Czech koruna and of the Polish zloty appreciated vis-à-vis the euro in January, while the Hungarian forint depreciated slightly in the beginning of the year. In January, the interest rates only changed in Hungary, when Magyar Nemzeti Bank decreased the basic interest rate by 0.25 percentage points. The key interest rates in Poland and in the Czech Republic remained unchanged.

The year-on-year inflation rate measured by the index of consumer prices (ICP) decreased in Slovakia to the level of 0.4% (in December 0.5%) in January in comparison to the previous month. The negative dynamics of production prices alleviated again in December as a result of further decline of the prices of industrial producers. A significant slow-down of the year-on-year fall was recorded by the prices of agricultural products at the end of the year.

According to the flash estimate of the Statistical Office of the SR, the GDP decreased in the fourth quarter of 2009 in constant prices on a year-on-year basis by 2.7% (not seasonally cleaned), while the seasonally cleaned GDP increased on a quarter-on-quarter basis by 2.0%. The overall employment decreased in comparison with the same period of the former year by 4.0% and on a quarter-on-quarter basis by 0.5%. According to the flash estimate in 2009 – when compared with 2008 – the GDP decreased in constant prices by 4.7% and the overall employment by 2.3%.

The negative balance of the current account increased in December in comparison to the previous month especially as a result of the deterioration of trade balance achieving a slight deficit when compared with the surplus in the previous month. The balance of the current account was also adversely affected by the deterioration of the deficit of the balance of services and current transfers. However, the positive trend of the year-on-year dynamics of export and import from the previous months continued also at the end of the year. In December, the industrial production index has recorded the most significant year-on-year increase since April 2008, which also resulted from the increase of the industrial production dynamics. On the contrary, an unfavourable development was recorded by the construction industry with deepened year-on-year decrease. The total revenues in selected sectors reached a slow-down of the year-on-year decrease in comparison to November mostly as a result of the positive development of revenues in the industry. The overall economic sentiment indicator increased again in January compared to the previous month. The development of the indicator was positively influenced mostly by the improvement of trust in services and the increase of consumer confidence. However, the indicator of trust in industry decreased again after three months, especially as a result of the expected production decrease in the upcoming months. A decline of optimism was also recorded by construction industry and retail, therefore, the development of the industrial production index and the slow-down of the GDP fall in the fourth quarter shall be considered with slight optimism.

When compared with the same period of the previous year, the average nominal wage slightly increased in December and the real wage slightly decreased on a year-on-year basis. The negative year-on-year dynamics of employment for selected branches alleviated on average in December as well. The rate of recorded unemployment achieved 12.7% in December and slightly increased in comparison to the previous month.

The development of deposits in terms of sectoral breakdown was very similar in December while the volume of deposits of non-financial companies and households increased on a month-on-month basis. The volume of short-term deposits in both sectors increased with the parallel decrease in the volume of deposits with agreed maturity up to 2 years. Loans to private sector recorded for the first time since April a month-on-month decline, especially as a result of a more significant reduction of loans to non-financial companies. This development was influenced mostly by the decrease of short-term loans. Loans to households continued to grow also at the end of the year. The development of client interest rates was different for deposits and loans. For loans, the interest rates from the loans to non-financial companies and from the loans to households decreased slightly. The client interest rates from deposits remained almost unchanged in both sectors.

Jana Kováčová
Spokesperson of the NBS

National Bank of Slovakia
Communications 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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