Economic and Monetary Developments in Slovakia in

Transcript:Economic and Monetary Developments in Slovakia in:
Economic and Monetary Developments in Slovakia in the past 20 years Ján Tóth Deputy Governor of the National Bank of Slovakia 2 Outline Slovakia - different phases of transition Slovak vs. Czech Experience „Looking back“ - selected economic indicators Euro adoption and Great Recession 3 Different phases of transition Early transition - Federation Meciar’s Era Stabilization period, catch-up in integration processes Big reform push period Pre-euro Euro (on the onset of Great Recession) 4 Early transition 1990-1993 1989-1992 economic policy within the Federation the same The early transition had much greater impact on Slovak unemployment (more heavy industry focused on ex-Soviet markets), in 1992 exceeding 10% in SR vs. 2.6% in CR New tax system (VAT introduced) The currency fixed at 1:1 first, but the Slovak economy less competitive (creation of Slovak central bank, 10% devaluation in summer 1993) 5 Meciar’s Era 1994-1998 Little interest to attract FDI through privatization First tight fiscal policy, later very loose (also due to issuance of government guarantees) Twin deficits, fixed exchange rate regime protected by very high real interest rates, deteriorating loan portfolios of state banks No OECD, NATO membership EU membership likely to be postponed Collapse of fixed exchange rate at the end of 1998 6 Stabilisation 1999-2002 Liberalisation of markets, high inflation and unemployment Big push towards integration OECD membership (2000) Preparation for EU and NATO membership (2004) Privatization of state banks including the cleaning up of loan portfolios (gross costs 10.6% of GDP, net 5.5% of GDP) Opening up for FDI, big privatization improves foreign reserves as well as net foreign debt position 7 Big reform push 2003-2006 Flat tax, labor market liberalization, pension reform Much greater visibility among investors New capacities based on FDI mainly in autos and electronics Strong sustainable real currency appreciation, inflation stabilization (inflation targeting regime) 8 Pre-euro period 2007-2008 Very high growth rate Continuing currency appreciation Flat tax, labor market liberalization, pension reform Much greater visibility among investors New FDI capacities expanding 9 EURO and Global Recession 2009- Greater slump, faster recovery Ex-ante expected benefits of EURO adoption: Direct (immediate) benefits elimination of exchange rate risk against euro lower costs of capital elimination of some transaction costs better resistance to (currency) crises higher price transparency Indirect (long-term) benefits trade growth increase of FDI Resulting in faster growth/increase of living standards/progress in real convergence 10 Slovak vs. Czech experience Growth Policy (ratings, bond spreads, structural indicators)