IMF tells Slovaks to tackle unemployment, increase revenue collection

By bne IntelliNews September 3, 2014

High unemployment and large regional disparities remain key challenges in Slovakia, while the country’s economy is gathering momentum due to a recovery in the euro area and domestic demand, the IMF said in a statement on September 2 after concluding Article IV consultations with Slovakia.

The fund now expects the country’s GDP to grow by 2.4% this year and by 2.7% in 2015, although there are risks coming from geopolitical tensions and the strength of recovery in Europe. Thus, the fund slightly worsened its expectations from June, when it saw this year's growth at 2.5%.

The IMF added that inflation, which turned negative this year, will pick up later in the year, while trade and current account balances are expected to remain in surplus. Public debt is manageable and the banking sector is sound with strong levels of capital and liquidity.

The fund has welcomed Slovakia’s decision to keep the VAT rate at 20% and said that increasing revenue collection is crucial.

The country is encouraged to promote investment and job creation. IMF noted that the jobless rate remains high, around 14%, with about two thirds of this long-term and high unemployment among youth (33%). The country should reduce the tax wedge, strengthen education and public employment services, the fund said.

IMF's projections  2014 2015
Real GDP (y/y %) 2.4 2.7
Inflation (HICP) (y/y %) 0.4 1.5
Unemployment rate (%) 14 13.7
General govt debt (% of GDP) 55.4 55.3
Trade balance (% of GDP) 6.1 6.4
Current account balance (% of GDP) 2.2 2.4
Gross external debt (% of GDP)  84.9 83.8
Source: IMF    
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