Electronic Library of Scientific Literature - © Academic Electronic Press
Volume 51 / No. 3 / 2003
CONTENTS
Reports
Ivan OKÁLI – Herta GABRIELOVÁ – Egon HLAVATÝ – Karol MORVAY – Richard OUTRATA
An Overall Evaluation of the Economic Development in 2002
In the year 2002 the economic development in Slovakia was closely connected to its political development. After the autumn Parliamentary elections the power had remained in the hand of an old-newish right oriented government. A continuity of administration of the governmental power oriented towards further reforms strengthened the political credibility of the Slovak Republic (SR). Also thanks to this Slovakia got the invitation to the European Union and NATO at the end of 2002 and at the same time a higher rating of its economy reaching the investment level.
The economic policy performed during the final phase of the political cycle directly influenced the overall development of the economy – partially in a negative way.
In 2002, on behalf of the effort to recover the balance during the years 1999 – 2000 the government wanted at least partially to compensate restrictions in the households’ consumption by a temporal freeze for deregulation of prices. As a result, real wages were rising much faster in 2002 than the labour productivity.
A relatively fast growth in the households’ consumption, together with almost identical speed of the growth in public consumption (due to ongoing absence of the reforms regarding the high expenditure demanding public services sectors) caused also during the year 2002 a high deficit in the trade balance and the current account. Finally the deficit was reflected in further deterioration of the overall balance.
The overall macroeconomic balance in 2002 (and even as early as in 2001) in comparison with the year 2000 rather deteriorated, but still remained at the level slightly exceeding average values recorded in the whole transition period of the years 1990 – 2002. This way the Slovak economy will step into the next development stage from a better starting position than at the beginning of all previous transition cycles which have run so far, and will continue all structural reforms, and what is very positive, with some prospects of a substantial elimination of accompanying impacts.
This might be a contribution for a better balanced and much faster growth in the economy performance. From the point of view of the above described status regarding the overall macro balance in the year 2002, the decline in the GDP growth rate envisaged for 2003 should be understood only as temporal and less dramatic than the decline in the years 1999 and 2000.
The growth rate of the Slovak economy in the year 2002 progressed much faster despite the unfavourable situation regarding the prosperity of the world economy and especially that of the EU member countries.
This resulted from several factors. We should note mainly the competitiveness based on low wage costs, the restructuring of the banking sector and also the restructuring of en-terprises finalized during the years 1999 – 2001 (it was reflected on the improved financial situation of enterprises, as well as in growing strength of the tradesmen sector and small or medium enterprises1), the monetary policy oriented on sustaining the pro-export rate of the Slovak koruna, lower interest rates, growing investment activities in major export oriented industries in 2000 – 2002, territorial diversification of the exports.2
A more detailed view of the movements, which the year 2002 introduced regarding the economic and also the closely related social development in the Slovak Republic are presented in Table 1. These figures show that a remarkable increase in the performance proved to be the most important phenomenon in the development of the Slovak econo-my in the year 2002. This was seen, in difference from the years 1994 – 1998, not only on macro-level, but also on micro-level in the form of good economic results of enterprises. Especially the start of a substantial turn, which began in the year 1999, and which reshaped the development of economic results in the processing industry enterprises is remarkable.
The rate of contribution to a faster GDP growth in the year 2002 on the side of a faster growing labour productivity eased the pressure of the growth in wages on wor-sening of the overall balance. This was done directly through an impact causing a fall of unit labour costs, but also indirectly through the positive impacts upon the exports and the foreign trade balance as well as by improvement the economic results of enterprises plus respective expansion of the tax base which allows for growth in income regarding public budgets.
T a b l e 1
Social-and-Economic Development in the Years 1990 – 2002
|
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
|
|
A. Development of the economy performance |
||||||||||
|
Index of GDP1 Previous year = 100 |
1.9 |
5.2 |
6.5 |
5.8 |
5.6 |
4.0 |
1.3 |
2.2 |
3.3 |
4.4 |
|
1989 = 100 |
79.4 |
83.5 |
88.9 |
94.1 |
99.4 |
103.4 |
104.7 |
107.0 |
110.5 |
115.4 |
|
Index of industrial production1, 2 Previous year = 100 |
–3.7 |
4.6 |
8.3 |
2.5 |
1.3 |
3.6 |
–2.6 |
8.8 |
6.7 |
6.6 |
|
1989 = 100 |
62.5 |
66.8 |
72.3 |
74.1 |
75.3 |
78.1 |
76.0 |
82.6 |
88.1 |
93.9 |
|
Index of labour productivity in the national economy 1989 = 100 |
92.3 |
98.9 |
103.5 |
105.7 |
112.6 |
117.4 |
122.7 |
127.2 |
130.1 |
135.6 |
|
Index of labour productivity in the industry 1989 = 100 |
83.0 |
94.0 |
100.8 |
105.0 |
108.8 |
117.6 |
118.0 |
132.4 |
139.6 |
148.5 |
|
Profitability of costs in non-financial corporations. in % 3 |
3.2 |
3.4 |
4.2 |
2.8 |
2.5 |
0.4 |
1.4 |
2.7 |
4.6 |
5.0o |
|
Profitability of costs in processing indust. in %3 |
–0.2 |
0.3 |
1.8 |
–0.1 |
–0.1 |
–1.4 |
0.8 |
3.0 |
5.0 |
4.5o |
|
B. Indicators of the balance |
||||||||||
|
Inflation rate %4 |
23.2 |
13.4 |
9.9 |
5.8 |
6.1 |
6.7 |
10.5 |
12.0 |
6.7 |
3.3 |
|
Of it: rate of core inflation in % |
. |
. |
. |
. |
. |
6.1 |
6.0 |
5.7 |
4.3 |
2.1 |
|
f interest rate from loans in %5 |
14.4 |
14.6 |
13.3 |
13.4 |
18.4 |
19.4 |
16.9 |
11.8 |
9.4 |
9.1 |
|
State budget balance / GDP in %6 |
–6.2 |
–5.2 |
–1.5 |
–4.2 |
–5.4 |
–2.6 |
–1.8 |
–3.1 |
–4.5 |
–4.7 |
|
Annual D productivity7 – annual D of real wages in national economy, in percentage points |
–1.3 |
3.7 |
0.9 |
–4.6 |
0.5 |
1.7 |
8.2 |
8.6 |
4.0 |
–1.5 |
|
Net exports/GDP in %6 |
–5.0 |
4.6 |
1.7 |
–11.2 |
–9.6 |
–10.6 |
–4.3 |
–2.4 |
–8.5 |
–6.8 |
|
C. Social development |
||||||||||
|
Index of employment, previous year = 100 8 |
99.2 |
98.1 |
101.7 |
103.6 |
99.1 |
99.7 |
97.0 |
98.6 |
101.0 |
100.2 |
|
Unemployment rate in %8 |
12.7 |
13.7 |
13.1 |
11.3 |
11.8 |
12.5 |
16.2 |
18.6 |
19.2 |
18.6 |
|
Annual change in real wages in % |
–3.9 |
3.2 |
4.0 |
7.1 |
6.6 |
2.7 |
–3.1 |
–4.9 |
0.8 |
5.8 |
|
Index of real wages , 1989 = 100 |
72.8 |
75.0 |
78.3 |
83.8 |
89.2 |
90.8 |
88.3 |
84.2 |
84.9 |
89.8 |
1
In constant prices.However, the development of balance indicators is warning that there might be a danger of overvaluation of the positive moments in the economic development in Slovakia in the year 2002. The rate in which the state budget deficit increases and also the public finance deficit in relation to the achieved GDP growth will inevitably be transferred into a increasing ratio of the government debt to GDP. Worsening of the situation with the public finance is still stronger calling forth the necessity to continue in the implementation of structural reforms which have already started.
Evaluation of social impacts of the economic development regarding the year 2002 itself sounds very impressive both viewing it from the point of view of employment/ (unemployment) development and also from the point of view of payroll development.
However, in the context of a long term development it is highly probable, that after the year 2002 the average social position of the SR population was still worse to compare with the situation prior beginning of the transition process. Regarding expected trends of the economy development in the year 2003 certain improvements can be expected in relation to the situation on labour market, but not much in incomes.
An Estimate on the Development of the Slovak Economy Performance in the Year 2003
In the year 2003 to compare with the previous year we will see a moderate slowdown in the economic growth. The growth rate, however, will retain a higher level than in the years 1999 – 2001. It is also likely, that parallel with the improvement of the overall balance the results of the year 2003 will become a starting point for the expansion of GDP growth in the next years. Partial view on the demand development and its influence upon GDP development in 2003 are summarized in Table 2.
T a b l e 2
Prognosis of GDP Development and Its Use Structure in the Aear 20031
|
In bill. SKK1 |
Indices – – previous year = 1001 |
The share on GDP use in %5 |
||||
|
2002 |
2003 |
2002 |
2003 |
2002 |
2003 |
|
|
Households consumption 2 |
394.6 |
402.5 |
105.3 |
102.0 |
53.4 |
52.7 |
|
Public consumption |
150.3 |
154.2 |
104.0 |
102.6 |
20.4 |
20.2 |
|
Gross capital formation3 |
220.3 |
226.9 |
104.1 |
103.0 |
29.8 |
29.7 |
|
Domestic demand |
765.2 |
783.6 |
104.7 |
102.4 |
103.6 |
102.6 |
|
Export of goods and services |
585.6 |
629.5 |
105.9 |
107.5 |
. |
. |
|
Import of goods and services |
612.4 |
649.8 |
105.3 |
106.1 |
. |
. |
|
Net export of goods and services |
–26.8 |
–20.3 |
. |
. |
–3.6 |
–2.6 |
|
Gross domestic product4 |
738.4 |
763.3 |
104.4 |
103.4 |
100.0 |
100.0 |
|
Final consumption |
544.9 |
556.7 |
104.9 |
102.2 |
73.8 |
72.9 |
|
Gross savings |
193.5 |
206.6 |
103.0 |
106.8 |
26.2 |
27.1 |
1
In constant prices.A slowdown in GDP growth in the year 2003 will result from a reduced growth of all constituents of domestic demand. Within the framework of the development of the gross capital formation the growth rate of gross fix capital in the year 2003 will however be higher than in the year 2002. Results regarding the foreign trade with goods and services in the year 2003 will be better than in the year 2002 and thus will positively influence the rate of GDP growth. A higher import intensity of the domestic demand over the exports will be accountable for the situation when the acceleration of the growth in exports related to the growth of domestic demand will extend the range between the rate of growth in exports and imports. A positive feature of the economic growth in the prognoses for the year 2003 is a really strong acceleration of the rate of growth regarding gross savings.
Changes to be expected in the economic growth in the year 2003, are presented in Table 3.
T a b l e 3
The Share of the Constituents of Demand on the Per Cents of GDP Growth in Points1
|
Variant A2 |
Variant B2 |
|||
|
2002 |
2003 |
2002 |
2003 |
|
|
Households consumption |
2.4 |
1.1 |
0.3 |
–0.6 |
|
Public consumption |
0.7 |
0.5 |
0.4 |
–0.1 |
|
Gross capital formation |
1.1 |
0.9 |
0.6 |
–0.0 |
|
Domestic demand |
4.2 |
2.5 |
1.3 |
-0.7 |
|
Export of goods and services |
. |
. |
3.1 |
4.1 |
|
Import of goods and services |
. |
. |
. |
. |
|
Net export of goods and services |
0.2 |
0.9 |
. |
. |
|
Gross domestic product |
4.4 |
3.4 |
4.4 |
3.4 |
|
Final consumption |
3.1 |
1.6 |
0.7 |
–0.7 |
|
Gross savings |
1.3 |
1.8 |
3.7 |
4.1 |
1
In constant prices.
In the variant A, where the contribution of the exports towards the GDP growth is expressed by real net exports, we can see the exports with a burden (it is reduced by) of total imports, it means also by imports belonging into one of the constituents of domestic demand. Therefore the information included in the variant A, the Table 3, indicates only the participation of constituents of demand on the GDP use. Participation of respective constituents of domestic demand regarding the use of GDP increase in variant A in the year 2003 to compare the year 2002 is decreasing, although in total figures (expressed as an overall domestic demand) it still remained higher than the share of (net) exports.
Substantially different view regarding the contribution of the constituents of an overall demand and to its changes in the year 2003 is presented in the variant B which splits the imports among all demand constituents. Contribution of exports (of the external demand) to the GDP formation in the year 2002 already exceeded the contribution of domestic demand. In the year 2003 the exports become a single factor supporting the GDP growth, even more, a factor which by its part of the growth effect will eliminate negative impacts of the development in the domestic demand regarding the GDP growth. This is how the impacts of the economic-and-political measures targeting the improvement of the macroeconomic balance in a changed structure of the economic growth will be reflected in the year 2003.
Jaroslav NĚMEC*
*
Ing. Jaroslav NĚMEC, CSc., Institute of Slovak and World Economy SAS, Šancová 56, 811 05 Bratislava 1Under this title, an expert seminar prepared by: International Labour Office, Central and Eastern European Team, Budapest; Friedrich Ebert Stiftung, e. V., affiliation in the Slovak Republic – and also Ekonomický časopis/Journal of Economics participated at the seminar – was held on 26 March 2003 in Bratislava. The seminar was preceded by the Social Discussion Forum – an event that is being successfully organised by Friedrich Ebert Stiftung, e. V. already during the past several years, this time on the topic Experiences with the Pension Systems Reform in the CEECs.
Short Information about the Program and the Course of the Seminar
First of all, it has to be underlined that the seminar was successful. The preparation, administration and whole provision of the seminar have been at the appropriate level, as it is common when organised by this foundation. The negotiation was open by Michael Petras, the head of the Friedrich Ebert Stiftung office. The speakers at the seminar were following:
Elaine Fultz – an expert in the field of ILO–CEET Social Security, in her paper Pension Reform in the Central and Eastern Europe she presented the results of survey carried out by ILO–CEET (International Labour Office – Central and Europen Team) Budapestian expert team under the leadership of Prof. Mária Augusztinovics, and the outcomes of Polish author Agnieszka Chloń-Domińczak from The Gdansk Institute for Market Economics, gained in the frame of the project Strengthening Social Security in Central and Eastern Europe through Research and Technical Cooperation, sponsored by the French government. In mentioned paper, E. Fultz drew out the picture of the process of pension reforms in Hungary and Poland, she compared their bases, similarities and differences in economic and political conditions of both countries, the first results, uncovered and hidden risks. Later she presented a paper Between State and Market System: Comparison of the Czech and Slovenian Pension Reform that has been elaborated by Katharine Müller from the European University Viadrina in Franfurt/Oder. This paper summarises the results of research carried out by Martin Mácha, former director of Research Institute of the Ministry of Labour and Social Affairs in the Czech Republic, presently a member of William Mercer Associates in Prague, as well as the research results of Tine Stanovnik, a professor at Faculty of Economics – University of Ljubljana and a researcher at the Institute for Economic Research in Ljubljana. Also these results have been obtained in the frame of the above mentioned project sponsored by the French government. The Czech and Slovenian pension reform is compared there with the Hungarian and Polish ones, as two cases of a different approach, characterised in this presentation as “a step towards a continental European main stream of pension security”.
Michal Horváth, a Deputy Minister for Labour, Social Affairs and the Family in the SR, presented a paper on Possibilities of Solving the Oncoming Pension Systems Crisis. In his presentation, he stressed the “ageing population” as a basic problem that present pension systems, and thus also the reforms of these systems, have to face. In his opinion, this problem doesn’t bother only the countries with a continuous pension security. Even the pension system based on the capitalization financial principle is not immune to this problem. He admits that even on this base, scheduled pensions could not be observed. In case of a decrease in demand of less-numerous new generations, in proportion to supply of accumulated assets of older generations, the real value of these assets – and thus also the source of disbursed pensions – could decrease. Therefore, he considers an increase in pension age and concurrent reserve funds formation as essential. Regarding this aspects, he informed also about the intentions of the Ministry of Labour, Social Affairs and Family of the SR in proposals of oncoming reform in Slovakia.
Peter Staněk, a researcher from the Institute of Slovak and World Economy in Bratislava, presented in a paper Problems of Pension System Reforms in the Slovak Republic and the European Union a broadly-designed analytical view of the European economic and political environment, in which the Slovak Republic is preparing for the pension reform, and in which similar reforms are in a progress also in other European countries. In his presentation, he confronted intentions and expectations of up-to-now presented proposals on pension reform in the SR with development tendencies of the European pension systems, which indicated a perspective need for convergence, but mainly with the overall economic possibilities of the country. The final valuation that was realistic has proved to be quite critical. He warned of several initial and prospective risks that will require careful accounting and corrections before making a final decision. He called attention also to a necessity to harmonise pension reform with the other ones, particularly with tax reform.
Mária Svoreňová, a consultant of the SR Confederation of Trade Unions for the social security issue, analysed in her presentation Pension Reform in the SR and Some of Its Opened Questions several controversial questions which are related to the reform in Slovakia, but which are also the subject of critical assessment at the wider international forum. In her attitude she expressly interpreted the trade unions’ point of view, however, she tried to be unprejudiced in her analysis and reasoning.
An objectivity was also the aim of the seminar’s organisers, what has been reflected in the speakers’ approaches, too. After the representatives of the state, trade unions and research (E. Fultz, P. Staněk), Michal Němec – a director-general of the first supplementary pension insurance company TATRY-SYMPATIA – has spoken as a repre-senttative of employers at the end of the seminar. He tried particularly to justify the need for converting from present social security to social insurance. He applied this intention quite expressly also in his evaluation of the conception of pension system reform in Slovakia.
The discussion was quite dynamic, although the questions and answers predominated, as it becomes common at the similar forums nowadays. The exchange of opinions was invoked mostly by mentioned critical report presented by Peter Staněk.
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