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Slovak Economy

March 26, 1994

Your article "No-Confidence Vote Ousts Slovak Leader"(March 12) provides readers with a mixture of information and the author's assessment of a current economic situation in the Slovak Republic, which according to her, ousted the Prime Minister Vladimir Meciar.

According to the article, inflation in the Slovak Republic gallops at triple-digit rates. Nevertheless, the recent data released by the Statistical Office of the Slovak Republic, based on CPI, indicates 26% inflation in 1993 as compared to 10% in 1992 and 61.2% in 1991. The recent year-to-year increase can be to a great extent explained by effects associated with introduction of tax reform on Jan. 1, 1993, as one of the major steps of ongoing economic reform, and the 10% devaluation of the Slovak crown last July, as a component of the National Bank's austerity program to increase the hard currency reserves as a precondition for maintaining current account convertibility.

The economic performance in both the Czech and Slovak republics deteriorated in the first two quarters of 1993 as a product of a separation--the Slovak Republic being damaged more due to the higher dependence on the inter-republic trade, which decreased about 20% in the first six months of 1993, and higher costs associated with building institutions of the new independent state.

Although the Slovak economy is far from doing well, the breakup of the former Czechoslovakia did not set Slovakia on "a course for economic ruin." Gross domestic product, which decreased by -2.5% in 1990, -15.8% in 1991 and -6% in 1992 and in the first half of 1993, -6.2%, as compared to the same period of the previous year, started slowly to recover in the second half of 1993 so that 1993's decrease in GDP is -4.1%.

The economy's credibility, if not the government's, is slowly recovering as is indicated by the 40% growth of foreign direct investments in the first half of 1993 as compared to the same period of 1992, the IMF's and World Bank's loans granted to the Slovak Republic after the split, and the successful sale of the bonds issued by the National Bank of Slovakia in the international financial markets.

BRIGITA SCHMOGNEROVA

Head of the Economic Policy Section

Presidential Office, Slovak Republic

Washington

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