geopolitical risk ratings firm

Slovakia – Coalition Options Uncertain

FORECASTS OF RISK TO INTERNATIONAL BUSINESS

Turmoil
Financial
Transfer
Direct
Investment
Export
Market
18-Month: Low A- A- A-
Five-Year: Low A- A- B+
KEY ECONOMIC FORECASTS

Years

Real GDP Growth %

Inflation %
Current
Account ($bn)
2010-2014(AVG) 2.6 2.0 -0.66
2015(F) 2.9 0.2 -1.20
2016-2020(F) 2.7 2.1 -1.95

Coalition Options Uncertain

The deadline for holding parliamentary elections is less than nine months away, and while there is little doubt that the incumbent center-left Smer will once again finish first, the ability of Prime Minister Robert Fico’s party to maintain its outright majority in the 150-member National Council is less certain, as is Smer’s path to a majority coalition if it should fall short. Polls conducted in the first half of May showed support for Smer weakening to less than 35%, below the level required to win at least 76 seats.
Exactly which parties qualify for seats will greatly influence the composition of the next government. Recent polls indicate that smaller parties that might make suitable coalition partners for Smer are poised to win seats in the Parliament after being shut out at the last elections, while at least two parties that were members of the center-right government formed after the 2010 elections are in danger of failing to secure the minimum 5% vote share required to qualify for seats in the National Council.
In general, the political stars appear to be aligning in Smer’s favor, but Fico can take nothing for granted. Recent moves on the budget front indicate that the prime minister has not lost hope that he might yet be able to boost his party’s support, thereby eliminating the need to seek out coalition partners, with populist spending measures. Unfortunately, any political benefit to be derived from the government’s largesse could be undermined by a recent episode that highlights a problem of questionable ties between the government and business interests.
Fico attempted to deflect the negative attention away from his government by noting that most of the questionable contracts concluded with the failed Vahostav-SK construction firm were signed in the period 2010–2012, when Smer was not in government, and KDH leader Jan Figel was the minister of transport. The finger-pointing strategy might spare Fico’s party a further loss of popular support over the scandal, but it may also have undermined the prime minister’s chances of forming a majority government after the next elections. Prior to the episode, a possible teaming of Smer and the KDH, which is currently competing with the new Siet party for second place, was considered a realistic possibility. However, it is now safe to assume that Figel will do everything in his power to deny Fico another term.

                             Forecast Summary

SUMMARY OF 18-MONTH FORECAST

REGIMES & PROBABILITIES
*Center-Left Coalition 45% Center-Right Coalition 30% Smer Majority
25%
RISK FACTORS CURRENT
Turmoil Low Same SLIGHTLY MORE Same
Investment
Equity Moderate SLIGHTLY MORE Same SLIGHTLY MORE
Operations Moderate SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE
Taxation Low SLIGHTLY MORE Same SLIGHTLY MORE
Repatriation Low Same Same Same
Exchange Low Same Same Same
Trade
Tariffs Moderate Same Same Same
Other Barriers Moderate SLIGHTLY MORE Same SLIGHTLY MORE
Payment Delays Low Same Same Same
Economic Policy
Expansion High Same SLIGHTLY LESS SLIGHTLY LESS
Labor Costs Moderate SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE
Foreign Debt Moderate Same SLIGHTLY MORE Same
SUMMARY OF FIVE-YEAR FORECAST

REGIMES & PROBABILITIES
*Center-Left Coalition 45% Center-Right Coalition 30% Smer Majority
25%
RISK FACTORS BASE
Turmoil Low Same Same Same
Restrictions
   Investment Low SLIGHTLY MORE Same SLIGHTLY MORE
   Trade Moderate Same Same Same
Economic Problems
   Domestic High SLIGHTLY LESS SLIGHTLY LESS SLIGHTLY LESS
   International Moderate Same Same Same
   * When present, indicates forecast of a new regime

 
 

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