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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