UPDATE 1-Slovak FinMin says inflation to meet EU test

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BRATISLAVA, July 20 (Reuters) - The Slovak finance ministry expects the country to easily meet the inflation criterion for euro adoption at the key assessment period next spring, a document showed on Friday.

The ministry said in a document published on its Web site (www.finance.gov.sk) that it sees the 12-month average EU-norm inflation (HICP) rate at 1.8 percent year-on-year for a key euro zone entry period of April 2007-March 2008.

That would be well below the reference rate, which its sees at 2.9 percent, slightly higher than the 2.7 percent level seen by the central bank.

"Meeting the (euro entry) criteria in nominal terms is not in danger at the moment," the ministry said.

Inflation is a key challenge for Slovakia, which aims to adopt the single European currency in 2009. Slovak annual price growth has fallen steadily to 1.5 percent in June, matching a record low seen in May.

The central bank (NBS) has said its sees the annual average at around that level next spring when the country's application to join the common currency the following year will be assessed.

A European Central Bank (ECB) memo, obtained by Reuters last month, said beating the reference rate for inflation does not automatically mean it successfully meets the test as the inflation rate must also be sustainable, a factor the memo brought into question.

However, analysts have said that if Slovakia is well below the reference rate, it would be difficult to reject the EU member on grounds of the inflation rate.

The ECB staff also said in the memo that Slovakia should tighten fiscal policy at a time of fast economic growth in remarks, which were echoed by EU Monetary Affairs Commissioner Joaquin Almunia earlier this week.