* 2009 GDP forecast cut to -6.2 percent
* GDP growth of 1.1 percent seen in 2010
* Positive risks to forecasts prevail
(Adds analyst comments)
By Peter Laca
BRATISLAVA, June 15 (Reuters) - The Slovak Finance Ministry
expects the euro zone newcomer's economy to shrink by 6.2
percent this year, a radical revision from the previous forecast
of 2.4 percent growth, a ministry source said on Monday.
The finance ministry source, who spoke on condition of
anonymity, said the updated forecast was for 1.1 percent real
economic growth in 2010, a cut from the previous prediction of
3.6 percent.
The new forecasts, expected to be officially released on
Tuesday, were based on a "conservative approach", the source
said. Analysts also viewed the forecast as conservative.
Slovakia's economy has slowed rapidly because of a collapse
in western European demand for its exports, mainly cars and
electronics goods, and the source said negative risks to the new
forecast lay mainly in the external environment.
The previous Slovak prognosis was published in February and
the finance ministry has since said economic contraction was
likely this year in Slovakia, a euro zone member since January.
"Because this prognosis will be the basis for the revision
of this year's budget, as well as the basis for preparing the
budget for next year, the finance ministry has opted for a
conservative approach, and positive risks prevail over the
negative ones," the source said.
Finance Ministry spokesman Miroslav Smal declined to
comment.
The new ministry prediction is more pessimistic than the
Slovak Statistics Office's outlook for a 3.5 percent contraction
this year and the European Commission's expectation of a 2.6
percent drop.
The central European country of 5.4 million people had
record high GDP growth of 10.4 percent in 2007, and posted 6.4
percent expansion last year.
BIGGER FISCAL GAP
The finance ministry will now adjust this year's budget
outline to the new economic forecasts, and should have new
fiscal projections ready next week, the source said.
Prime Minister Robert Fico, who won power in 2006 on
promises to take better care of the poor, has been trying to
juggle shrinking budget revenues and a pledge to keep expanded
welfare programmes intact.
The government has abandoned an attempt to keep its public
finance deficit to 2.1 percent of GDP and now aims to keep the
gap within the EU's 3 percent ceiling, although some analysts
estimate it will be at least twice that size.
UniCredit Bank in Bratislava will soon present an update of
its GDP forecast to predict a drop of between 5 to 6 percent,
its chief economist Jan Toth said, adding the public finance gap
could be around 6.3 percent of GDP.
A wider deficit would mean bigger state borrowing despite an
international bond issue worth 2 billion euros in May, Toth
said."The eurobond will help a lot, but the state will have to
tap the markets again because its plans did not account for so
much bigger a deficit."
(Additional reporting by Martin Santa; Editing by Jan
Lopatka/Victoria Main/Ruth Pitchford)
