* Central bank sees economy shrinking 4.8 pct in 2009
* Expects GDP to grow 3.1 pct in 2010, up from prior forecast
* Risks balanced but euro zone recovery key
(Adds quotes, details, background)
BRATISLAVA, Dec 15 (Reuters) - The Slovak economy will
contract less than previously expected this year, the central
bank of the euro zone's youngest member said on Tuesday, adding
that it now also expects stronger economic growth in 2010.
The export-reliant economy, driven mainly by the auto and
electronics sectors, has been going through its deepest downturn
since independence in 1993, but the central bank is pinning its
hopes on a faster recovery in global demand to help it pick up.
The National Bank of Slovakia (NBS) upgraded its forecast
for the country's gross domestic product to a contraction of 4.8
percent this year from its previously expected 5.6 percent drop.
The finance ministry sees a 5.7 percent contraction.
The bank said in a regular update of its economic forecasts
that it saw real GDP growth of 3.1 percent next year, up from a
previously forecast 2.9 percent rise.
"It needs to be emphasised that the recovery of Slovakia and
the global economy remains fragile," outgoing NBS Governor Ivan
Sramko, who is also a member of the European Central Bank's
governing council, told journalists.
"We expect foreign demand to be a pro-growth factor also in
the coming years," Sramko said, adding that the euro zone's
recovery remains crucial for Slovakia.
Peter Sevcovic, head of the monetary policy department at
the central bank, said the risks to the bank's economic growth
and inflation forecasts were balanced, citing 70 percent of the
risks as external.
The bank expects the annual inflation rate at the end of
2009 to be 0.9 percent, which is sees accelerating to 1.2
percent next year.
Sramko reiterated that swift fiscal consolidation is a
precondition for a sound recovery, adding that Prime Minister
Robert Fico's government should curb the rising fiscal deficit
faster than the European Commission expects.
The European Union's executive body has set 2013 as a
deadline for Slovakia to narrow its fiscal gap, seen at 6.3
percent of GDP this year, to the EU's official limit of 3.0
percent.
The finance ministry, however, aims to do this a year
earlier after cutting the deficit to 5.5 percent in 2010, when
Slovakia should emerge from the crisis as the EU's
fastest-growing member, based on European Commission
predictions.
(Reporting by Martin Santa; Editing by Hugh Lawson)
