Growth may accelerate under new Slovak government

Significance

The governing coalition has a comfortable parliamentary majority, but faces gathering concerns over Prime Minister Robert Fico's health, teachers' protests over wages and opposition calls to dismiss the new education minister.

Impacts

• Short-term fiscal deterioration is expected in 2016-18 (the deficit is likely to remain elevated), as government expenditure rises.
• Nevertheless, Slovakia's investment grade is expected to remain solid.
• This is due to strong levels of FDI in autos, with local businesses making use of EU funds and subsidies for new investments.
• Political risk will diminish in line with higher GDP growth rates and lower rates of unemployment.
• This will be particularly so after 2017 once government measures have fed through to the economy.