ČLÁNOK




Analysts Say Crown’s Firming Mirrors Good Macroeconomic Results
3. apríla 2003

Market analysts attribute recent strengthening of the Slovak currency to strong macroeconomic results of the Slovak Republic. Slovenska Ratingova Agentura analyst Michal Dzacovsky said that the crown was supported by growth GDP in the first quarter, trade balance results, and most of all, rising exports. „Excessive strengthening of the crown would not have to be advantageous for the Slovak economy and favorably developing export,“ he said.

A strong crown is positive for the public, since people can afford more for the same amount of money abroad. „A decrease in the crown’s exchange rate against the euro is pleasant for the population with regards to the upcoming holiday season,“ stated CSOB analyst Marek Gabris. A stronger crown also means we will pay less for imported goods, he said. It will also be beneficial for importers if they leave their prices unchanged, and for consumers if the stronger crown is reflected in prices of imported goods. Tatra Banka analyst Robert Prega indicated the latest trade-balance figures as a signal that the Slovak economy is able to cope with a stronger exchange rate. Slovakia’s export has shown a roughly 20-percent growth rate for the third consecutive month, industrial output growth is just as strong and the trade balance is improving chiefly thanks to stronger exports, said Mr. Gabris. „This is probably a consequence of investments in the previous months, which led to an extension of export capacities,“ he said. Productivity in branches that drive Slovakia’s exports, such as the automotive industry, machine engineering and metallurgy, has significantly increased.

The stronger crown will reflect in foreign trade as well. „Primarily, the price of goods will be calculated at a lower exchange rate and imports expressed in crowns will visually go down,“ stated Mr. Gabris. A lower exchange rate of the crown against the euro will also have an impact on the corporate sector, however, it should not have problems coping with it. „It will have the strongest impact on companies dependent on energy imports,“ stated Mr. Prega.

Although the central bank said it was content with the firming of the crown and the local currency reacted with a massive strengthening below 41 SKK/EUR on Tuesday, it is questionable how far the crown will appreciate, said Mr. Dzacovsky. „Excellent results in the Slovak economy also attract speculative capital, which could cause further firming of the crown,“ he stated. Nevertheless, he does not expect the crown to appreciate below 40.60 SKK/EUR. The central bank could change key interest rates already this month as a result of improving macroeconomic figures and in order to prevent undesired crown’s strengthening, according to Mr. Dzacovsky. He assumes that the NBS could cut interest rates by 25-50 basis points. In contrast, Mr. Prega opines that the central bank will lower interest rates in a couple of months.


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