We offer a selection of news from the print section Slovakia and the World of TREND Weekly.
In recent months, there have been several changes in the structure of deposits in Slovak banks. These are important in terms of the structure and stability of their funding sources. Národná banka Slovenska drew attention to this in the current comment. Household deposits in January decreased by 1.3 percent year-on-year. Slovakia recorded a decline as the only country in the eurozone.
“The main factor is the reduction in the volume of current accounts from July to November 2022. Although time deposits started to grow after a long period of decline around the same period, this growth has so far been relatively moderate and has not been able to compensate for the reduction in current accounts,” the central bank said. According to the NBS, the unfavorable development of deposits may be due to the need to cover increasing expenses for current consumption, or the overall deterioration of the financial situation. On the other hand, this trend is largely offset by corporate deposits. Time deposits in particular began to grow more significantly.
“It is not just about new deposits, but especially in January, the growth of term deposits was also driven by the transfer from current accounts. The main factor is the relatively steep increase in interest rates on corporate time deposits,” NBS analysts write. The degree of competition between banks is apparently currently higher in the business segment than in the case of households.
Replacing stagnant household deposits with corporate deposits reduces the risk of financial institutions’ dependence on the interbank market or on financing from the central bank. “This can be seen positively, since Slovak banks historically have no experience with a significant share of this type of financing. However, compared to household deposits, corporate deposits are less stable and slightly more expensive,” NBS warns.
Germany wants binding targets in the EU to reduce national debts
According to Germany, the new EU budget rules should set binding targets for member states in reducing their debts. Last November, the European Commission presented a proposal to reform the Stability and Growth Pact in the EU. It is an agreement between EU members on the coordination of their budgetary policies, which sets a ceiling for public debt at the level of 60 percent of gross domestic product and for the deficit of public finances at the level of three percent of GDP.
According to the aforementioned document, Germany proposes to impose on member states with debts above 60 percent of GDP the obligation to reduce them by half a percent every year. The authorities suspended the rules of the Stability and Growth Pact in 2020 due to the covid pandemic. The temporary suspension of their validity, the so-called general escape clause, was supposed to allow governments to support economies affected by the pandemic and anti-epidemic restrictions. Greece has the highest public debt in relation to GDP at the level of 170 percent, in Italy the indebtedness rate reaches 140 percent. The EC plans to present a proposal for the reform of the Stability and Growth Pact at the end of April. However, member states are deeply divided on the issue of public finance recovery.
We are at the bottom of the EU in terms of financial literacy
Slovaks are moderately proficient in financial literacy and are at the bottom in Europe. According to the survey of the European Central Bank, the SR achieved 13.3 points out of 21. This was reported by Ľubomíra Mardiaková from Across -Private Investments. Romania, Bulgaria and Cyprus had the lowest scores with less than ten points. The best are Denmark, Sweden and Finland with over 17 points.
“Countries with high levels of financial literacy have typically incorporated financial education into school curricula and offer free or low-cost courses to the public. In addition, they raise awareness of financial literacy through the media and various campaigns,” states the company’s portfolio manager Dominik Hapl. Denmark, for example, has introduced a national financial literacy program for children and young people, which is taught from kindergarten to secondary school.
OFZ started one of the furnaces after 10 months
After ten months, the ferroalloy producer OFZ restarted production in one of the seven furnaces in Oravské Podzámek-Široka. Production at the plant was shut down last year due to high electricity prices. “In the ten months that we have been shut down, we have lost roughly two-thirds of the market. If we had delayed the launch for longer, maybe in a month or two we wouldn’t have anyone to launch for. We will continue to create a loss in production, so we are trying to limit it to the necessary minimum. In order to retain at least those customers who are vitally important to us,” explained OFZ Executive Director Branislav Klocok.
Samsung’s profit fell sharply in the first quarter
South Korea’s Samsung Electronics is grappling with a sharp decline in global demand for semiconductors and a reduction in their prices. Therefore, following the example of smaller rivals, it will reduce the production of chips. According to preliminary data, the company’s profit fell by 96 percent in the first quarter, amounting to 417 million euros. That’s the smallest quarterly profit in 14 years. The slump is a consequence of slowing demand. The company’s sales for the quarter fell by 19 percent. Analysts estimate that Samsung’s chip division will likely report a record loss for the first quarter of this year.
Inflation is higher in the east of the EU, the reason being the different consumption basket
Inflation is higher in the east of the European Union than in the west. One of the factors is the higher share of food and energy in the consumption basket of these countries. If the consumption structure were the same as in the eurozone, the reported March inflation would be 0.8 percentage points lower in Slovakia in March. Analysts of the Financial Policy Institute, which covers the Ministry of Finance, drew attention to this.
Inflation in the eurozone fell to 6.9 percent in March, but the growth rate of food prices accelerated to more than 15 percent year-on-year. Overall price growth in the Slovak Republic in the same period reached 14.8 percent. “The share of expenditure on food and energy accounts for almost half in Slovakia, while in the eurozone it accounts for less than a third. If we spent only a third on food and energy in Slovakia, as in the eurozone, with unchanged price growth of the individual components of the consumption basket, the overall price level would grow more slowly in March by almost a percentage point,” the institute’s analysts explained.
However, according to analysts, food prices in the Slovak Republic may grow faster due to the high prices of domestic producers. The price of commodity butter in Slovakia has long been the highest in the EU, currently exceeding the average price by 30 percent. The price of raw milk in Slovakia is consistently one tenth lower than in the EU. The price of Slovak wheat has been even higher than the EU average since December, which is an anomaly that last occurred ten years ago, analysts of the Institute of Financial Policy point out.
Record sales of German automakers
Last year, the German automotive industry increased sales by 23 percent, to a record 506.2 billion euros. At the same time, the study of the company -Ernst & Young showed that in terms of sales growth, manufacturers again increased their lead over component suppliers. This managed to improve sales by only six percent.
Tesla cuts prices in the US
The American electric car manufacturer Tesla is reducing the prices of its vehicles on the domestic market by two to six percent. It was the fifth price reduction this year. This month, the US is preparing for the likely adoption of stricter standards and restrictions on tax credits for electric cars. Some analysts have expressed concern that this could threaten Tesla’s profit margins. The company aims to deliver 1.8 million cars to customers this year. Since the beginning of the year, the company has cut the price of the base Model 3 by a cumulative 11 percent and the base Model Y by 20 percent.
3 percent
The slowdown in developed economies will push this year’s global growth below the three percent mark. A strong recovery is unlikely due to geopolitical tensions and inflation. Last year, global growth slowed by half, to 3.4 percent.
45 points
Activity in the construction sector of the eurozone fell in March for the 11th month in a row and the most in three months. The purchasing managers’ index from the sector decreased to 45 from 47.6 points in February. The weak performance was mainly due to a decline in housing construction.
185 million euros
The foreign trade of the SR in February was helped by a better trade balance of cars and mineral fuels. The balance of foreign trade in goods ended in the second month of the year with a surplus of 184.9 million euros.
53 million euros
The largest Slovak furniture manufacturer Decodom in Topoľčany is planning sales of 53 million euros this year, two million more than last year. Export accounts for 60 percent of sales. Kitchens go mainly to the Czech Republic, living rooms to Germany.
Don’t overlook
Internet piracy is weakening in Europe, but Slovakia exceeds the European average