Page 61 - CE Outlook Regions 2022

A3, a short-term deposit liability rating of P-2 and a core stand-alone
credit rating of Baa2.

At the end of 2021, Slovak Finance Minister Igor Matovic introduced
his proposal for the tax revolution, according to which he plans to
decrease income tax for legal entities from 21% to 19%. These
costs will be covered by an increased tax imposed on the banking
sector.

According to VUB bank analysts, via increased taxation the Slovak
government wants to raise an extra €100mn from the banks, which
would be around a 35% tax on profit (compared to a drop in income
tax to 19% for legal entities). For now, it is probably just a question
of whether this will be as early as 2022 or as late as the beginning of
2023, the analysts stressed.

VUT bank warned that higher taxes imposed on banks would mean
higher savings on operations, outflow of foreign investors, or
perhaps even the closing of smaller banks in the country.

3.4.3 Industry

According to the EC, Slovakia’s industry-heavy export sector has
been hit by severe supply-chain disruptions. Global component
shortages and shutdowns of industrial production operations are
expected to continue throughout 2022, and to limit the potential of
Slovakia’s automotive industry, resulting in lower export levels during
that period.

According to the central bank outlook, component shortages could
persist until mid-2022. In the automotive industry, supply bottlenecks
are becoming both more severe and more protracted.

However, even a possible faster resolution of the supply crisis in the
automotive industry will not necessarily lead to a more significant
acceleration of the growth of Slovak industry in 2022. According to
UniCredit Bank analysts, the problems have been also reported by
the recent drivers of Slovak industry, such as metallurgists who
expressed their concerns about the development in 2022.

Fitch Ratings expects the Slovak automotive sectors to remain
broadly cost-competitive, given a favourable infrastructure,
supportive government policies, and relative proximity to key export
markets, mainly within the EU. The key short-term risks to the sector
are disruptions in supply chain issues and shortages of components,
particularly semiconductors.

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