The Slovak economy has recovered from its economic downturn of 1998 to 2000, which reduced output growth to an annual rate of 2 per cent. The period of weak growth had resulted from a stabilisation package introduced to correct large imbalances, notably a current account deficit of nearly 10 per cent of GDP in 1998. The package consisted of fiscal tightening and a number of structural reforms to advance the development of a market economy. The initial result of this policy package was a nearly 10 per cent contraction in final domestic demand over the period 1998 to 2000, although a large positive contribution from external demand enabled the economy to avoid a recession (Figure 1). In 2001, domestic demand rebounded strongly, led by a....