Kažimír: Slovakia's transformation offers lessons for new normal

Thirty years ago, Slovakia embarked on a profound economic transformation, moving from central planning to a market economy.

Early lessons underscored that macroeconomic stability is a precondition for growth, achieved through openness and credibility.

The nation integrated into global value chains, attracting foreign direct investment to become a leading automotive hub.

The National Bank of Slovakia evolved its mandate from basic payment systems to complex financial stability tasks, learning that a central bank's role requires independence, analytical capacity, and public trust.

Confronting banking sector weaknesses decisively in the late 90s was crucial, as healthy banks are essential for monetary policy transmission.

Joining the euro area in 2009 was a strategic move, trading independent monetary policy for a global currency and long-term stability.

This required rigorous fiscal discipline and inflation control, with national fiscal and macroprudential tools becoming primary instruments within the Eurozone.

Kažimír highlighted a rapidly changing global environment, noting the 'last mile' of inflation where delaying action is often more costly than acting early.

Uncertainty regarding the 'neutral' interest rate demands data-dependent policy, moving beyond pre-pandemic models.

The shift from 'just-in-time' to 'just-in-case' global trade, alongside frequent supply-side shocks, points to more volatile inflation ahead – the 'New Normal.'

For modernizing economies, Kažimír offered three key reflections: macroprudential tools are essential for managing local credit risks, fiscal-monetary alignment is crucial for price stability, and clear communication anchors public expectations in uncertain times.