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By Peter Laca
BRATISLAVA, Dec 8 (Reuters) - Slovakia will be hit by the global financial crisis but euro zone entry in January should help it avoid deep wounds suffered by some EU peers outside the euro club, Prime Minister Robert Fico said on Monday.
Turmoil on global financial markets magnified the positive effects of adopting the single European currency, Fico told Reuters in an interview.
"I now consider the decision to adopt the euro as even more important than in 2006 when we confirmed the goal of fulfilling the Maastricht criteria," Fico said.
"When we see how the financial crisis is wrecking some national currencies, how some small countries with open economies are having troubles, we perceive the euro even more positively."
Slovakia, which will become the 16th member of the single currency area in January as the first ex-communist EU member from central Europe, has been spared from a direct impact of the financial turmoil on its banks.
But the small and open economy, relying heavily on exports of cars and electronics, will be hit as economic slowdown curbs demand for its products on key western markets.
The government has already cut its economic growth forecast for 2009, although the revised prediction of a 4.6 percent rise should remain one of the highest expansion rates in the EU.
Fico, who took power in 2006 with an agenda to take better care of the poor, said the euro will make Slovakia even more attractive for investors, adding to other attractions such as low labour costs or membership of the internally borderless Schengen area.
The crisis has boosted the euro's allure in central and eastern Europe, and Slovakia's neighbours hit by the crisis now wished they were more advanced in the integration process, Fico said.
"I saw at the latest V4 meeting (a central European forum) that mainly Poland or Hungary would welcome it if they could be on the same line as Slovakia is today," he said.
CRISIS MAY TAME INFLATION
Fico said a key focus was now to prevent inflation from accelerating after euro adoption, which was a scenario seen in previous euro zone newcomers and a trend feared by many Slovaks.
But slowing economic activity may curb consumer price growth in Slovakia because of cooling consumption, Fico said.
"We may see a rare phenomenon; that euro adoption is followed by slowing inflation and not by its acceleration."
The Slovak central bank last week cut its prediction of 2009 average inflation rate to 2.7 percent, from 3.4 percent.
Economic slowdown will also reduce state budget revenues, which forced the government to widen the fiscal deficit target for next year to 2.1 percent of gross domestic product from the previous target of 1.7 percent.
"If the (GDP) slowdown is much worse ... the only remaining way is expenditure cuts in areas that are not directly related to our priorities," he said, reiterating the government would not touch planned welfare spending.
The 2009 deficit goal would be under the 2.3 percent limit set for this year, and Fico said he was satisfied with the pace of fiscal consolidation as many other EU countries were widening their deficits to combat the financial crisis.
He said projects like completion of the Mochovce nuclear power plant, a plan for another nuclear station, each worth at least 3 billion euros, and highway construction should add to economic growth if the crisis hits the key car industry.
"I am not underestimating the crisis. On the contrary, I am saying that Slovakia will also have scratches, maybe deeper, maybe smaller, but it should not be as bad as in some other countries in European Union." (Reporting by Peter Laca; editing by Stephen Nisbet)