Central Bank Forecast: Slovakia Will Probably Fall into Recession in 2023

Central Bank Forecast: Slovakia Will Probably Fall into Recession in 2023

Bratislava, September 28 (TASR) – Slovakia’s gross domestic product is expected to grow by 1.8 percent this year, but in 2023 the country is likely to fall into recession, with GDP falling by 1 percent, Slovak central bank (NBS) governor Peter Kazimir reported on Wednesday, presenting the autumn forecast of economic and monetary developments.

In addition, the institute expects inflation to reach 18 percent next year, and even 22 percent if it comes to the worst.

“We assume that our economy will not grow next year, but on the contrary will decline by 1 percentage point,” said Kazimir. In June, NBS forecast GDP growth of 1.4 percent in 2023, with inflation reaching approximately 11 percent.

The autumn prognosis was mainly influenced by rising energy prices and uncertainty concerning further developments on world markets, as well as the war in Ukraine. NBS has therefore drawn up three scenarios.

The middling scenario estimates that energy charges for households could double. If gas and electricity prices are stabilised at a lower level, however, the Slovak economy could avoid recession next year and grow by several tenths of a percent. This optimistic scenario comes close to the Finance Ministry’s latest forecast, which expects Slovak GDP to grow by 0.6 percent. The pessimistic scenario prognosticates a GDP decline of more than 4 percent.
According to Kazimir, the situation could improve in 2024, with NBS predicting GDP to grow by more than 3 percent and inflation to fall in that year, albeit the latter would still be higher than in previous years.

The good news, according to NBS deputy governor Ludovit Odor, is that so far there are no signs of a decline in foreign demand. The unemployment rate should also remain unchanged, not diverging from a rate of 6 to 7 percent for the next two years. The gradual ageing of the population and the departure of older workers from the labour market are already contributing to this.

The bank also looked at the approach taken by companies and examined whether they have been taking advantage of the current situation and raising prices above the necessary level. It found their margins to be constant, however.