EC Predicts Slower GDP Growth in Slovakia until End of 2021

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illustration picture (photo by TASR)

Brussels, November 7 (TASR correspondent) – Slovakia’s real GDP growth will significantly decelerate from last year’s level of 4.0 percent to 2.7 percent in 2019 and remain at similar levels – 2.6 percent and 2.7 percent – in 2020 and 2021, respectively, stated the European Commission (EC) when presenting its autumn economic prognoses for EU countries on Thursday.

As a result of significant salary growth and record-low unemployment, private consumption will continue to be a significant source of GDP growth, but weaker demand from key trading partners in the EU will “take its toll” in the form of lower exports to those countries, mainly in 2019.

According to the EC, Slovakia has been under pressure from lower foreign demand in 2019, but exports can be expected to increase gradually, probably by 4.5 percent in 2021. Slovakia’s trade balance should slip into negative territory in 2019 and then gradually recover in 2020 and 2021. However, this bounce back will depend on the prospects for Slovakia’s key trading partners and developments influencing the automotive industry (such as potential US customs charges).

Job creation in Slovakia decelerated in 2019, and the EC stressed that this trend might continue in 2020 and 2021. The unemployment rate is expected to drop to a record low of 5.9 percent in 2019 and to fluctuate around this level in 2020 and 2021 as well. The positive impact of job creation on disposable household incomes is expected to weaken, but strong salary growth should support these incomes. Following this year’s significant salary growth in the public sector, salaries will go up only moderately in 2020 and 2021.

The Commission predicted that inflation will remain at a slightly increased level during the monitored period, standing at 2.7 percent in 2019, 2.5 percent in 2020 and 2.2 percent in 2021. Overall inflation should mainly be driven by services, food prices and energy. Food prices, which recorded rapid growth in 2019, should slow down in the next two years.

Slovakia’s public finance deficit rose by 0.1 percentage points to 1.1 percent of GDP in 2018. It should fall to 0.9 percent of GDP in 2019. The EC expects it to increase to 1.2 percent in 2020 as a result of Government fiscal measures aimed at reducing the tax burden and the introduction of minimum pensions.