FinMin: GDP Growth Expected at 3.3 percent in 2017, Faster Rates Ahead

Stock photo by TASR

Bratislava, February 6 (TASR) – The Slovak economy is predicted to post growth of 3.3 percent this year, before growing at an even brisker clip in the years to come, TASR learnt from the latest macroeconomic prognosis released by the Finance Ministry’s Financial Policy Institute (IFP) on Monday.

Compared to the previous prognosis, the forecast for 2017 has been lowered – as opposed to the prediction for next year, which has improved.

This year’s expected GDP growth matches last year’s figure. “The structure of growth will be well balanced, the economy will be driven by domestic and foreign demand. An increase in investments will be spurred on by the public sector, the automotive industry and the construction of the D4/R7 [Bratislava bypass],” said IFP.

In the years to come growth should be boosted especially by new automotive production. “In 2018 and 2019 economic growth will accelerate to 4 and 4.4 percent thanks to new production capacities. The slight delay in building the Jaguar Land Rover plant and the construction of the D4/R7 bypass will foster growth in investments next year,” said IFP. Growth in exports by as much as 7 percent in 2018 and 2019 is envisaged to come hard on the heels of the launch of new car production.

The prospects for the labour market are also good, as the employment rate is predicted to go up by 1.8 percent and the economy should add 42,000 new jobs this year. “The positive developments on the jobs market will reduce the unemployment rate to 8.4 percent [this year],” said the institute. Employment growth in 2018 should amount to 1.1 percent.

IFP expects salaries to rise in all sectors except market services. The average nominal salary should go up by 3.5 percent to €942 per month this year, with real salaries to follow suit, growing by 2.4 percent.

Consumer prices should bottom out and resume growth – at 1.1 percent in 2017, primarily buoyed by net inflation. Higher crude oil prices will translate into higher fuel prices and, by extension, higher prices of foodstuffs and services, according to the analysts.

As for risks potentially jeopardising growth, the ministry’s analysts primarily point to unclear political prospects in Europe, the hard Brexit scenario, and the onset of protectionism in global trade. “The fuzziness of upcoming political moves makes it impossible for now to quantify the extent of these risks. The instability of the banking sector in Italy is another risk. By contrast, fiscal expansion in the United States and the too early lifting of the Czech National Bank’s exchange-rate commitment are positive risks,” stated IFP.