NBS Prognosis: Slovak Economy to Shrink by 10.3 percent This Year

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NBS Governor Peter Kazimir (photo by TASR)

Bratislava, June 10 (TASR) – The Slovak economy should contract by 10.3 percent this year, according to the latest medium-term prognosis released by Slovakia’s central bank (NBS) on Wednesday.

NBS thereby worsened its GDP development estimate from the previous quarter by 1 percentage point. The central bank expects an economic recovery next year, with GDP going up by 8.4 percent. In 2022, GDP should grow by 4.5 percent.

The contraction of the Slovak economy should be mainly caused by a decline in foreign demand and the suspension of a major part of the domestic economy. “The Slovak economy has found itself in free fall. It’s as if we travelled back in time to 2017. Although the economy will recover, and we’ll see GDP growth next year, these processes will be slower than we thought a month ago. We’re still living in a time of great uncertainty,” NBS governor Peter Kazimir told a news conference on Wednesday.

According to Kazimir, the measures taken by NBS, the European Central Bank (ECB) and the Government prevented the economy from falling even deeper, and this is happening in co-operation with the financial sector. “Contrary to the previous one, this crisis is changing global trade and supplier relationships in a key manner, and we assume that the character of domestic consumption will change as well. None of this is good news for a small export-oriented economy like Slovakia’s,” stated Kazimir. “Significant negative risks are hidden in the current prediction,” he noted. Therefore, the adoption of measures by the Government will be important, he stressed.

Nevertheless, GDP growth should resume in the next few years, with the economy reaching its pre-crisis level in the first half of 2022. “While before our optimistic scenario was that the economy would get to the pre-crisis level in 2021, now we say that this will happen only in 2022,” stated NBS Vice-governor Ludovit Odor.

NBS also expects a drop in employment and salaries this year, however, the Government’s fiscal measures will restrict this decrease. Employment should fall by 2.1 percent this year and by 0.8 percent next year. NBS predicts that employment will grow by 0.8 percent in 2022. “The impacts on the labour market will be very intense. We estimate that the number of jobs lost this year will be as high as the number of jobs created over the past 2.5 years,” stated Kazimir, adding that NBS expects 70,000 jobs to be lost this year.