EBRD keeps Slovakia’s 2018 GDP growth forecast at 3.9%

The EBRD projects that the economy will expand by 3.9% this year and by slightly stronger 4% in 2019, according to the Bank’s Regional Economic Outlook. The forecast for 2018 is unchanged from the May report, while that for 2019 is lowered by 0.2pps. The EBRD projections for both years are thus among the more pessimistic ones with the most upbeat being those of the government and the central bank. The Bank said that household consumption remained strong in H1, but that it was investments that mainly drove the economic expansion, while exports continued to benefit from strong foreign demand and enlarged automotive industry capacities. We believe that this trend is to continue by the end of the year as the fourth car maker, Jaguar Land Rover that opened its plant in Nitra earlier this month, has made heavy investments. The Bank shares this view and says that investments are to remain solid also thanks to an accelerated EU funds drawing. Moreover, high-frequency data indicate that household consumption has remains quite robust in Q3. The EBRD noted that despite the unemployment decline, the share of long-term unemployed remains among the highest in the EU, and added that the high level of structural unemployment and skills mismatch aggravate the already persisting labour shortages. The Bank says that the growing labour shortages will drive wages further up, which would support household consumption. At the same time, net exports might have been neutral to GDP growth as exports’ growth almost matched that of imports in July-August. The EBRD notes that the rising trade protectionism in the global economy represents a direct risk for the highly-export-oriented economy. It concludes that LT growth prospects would strongly depend on overcoming structural challenges, mainly on the labour market.

Share this post

TOP