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EC forecasts more balanced growth for Slovakia
6 May 2014 Flash News
AFTER last year’s slowdown, the European Commission forecasts that Slovakia’s economy will accelerate in 2014 and 2015, expecting more balanced growth, with domestic demand likely to become the driving force at the expense of net exports, the SITA newswire reported.
The EC anticipates that Slovakia's GDP will grow by 2.2 percent in 2014, and by a further 3.1 percent in 2015.
Furthermore, the EC in its spring forecast predicts that unemployment in Slovakia, despite a slight improvement, is likely to remain above 13 percent until the end of 2015, according to SITA.
Following last year's weakening, private consumption should rise in 2014 and 2015 due to higher disposable income and lower than expected inflation. The EC notes that retail sales in Slovakia are now the highest since 2008, as reported by SITA.
Investments in 2013 strengthened by 5.2 percent thanks to one-off effects of enlargement of automotive industry production capacities. More balanced growth can be expected by 2.3 percent in 2014 and 3.5 percent in 2015. The Slovak economy could be held back in this period by potential deferral of major infrastructure projects. On the other hand, residential construction could exceed the current forecast, as prices of residential properties according to the EC probably reached their bottom in 2013 and the volume of mortgage loans is significantly increasing.
Inflation, as measured by the harmonised index of consumer prices of the EU (HICP) in the first quarter, fell by 0.2 percent. In 2014, it should accelerate to 0.4 percent and in 2015 to 1.6 percent. The general government deficit in 2013 fell to 2.8 percent of GDP, while strong collection of value-added tax and a lower rate of co-financing of projects from EU funds more than offset the collection of less corporate income tax.
The EC predicts the deficit will decline slightly to 2.9 percent of GDP in 2014 and return to 2.8 percent in 2015, SITA reported.
Prime Minister Robert Fico considers the published figures to be positive news, the result of which should be Slovakia’s removal from the excessive deficit procedure.
"Slovakia will no longer be in the club of countries that have a deficit higher than 3 percent of GDP, and I can also confirm that it is expected that Slovakia will be removed from the excessive deficit procedure," he told a press conference on May 5, as quoted by SITA.
The EC will evaluate Slovakia again in this regard in June.
As the public debt in 2013 exceeded one of the thresholds defined in the national legislation on the debt brake, the government will have to reduce public spending. Despite a slight decrease in the number of employees of the general government, wages will rise in the public sector as a result of collective agreements, the EC forecasts as reported by SITA.
The general government debt in 2014 should reach 56 percent of GDP and in 2015 it is to reach 57.8 percent of GDP. However, the development of public finances will depend on the implementation of privatisation plans in the telecommunications sector and on the use of funds raised to reduce debt, the forecast points out.
Compiled by Michaela Terenzani from press reports.
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