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EC forecasts says economic recovery to accelerate

Europe’s economic recovery which began in the second quarter of 2013, is expected to continue spreading across countries and gaining strength while also becoming more balanced, the European Commission stated in its Winter Forecast 2014.

Europe’s economic recovery which began in the second quarter of 2013, is expected to continue spreading across countries and gaining strength while also becoming more balanced, the European Commission stated in its Winter Forecast 2014.

The EC counts on the continued revival of economy in most of it member states, as well as in the EU as a whole. After the end of recession in spring 2013 and three quarters of mild revival, a slight increase in economic growth is expected: after a real GDP growth of 1.5 percent in the EU and 1.2 percent in the eurozone in 2014, acceleration to 2 percent and 1.8 percent (for the EU and eurozone, respectively) is expected.

As for Slovakia, the EC forecast sees its economic growth as picking up in 2014. After robust growth in 2012, the Slovak economy slowed in 2013, with real GDP increasing by just 0.8 percent. Domestic demand continued to act as a drag, mainly due to still falling investment and stagnating private consumption. Net exports continued to grow, albeit at a slower pace. Now, domestic demand is expected to recover and play a leading role in generating growth that is projected to accelerate to 2.3 percent in 2014 and 3.2 percent in 2015. The unemployment rate will remain above 13 percent, however. Nevertheless, consumer confidence has steadily improved over the second half of 2013, reflecting a marked improvement in households’ expectations about the future.

Investment collapsed at the beginning of 2013 and remained weak for the first three quarters of the year. Despite expansion in equipment for the
automotive industry in the fourth quarter, investment continued to decrease over the year as a whole. The credit outlook for firms remains poor, as the net flow of loans to non-financial corporations was negative in 2013. While a positive impulse is foreseen from motorway construction, investment is projected to stagnate in 2014 and a more substantial pickup is only expected in 2015.

Export growth in 2014 and 2015 will be boosted by declining export prices and improving demand in Slovakia’s main trading partners. Imports are expected to increase in line with exports and, for 2014 and 2015, net exports are likely to give way to domestic demand as the main driver of growth.

Given declining commodity prices, the envisaged reduction of regulated energy prices for households and weak demand-pull pressures, inflation as measured by the HICP is projected to be only 0.7 percent in 2014, according to the forecast. For 2015, given the foreseen recovery in domestic demand, inflation is expected to increase to 1.6 percent. The Slovak economy’s growth is expected to gather pace reaching 2.3 percent in 2014 and 3.2 percent in 2015. The composition of growth will become more balanced as the main driving force shifts from net exports to domestic demand. Employment will grow only modestly over the forecast horizon and inflation will remain low.

Slovak growth rates will belong among the EU leaders, the forecast said, but Baltic countries and Poland will grow faster, the Sme daily wrote. Next year, Slovakia should achieve the third highest growth among eurozone members, trailing only Latvia (4.3 percent) and Estonia (3.6 percent).

(Source: EC press release, Sme)
Compiled by Zuzana Vilikovská from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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