Consumer prices continue to decline

Cheap crude oil and reduced VAT on selected foods are making an impact.

(Source: Sme)

Consumer prices in Slovakia continued to decrease in November, but this decline was milder than in October also due to the vanishing effect of the introduction of free rail transport for selected groups of Slovakia’s population. The year-on-year inflation decreased 0.4 percent in November, compared to the October decrease of 0.6 percent, according to the Slovak Statistics Office.

“The type of deflation that Slovakia has been experiencing over the recent years is not inevitably harmful for the economy,” Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia wrote in his memo. “Contrary to this...moderate deflation increases available funds of households for purchase of common goods and services – along with this their prices have been maintaining a muffled but still mildly positive increase which prevents the forming of a deflation spiral.”

Koršňák recalled that Slovakia most recently reported year-on-year growth of prices in December 2013, i.e. almost two years ago.

The analyst sees especially last year’s lower comparison basis, when the effect of free rail transport has been gradually vanishing, as behind milder decline dynamics. Inflation has been dragged down especially by other factors when regulated prices decreased by 2 percent year on year. The year-on-year decline of motor fuel prices mirroring record low prices of crude oil on world markets continued too.

The development of food prices continues to prevent a faster return to positive inflation in Slovakia. Food prices are expected to decline during the coming months while this development will be supported by reduction of VAT on selected foods, according to Koršňák.

Get daily Slovak news directly to your inbox

Top stories

News digest: Pilot testing deemed successful

Coronavirus affects bus connections, gastronomy businesses send an open letter to the prime minister. Take a look at the latest in our news digest.

PM Igor Matovič presents the results of the pilot nationwide testing on October 26.

Slovakia orders a curfew and embarks on its COVID experiment

High turnout in testing in four northern districts, decision awaited on extending the project to the nation. Prison for a prominent prosecutor and parliament's speaker injured.

Waiting for the results of COVID tests during the pilot phase of the nationwide testing in the town of Nižná in Orava, northern Slovakia.

No balanced budget for next three years, this time due to COVID-19

2021-2023 general government budgets lack consolidation measures.

Finance Minister Eduard Heger