OECD expects Slovak economy to slow down

Yet it should remain above 3 percent.

Household consumption should contribute to economic growth this year.Household consumption should contribute to economic growth this year. (Source: TASR)

After last year’s acceleration, the tempo of Slovakia’s economic growth will slow down in 2016. The Organisation for Economic Cooperation and Development (OECD) predicts in its spring prognoses that the GDP will rise by 3.1 percent this year and 3.2 percent in 2017, down from 3.6 percent in 2015.

The reason for slower growth is the weakening of stimulus provided by extended use of EU money from the previous programming period, the TASR newswire reported.

The rate of GDP growth will, however, remain above 3 percent, mostly thanks to high domestic demand. The increase in household consumption should accelerate thanks to an improving situation in the labour market, while the drop in public investments should be partly compensated by new foreign direct investments in the automotive sector, TASR wrote.

OECD expects private consumption to increase from last year’s 2.4 percent to 3.3 percent in 2016 and 3.2 percent in 2017. The government spending should drop from 3.4 percent last year to this year’s 2.5 percent and further down to 0.8 percent in 2017.

The unemployment rate should continue declining. OECD forecasts it will fall from 11.5 percent in 2015 to 10.4 percent this year and 9.6 percent in 2017.

The inflation should stay negative this year, with OECD predictions counting with a drop in consumer prices by 0.3 percent this year, yet prices are expected to rise in 2017, by 0.9 percent.

The financial consolidation should continue as the new government wants to achieve a surplus budget in 2019. OECD predicts that the public finance deficit will drop from 2015’s 3 percent to 2.3 percent of GDP this year and to 1.6 percent in 2017. The public debt should rise from 52.9 percent of GDP last year to 53.3 percent this year, and then fall back to 53 percent in 2017, TASR reported.

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