Car industry alters Slovakia’s GDP estimate for next year

Slovakia should now concentrate more on public finances and structural reforms, the National Bank of Slovakia recommends.

Jaguar Land Rover plant in NitraJaguar Land Rover plant in Nitra (Source: TASR)

Since the global economic growth is gradually slowing down, the National Bank of Slovakia (NBS), the country’s central bank, has revised the growth estimate of the gross domestic product for 2019.

Thanks to the launch of car production at the Jaguar Land Rover (JLR) plant in Nitra, the GDP growth should amount to 4.3 percent in 2019. However, in its previous prognosis, the central bank forecast the economy to grow by 4.5 percent.

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This is mostly due to the expected decrease in foreign demand.

On the other hand, increased private consumption should reflect on increased domestic demand.

In its mid-term forecast and its quarterly report on the state of Slovakia’s economy, NBS recommended the country consolidates public finances and invests in structural reforms if Slovakia wants to maintain its strong growth after a downturn occurs in the automotive industry.

As for the following years, NBS expects the GDP growth to gradually slow down. In 2020, GDP should be at 4 percent and 3.1 percent in 2021.

Employment growth continues to decrease

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Employment growth will continue to slow down as Slovakia suffers from labour shortages, caused by poor demographic developments.

On the other hand, increasing labour demand will result in salary growth. However, as soon as the economic growth decelerates, wage growth should also go down.

NBS estimates that unemployment in Slovakia will amount to 5.5 percent in 2021.

Inflation should be at 2.6 percent next year. Its growth will be caused by increased salaries and people’s consumption.

December figures

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In the third quarter of 2018, the GDP growth accelerated to 4.6 percent year-on-year. Consumer demand has been behind the growth, according to NBS.

However, employment growth slowed down to 1.9 percent y-o-y in the third quarter. The decline in employment has been visible in each sector, with the exception of services. Wages increased by 6.1 percent.

Inflation slowed down, but the prices of products and services increased by 2.7 percent y-o-y, NBS wrote in its report.

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