Coronavirus may slow down Slovak economy

Slovakia’s automobile industry is unlikely to be affected.

Illustrative stock photoIllustrative stock photo (Source: Sme)

The coronavirus outbreak might have an impact on the Slovak economy, which is closely tied to developments in Germany. The possible impact may already be reflected in statistics for the first quarter, economic analysts predict.

“Due to the economic impacts of the coronavirus on the global economy, we have postponed the improved outlook and keep the GDP growth estimates at 2 percent,” said Slovenská Sporiteľňa analyst Katarína Muchová, as cited by the TASR newswire. She added that the impacts of the coronavirus on the Slovak economy are likely to be around 0.2-0.3 percentage points.

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Any precise estimates on the illness pose a big challenge at this early stage since it is not clear how individual countries will address the problem and how long its effects will last. If severe measures are introduced, concomitant with higher rates of uncertainty that might influence the behaviour of people, the negative effect could reach 0.7 percent.

“At the moment, we consider this to be a low probability scenario,” said Muchová.

The slowdown of the Chinese economy is not prognosed to pose any significant ramifications for Slovakia, as direct trade ties are low.

“Only about 6 percent of all Slovak imports originate from China, whereas Slovak exports to China make up slightly more than 2 percent of all exports,” said Muchová.

However, more important for Slovakia is the response of the German economy, which is linked to that of China to a significantly higher extent. Germany is the main trade partner for Slovakia and thus secondary effects might translate into the Slovak economy as well.

Equally important are the expectations of consumers and firms.

“Their pessimistic expectations might have a pronounced effect on consumption and investments,” said Muchová, adding that tourism could also take a hit.

“The automobile industry, the driving force of the Slovak economy, is unlikely to be affected, as key suppliers are based in central Europe and imports of components from China are low,” said Muchová.

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