The war in Ukraine will hurt Slovakia's economy

Higher energy prices will accelerate inflation, gas flow for now.

Kia Motors SlovakiaKia Motors Slovakia (Source: Courtesy of Kia Motors Slovakia)

The war in Ukraine will affect the economy of Slovakia while the scope remains unknown.

Raw materials, on which Slovakia depends on import of crude oil and natural gas from Russia, significantly raise the biggest concerns for now. The most frequently mentioned impact is the increase of prices of energy and fuels, that may, consequently, push inflation up.

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“The effects can be felt in every area, from tourism to food shortages caused by fear of conflict in a neighbouring country,” Matej Dobiš of Finančný Kompas told the Pravda daily.

International trade with Ukraine and Russia

Ukraine and Russia are not big trade partners of Slovakia, with shares of both on the Slovakia’s imports and exports amounting to only some percentage points. Imports from Russia accounted for 4.7 percent of total imports of Slovakia in 2020 and 1.6 percent in terms of exports, while in the case of Ukraine this was 0.5 and 0.9 percent, respectively.

But Russia is a significant trade partner in terms of energy. It supplies to Slovakia as much as two thirds of crude oil and products from its annual consumption and more than 90 percent of natural gas. Some Slovak companies rely on importing raw materials from the east as well, noted Matej Horňák, analyst with Slovenská Sporiteľňa, in his memo.

“Further developments in the conflict will show how and to what extent mutual economic cooperation and trade in goods will be affected and thus the extent to which the economy will be affected,” Horňák wrote.

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