Slovakia might head toward mild recession

For now, the country’s economy keeps growing.

The Slovalco aluminium plant in Žiar nad Hronom.The Slovalco aluminium plant in Žiar nad Hronom. (Source: TASR)

Slovak economy continued to grow in the second quarter of this year, despite the war in Ukraine, but still has not reached the pre-pandemic level.

“It was short of 0.2 percent,” the Statistics Office said about the current GDP values, which almost reached the 2019 figure in the second quarter of 2022.

SkryťRemove ad
Article continues after video advertisement
SkryťRemove ad
Article continues after video advertisement

The economy grew by 1.7 percent year on year and 0.4 percent compared to the previous quarter.

Households the driving force

Domestic demand remains to be the driving force behind the growth of Slovakia’s economy.

“Households have not significantly limited their spending so far,” said Matej Horňák of the Slovenská Sporiteľňa bank.

They also drew on their reserves created during the pandemic, he added.

The decrease of foreign demand continued. Nevertheless, the drop was lower than in the first quarter.

Horňák noted the current crisis tied to the lack of components and rising input prices, including energy prices, keeps on affecting industry and foreign trade more significantly than households.

“Lower production is indicated by a decrease in the consumption of (expensive) electricity,” pointed out macroeconomist Michal Lehuta of VÚB bank.

Climate change increases uncertainty

Car manufacturing, the most important industrial sector in Slovakia, reported yet another fall in the second quarter of 2022. Wholesale trade, retail trade and warehousing and support activities for transportation affected GDP positively, though.

SkryťRemove ad

Horňák noted that climate change, including recent droughts, may also influence the flow of products or electricity production from water. Though the impact of climate change is unknown, it increases uncertainty on the markets, he added.

Foreign demand is also shaped by the news about an economic slowdown around the world, including the EU and the USA, which can however lead to lower prices and lower inflation.

Mild recession

“Considering the two quarters with a better than expected performance of the economy, we expect growth of the Slovak economy at the level of 2 percent year-on-year this year,” Horňák said.

Lehuta is less optimistic, pointing to the decreasing consumption of households in the third quarter due to rising prices, problems in industry, as well as a potential shortage of gas.

Therefore, he expects a mild recession in the second half of 2022.

“If the flow of gas were to stop completely, this recession could reach much larger dimensions,” he said. “At the same time, employment could also decrease slightly.”

Employment increased year on year by more than 2 percent in the second quarter of this year, chiefly thanks to Ukrainian refugees.

Top stories

News digest: Matovič survives, new education minister arrives

Lesser-known Andy Warhol paintings up for auction and a poll on Slovaks' controversial wishes about the war in Ukraine.


3 h
Czech police officer controls a truck at the border with Slovakia in Stary Hrozenkov, Czech Republic.

Terrible living conditions in camps mean refugees want a better life west (interview)

Peter Devínsky on why migration routes now go through Slovakia.


11 h
Anti-government protest organised by the opposition Smer party in Bratislava, September 2022.

Poll mired in controversy reveals many Slovaks’ wish for Russian victory

Despite heated debate over the methodology used in the survey, experts are not shocked by the latest findings.


13 h
SkryťClose ad