Government's energy aid to prevent fall in people's living standards

Slovakia's central bank has published its winter 2022 economic and monetary forecast.

National Bank of Slovakia Governor Peter Kažimír.National Bank of Slovakia Governor Peter Kažimír. (Source: TASR - Pavel Neubauer)

The Slovak economy could grow by 1.6 per cent in 2023, and by almost 3 per cent in 2024.

As for inflation, the average inflation rate next year should reach 10 per cent, which is less than previously expected (around 18 per cent). In 2024 it could be around 9 per cent because of generous government measures, National Bank of Slovakia Governor Peter Kažimír announced on December 20.

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On Tuesday, he presented an economic and monetary forecast for winter 2022.

This year’s inflation should reach 12 per cent, the governor noted.

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Helpful government measures

The forecast claims government measures in the area of energy prices will effectively prevent a decline in people’s living standards next year and will likely prevent a decline in the economy, real incomes and the purchasing power of the population in 2023.

The central bank, nevertheless, cites that the financial aid to help people, and firms with rising energy bills, represent a burden on public finances and increased uncertainty regarding development in the coming years. The bank adds that Slovakia cannot allow the compensation of the difference between market and consumer energy prices in the long term.

Public debt should remain close to 60 per cent of GDP in the coming years even without further government measures, the forecast reads.

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Uncertainty remains

The central bank expects a deterioration in the performance of the public sector’s economy.

The deficit should be at the level of 5.9 per cent of GDP in 2023 and up to 5.5 per cent of GDP in 2024, as a result of measures to alleviate the energy crisis and high inflation, as well as the high extent of the government’s permanent measures.

Regarding the outlook for economic development, the central bank claims that it is influenced by a high uncertainty that goes beyond government policies, citing the war in Ukraine and the closely related energy crisis.

Yet, the central bank expects Slovakia to increase its drawing of EU money next year.

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Twice as many Ukrainians work in Slovakia now than before the Russian invasion.


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