The Slovak economy was pleasantly surprising at the end of the 2022. Despite the weaker performance of the domestic industry, it maintained relatively stable growth during the final quarter of the year. Analysts attribute the growth to the Christmas shopping of households, when household savings decreased to a new record.
“Thus at the end of 2022, Slovakia did not rank among predominantly industrialised countries such as Germany or the Czech Republic, which experienced a slight decline in their economies at the end of the year,” Ľubomír Koršňák, analyst of UniCredit Bank Czech Republic and Slovakia, wrote in his memo.
The Slovak economy grew 1.1 percent y-o-y in the fourth quarter of 2022, down from 1.4 percent during the third quarter of 2022, based on a flash estimate of the Slovak Statistics Office. On an annual basis, the GDP went up by 1.7 percent, down from 3 percent in 2021.
Adjusted for seasonal influences, GDP increased by 1.2 percent y-o-y and by 0.3 percent q-o-q during the final quarter of 2022.
Gross domestic product at constatnt prices (Source: Courtesy of the Statistics Office)High inflation caused a substantial difference between GDP values at current and constant prices. GDP at current prices amounted to €28.3 billion in Q4 2022, up €2.4 billion versus Q4 2021. GDP at constant prices reached €23.5 billion.
Households reach for savings
The growth of the Slovak economy was mainly supported by the growth of final consumption, i.e. household expenses. Analysts with the National Bank of Slovakia cite that two-digit inflation did not prevent households from greater spending at the end of the year. Although rising prices have been eating away at households’ income for a few quarters, retail sales continued growing in the last months of 2022.
Koršňák indicated that households had reached into their savings to cover their consumption.
“Thus, the saving rate reached all-time lows last year,” Koršňák wrote in his memo. He mainly attributes the surprising year-end recovery in consumption to the Christmas effect, which in turn may have exhausted the last reserves of part of the household, and limited the potential for further consumption growth at the beginning of 2023.
The Statistics Office will release revised data on March 7.
Positive outlooks
With respect to the optimistic development in the final quarter of 2022, UniCredit Bank increased its estimate of economic growth in 2023 from 0.5 percent to 1 percent. 365.bank expects a similar growth. Slovenská Sporiteľňa even envisages the GDP increasing by 1.5 percent.
“The solid result from the last quarter considerably slashed the probability that the Slovak economy will slip into a recession,” Slovenská Sporiteľňa analyst Matej Horňák wrote in his memo.
Winter preliminary economic forecasts published by the European Commission (EC) on Monday indicates that the growth of the EU’s GDP is estimated at 0.8 percent this year and 1.6 percent in 2024. It stood at 0.9 percent in the eurozone and 1.5 percent in 2024. Slovakia’s economic growth is expected to stand at 1.5 percent in 2023 and at 2 percent in 2024.
