The Slovak economy could have grown by much more than it did in 2022 had Russia not invaded Ukraine, according to new analysis.
Instead of the 1.7 percent growth registered last year, it could have expanded around 3 percent, analysts at Slovenská Sporiteľňa, Slovakia's biggest bank, have said.
“Despite the fact that war is now conducted in a fundamentally different way than in the past, with new weapons, modern technologies or in the online space, one thing remains the same - the effects on people, society, and the economy are terrifying,” analysts Matej Horňák, Marián Kočiš, and Mária Valachyová, said.
They said the main consequences of the war for the Slovak economy were felt in the form of increased energy prices, adding that "the economy shifted from the pandemic crisis to the energy crisis, and the long-awaited post-corona economic recovery was definitely swept from the table.”
Energy continues to matter
However, the analysts pointed out that Slovakia and the EU are making significant advances in developing energy independence from Russia which should help create greater macroeconomic stability and lower exposure to the effects of the current crisis.
They added that although energy prices are currently far below highs of the summer months, this effort must continue to ensure complete stability.
“We need to build new capacity, look for alternative suppliers and continue to invest in energy savings,” the analysts wrote. “Three-digit gas prices should now be definitively history.”
Wasted Ukrainian HR resources
The report also addressed the influx of thousands of refugees from Ukraine to Slovakia and the effects on the local labour market.
Latest data shows approximately 15,000 Ukrainian refugees have found a job in Slovakia - approximately one quarter of all 18-64-year-old refugees who have arrived in the country. Most of them have found manual labour work.
"Both Ukrainians and the Slovak economy suffer from wasted potential, as people fleeing the war often also have university qualifications,” the report said.
EU money - one patch for two holes
The bank says EU finances should be a key driver of forecast 1.5 percent y-o-y growth of the Slovak economy this year.
While much of the money allocated to “green” solutions was presented as part of an effort to mitigate climate change, in the current situation it is likely to serve as “one patch for two holes” – efforts for greener and sustainable growth, but also for the European Union’s energy self-sufficiency, the analysts said.