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Slovakia economy will grow by four percent: National Bank of Slovakia

The current political situation in Slovakia should not affect the development of the economy in any way, says Jozef Makúch.


Devdiscourse News Desk Slovak Republic
Updated: 31-03-2018 17:16 IST
Slovakia economy will grow by four percent: National Bank of Slovakia

In 2020, nominal wages are still expected to grow by 5.4 percent. (Image credit: Wikipedia)

The Slovak economy will grow at least four percent in the next three years. This is assumed by the National Bank of Slovakia (NBS) in its current forecast.

The economic growth this year should reach 4.2 percent, which means a 0.1 percent point decrease in the estimate compared to the latest January forecast. For the next year, the central bank will keep the growth forecast unchanged at 4.7 percent and increase the estimate by 0.2 percent for 2020 to 4 percent, as per WebNoviny.

According to NBS Governor Jozef Makúch, a slight decrease in the estimate of gross domestic product growth this year is a shift in the impulse from the onset of increased production capacities in the automotive industry.

DEVELOPMENT OF CONSUMER PRICES

The current political situation in Slovakia should not affect the development of the economy in any way. "There is no reason for the political crisis to have a significant impact on the economic development of Slovakia. These fundamentals are healthy and therefore no change in ratings or something similar is expected, " Makúch says.

More significant changes are not expected by the central bank even in the development of consumer prices. Harmonized inflation should exceed the 2 percent level over the forecast horizon.

According to WebNoviny, this year, prices should rise by 2.3 percent and inflation should stabilize at 2.2 percent in the next two years. For this year, the NBS forecasts the price increase by 0.1 percent, on the contrary, it increases by 0.1 percent in the next year and again reduced the forecast for 2020 by 0.1 percent.

EMPLOYMENT GROWTH

However, as expected, wages should be developed. In this and next year, the central bank has increased the average nominal wage growth estimate by 0.3 percent this year to 5.4 percent and 5.6 percent next year.

In 2020, nominal wages are still expected to grow by 5.4 percent. With real wages, it should increase this year by 3.1 percent, next year by 3.3 percent and by 3 percent in 2020.

At the same time, employment growth and a decline in unemployment should continue to be on the labor market. Estimates of employment growth are left unchanged by the central bank. In this year, it expects growth of 1.8 percent, next year by 1.2 percent and by 1.1 percent in 2020, as per WebNoviny.

Unemployment should drop from 8.1 percent last year to 7.2 percent this year. It should then further decrease to 6.6 percent in 2019 and 6 percent in 2020.

LACK OF WORKFORCE

Labor pressures are to be exacerbated by the lack of the necessary workforce. Job vacancies continue to grow, and the mismatch between demand and labor supply is reflected in the gradual slowdown in employment growth, as per WebNoviny.

"Continue to increase participation as well as employing workers from abroad. Nevertheless, it is expected that the lack of adequate workforce will proactively affect the cost of labor, " Makúch said, adding that wage growth will also support changes in the Labor Code.

Overall, the central bank considers that the risks of its current forecast are balanced. However, it points out that the deepening labor market pressures point to the necessity of adopting structural reforms, including measures to improve the business environment in order to maintain strong potential economic growth.

"This should be supported by sufficient qualified labor force, but also by the development of investments increasing the growth of labor productivity", added the NBS governor.

COUNTRY : Slovak Republic

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