BRATISLAVA, March 29, (WEBNOVINY) – The National Bank of Slovakia (NBS) sees the outlook of the Slovak economy more optimistically than it did at the end of 2010. In its medium-term prediction, NBS has increased its estimate of 2011 GDP growth from the 3 percent predicted in December 2010 to 3.3 percent. “Compared to December’s medium-term prediction, slightly higher GDP growth is expected as a result of faster growth of both domestic and foreign demand,” said NBS Governor Jozef Makuch at Tuesday’s press conference. Next year, the pace of growth of the Slovak economy should accelerate to 4.5 percent, whereas the December prediction was only 4 percent. 2013 growth could accelerate to up to 5.2 percent.
According to Governor Makuch the current prediction is based on more favorable expectations of the development of foreign demand, as well as estimates of higher export prices and higher prices of crude oil. In addition, regarding foreign trade, the NBS re-evaluated the launch of production of a new vehicle, newly scheduled for the end of 2011, which should lead to higher growth in 2012. “This year, compensation for this effect with production of foreign investments in other branches can be expected,” added Makuch. According to the central bank’s expectations, domestic demand should be more significant than export and could become the main stimulus of economic recovery.
In its current prognosis, the NBS has not changed estimates of the impact of fiscal consolidation in 2011. However, it has changed the structure of consolidation in the form of a more moderate employment decrease at the expense of compensation reductions. Eventual further consolidating measures could, according to the NBS, show in this year’s economic output. “An eventual need to introduce further consolidating measures by the Cabinet could cause or lead to deceleration of GDP growth dynamics,” warns Makuch. According to the NBS, implementation of further infrastructure projects or postponed investments could have possible positive impact on GDP growth. Higher commodity prices or import intensity might negatively affect the estimated GDP growth, too.
This year’s inflation, measured by the harmonized index of consumer prices (HICP), should reach 3.8 percent on average, which is 0.1 percentage point less than the NBS expected at the end of 2010. In 2012, inflation is expected to slow to 2.9 percent. However, this is more than the 2.6 percent the bank predicted in December. Next year’s faster growth of prices is, according to the central bank, caused by a higher than originally expected growth in regulated prices. “On the basis of evaluating risk factors, the medium-term inflation prediction seems slightly undervalued as a whole. This is the result of the potentially more dynamic development of the prices of oil, agricultural commodities, foreign inflation and employment,” states the NBS in its latest prediction. Persistent low household demand represents a risk to lower inflation.
However, bank analysts are slightly more optimistic, predicting 3.6 percent growth in 2011. The Finance Ministry moderately increased its estimate of economic growth in 2011 in the February revision of macroeconomic prognoses from 3.3 percent to 3.4 percent.
In 2010, Slovak GDP grew year-on-year by 4 percent. Thus, Slovak economy recovered after a decline during the crisis year of 2009, when the economy contracted after a long period of growth. While the Slovak economy grew 6 percent in 2008, the country’s GDP dropped by 4.7 percent in 2009, with no growth recorded in any quarter.
SITA