Slovakia and its economy in 2018

What´s happening in Slovakia? Under pressure amid large street protests against corruption, Prime Minister Robert Fico resigned in mid-March, and on 22 March a new cabinet was appointed, led by Peter Pellegrini, the former deputy prime minister. The political turbulence is not, however, expected to have hit the economy in the first quarter. Available data suggests economic activity continued to expand at a solid rate in Q1, after picking up in the last quarter of 2017. In January industrial production rebounded, supported by growing overseas orders from EU countries, which bodes well for the all-important car industry. In addition, domestic demand remained robust: Retail sales recorded another month of robust growth on the back of tight labor market conditions, and imports soared year-on-year. Output in the construction sector jumped over 20% in annual terms in January, on the back of a surge in civil engineering works and a sharp rebound in building activity.

Faster growth in fixed investment on the back of improved business confidence, along with solid demand from the Eurozone and rising EU fund inflows, should underpin growth this year. Moreover, further increases in employment will drive wages up and support household spending. Healthy growth and responsible fiscal policies should improve fiscal parameters. However, if political turbulence continues, it could weaken investor confidence and slow growth. GDP is planned to expand 3.6% in 2018, which is unchanged from last month’s estimate, and 3.5% in 2019.

Industrial production grew 1.1 % year-on-year in February, half of January’s 2.2% expansion. The expansion was due to an increase in manufacturing, while both the electricity, gas, steam and air-conditioning supply; and mining and quarrying components continued to contract heavily. Strong increases in the manufacture of basic metals and fabricated metal products, as well as of rubber and plastic products and other non-metallic mineral products were behind the manufacturing sector’s positive performance.

 

resource: focus-economics.com