Country Forecast Slovakia December 2017 Updater

Country Forecast Slovakia December 2017 Updater

  • December 2017 •
  • Report ID: 359041 •
  • Format: PDF


  • Following the March 2016 election Slovakia's one-party government was replaced by a four-party coalition government. The centre-left Direction-Social Democracy (Smer-SD) and its leader, Robert Fico, who was re-elected as prime minister, remain the dominant forces in Slovak politics. The opposition remains fragmented, and there are no obvious successors to Mr Fico or his party.
  • Smer-SD now leads a coalition government, which includes the conservative Slovak National Party (SNS) and the centre-right Bridge-Party of Co-operation (Most-Hid). In early August 2017 the SNS renounced the coalition agreement, which led to a minor coalition crisis. Although this was resolved relatively quickly and thus did not trigger an early election, there remains a strong risk that the government will not serve out its entire four-year term, despite the parties currently not having an incentive to call an early election.
  • Positive attitudes to business and foreign investment are widely shared by almost all of the mainstream political parties, and any potential political turbulence should not therefore threaten Slovakia's pro-business stance.
  • The government has set ambitious fiscal targets, which The Economist Intelligence Unit does not expect it to meet. Despite continued spending growth, we expect strong economic growth and better revenue collection to reduce the deficit gradually, to about 0.7% of GDP in 2020-22, from 2.2% in 2016. The public debt/GDP ratio will continue to fall, from 51.8% in 2016 to just below 46% in 2022, but it will still limit government spending owing to debt brake legislation.
  • Real GDP growth accelerated to 3.9% in 2015 and remained robust, at 3.3%, in 2016. In the coming years GDP growth will be driven by private consumption, supported by exports and a return to investment growth from 2017. We expect average annual real GDP growth of about 3.3% in 2017-22-well below pre-crisis rates-as supply-side limits to continued robust growth, such as disadvantageous demographics, become increasingly evident.
  • Inflation averaged -0.5% in 2016. Price growth has picked up in 2017, to what we estimate will be a full-year average of 1.3%. From 2018 strong wage growth will start to feed through into higher consumer prices. We forecast average annual inflation in 2018-22 of 1.9%.
  • The current account registered a small deficit in 2016 and we expect it to remain in deficit in 2017-18. Increased export capacity in the dominant automotive sector will push up export earnings from 2018, leading to small current-account surpluses in the remainder of our forecast period (2018-22).


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