The Slovak economy is projected to grow faster than previously expected thanks to government measures to reduce the impact of rising energy prices on households and businesses, and an improved economic outlook in Slovakia’s major export destinations. After an estimated growth of 1.7% in 2022, real GDP is forecast to increase by 1.5% in 2023 and by 2.0% in 2024. Although the weakening of global demand is still expected to weigh on economic activity, subsidised energy prices should support both households and energy-intensive exporters in 2023.
Newly announced government measures are projected to help avoid a crunch in consumer spending in 2023 by reducing the impact of higher energy prices. However, a real wage decrease is set to keep a lid on private consumption growth. Exports are expected to pick up in 2023 and 2024, as supply bottlenecks ease, energy prices are subsidised and the economic situation in major export destinations, like Germany, improves. EU funds are assumed to significantly contribute to investment growth in 2023, even to a larger extent than in 2022, although tighter financing conditions are expected to mute growth somewhat.
Inflation soared to over 12% in 2022 due to high energy prices and the pass-through to core components, particularly food. Consumer food prices are expected to continue to grow swiftly and to remain the main driver of inflation in 2023, just like in the last quarter of 2022. High energy prices are expected to keep inflationary pressures broad-based, and a tight labour market is set to contribute to more persistent growth of prices in the service sector. The government measures are expected to be at least partially phased out in 2024, increasing energy inflation. Therefore, inflation is forecast at 9.7% in 2023 and at 5.3% in 2024.