Slovakia's real GDP growth will significantly slow from 4.0% in 2018 to 2.7% in 2019, according to the European Commission (EC) autumn economic prognosis published on November 7.
Slovak growth is expected to remain at 2.6% and 2.7% in 2020 and 2021, respectively, due to significant salary growth, record-low unemployment and strong private consumption.
Weaker demand from its trading EU partners will lower Slovakia ́s exports to those countries, mostly in 2019. The exports are expected to grow gradually, most likely by 4.5% in 2021. Slovakia's trade balance should go into the red in 2019 and then gradually recover in 2020 and 2021.
“After strengthening in 2019 on the back of a tight labour market and supported by strong salary increases in the public sector, wage growth is set to ease slightly in 2020-2021,” the report said. The unemployment rate is projected to decline to a record low of 5.9% in 2019 and to fluctuate around 6% in 2020 and 2021.
Inflation is predicted to remain at a slightly higher level, at 2.7% in 2019, 2.5% in 2020 and 2.2% in 2021, driven mainly by services, food prices and energy. “Services, food prices and energy are all expected to contribute substantially to overall inflation,” the report read.
Slovakia's public finance deficit increased to 1.1% of GDP in 2018 and is expected to drop to 0.9% of GDP in 2019, to increase to 1.2% in 2020 as a result of Government fiscal measures aimed at reducing the tax burden and the introduction of minimum pensions.