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2022/12/02 / Erste Group Research

EU funds may avert recession in Slovakia


Taking into account the huge challenges facing the Slovak economy, the economic performance remains more than solid. After the relatively successful 1H, the economy in 3Q recorded growth again, combined with good figures coming from the labor market. We expect domestic demand to remain the most important driver of growth in 3Q, mainly fueled by investments, affected by the low base and rising inflow of EU finances. High-frequency indicators such as foreign trade figures indicate a negative contribution from foreign demand. For this year, we expect the economy to grow by 1.5% y/y.

Inflation has accelerated in the last months, approaching 15% y/y, driven by food prices and an indirect impact of energy prices. A peak of price growth is anticipated at the beginning of the next year; however, its level remains a question, due to still pending energy price regulation for households. This should be announced in the coming days. ECB steps, the economic outlook and inflation growth have put the bond market under pressure, resulting in rising bond yields and debt servicing costs. We expect yields to end this year around 3.2%.


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General information

AuthorErste Group Research
Date2022/12/02
Languageen
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusSlovakia
Currency in focusEuro
Sector in focus-
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