Look for:

Our offer for

Research Detail

2020/04/02 / Erste Group Research

New coronavirus shakes the economy - UPDATE

COVID-19 is this year's big game-changer

Slovakia's key concern at the moment is COVID-19, the disease caused by the new coronavirus. Social distancing measures have closed off borders (goods transport exempted) and have significantly restricted demand and supply for the coming weeks/months. Given the temporary nature of the shock, the economy should bounce back but the speed of recovery remains uncertain.

We updated our forecast and expect GDP to fall by 5% this year, followed by a skewed V-shaped recovery starting in the latter half of 2020 before rebounding to a positive 4.5% in 2021. Labour market will be affected this year, followed by an improvement in 2021.

The extent of the labour market damage depends inter alia on the speed and size of fiscal policy response, which may mitigate it. We expect unemployment rate to rise to 7.8%, amidst a decrease in employment and weaker nominal wage growth (at 3.3%). The recovery next year should bring an improvement – unemployment rate may inch down to 7.3% and nominal wage growth could speed up to 3.5%.

Inflation should ease towards 2.3% and 2% in 2020-21, respectively. Government bond yields have increased somewhat amidst COVID-19 -related uncertainty but ECB's and Fed's substantial monetary loosening will keep a lid on further increases. The current situation is calling for a strong fiscal response to support the economy and we may see this year's fiscal deficit rising to at least 7.5% of GDP, before declining in the next few years.
Parliamentary elections brought a decisive victory of the opposition party OLANO (politically mixed though more towards the centre-right, pro-EU, pro-NATO party) that gained 25% of votes, defeating the long-ruling SMER-Social Democracy. Igor Matovic, leader of OLANO, became the new Prime Minister in a four-party government with a constitutional majority. The new coalition is a mix of centre-left to centre-right parties. All parties are strongly anti-corruption and want to focus on improving the judiciary, healthcare and education. Yet, the key issue for healthcare and the economy will now be COVID-19.

PDF Download Download PDF (135kB)

General information

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


We use cookies and web analysis software to give you the best possible experience on our website. By continuing to browse this website, you consent for these tools to be used. For more details and how to opt out of these, please read our Data protection policy.


Any information, material and services regarding financial instruments and securities provided by Česká spořitelna/Erste Group/ or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites“) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions.

By agreeing to this hereto, the visitor entering this Websites confirms that has read, understood and accepted this Information and the Disclaimer