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2021/06/14 / Erste Group Research

Pandemic hit Slovak economy less than expected

GDP in the first quarter surprised on the upside, as it fell by only 2% q/q and stayed approximately at last year’s level. Significant growth impulse came from foreign trade while domestic demand contributed negatively. In contrast to the first wave of the pandemic, industry supported GDP growth during 1Q21.

We stick to our GDP forecast at 4% in 2021 with upside risks due to better than expected performance in 1Q21. For now, we acknowledge upside risks but are careful with revisions due to pending problems with chips and lowering willingness of population to get vaccinated in Slovakia, putting into question a potential third pandemic wave.

Inflation should reach 1.6% on average in 2021 before increasing to 1.8% in 2022. Labour market still resists hard impacts of the pandemic, as the total unemployment rate landed at 7.1% in the first quarter. Full-year average is expected at 6.7 % in 2021 before declining to 5.8 % in 2022.

ECB confirmed its accommodative stance at the June meeting; thus leading to a decrease in yields after inflation concerns lifted them earlier. Fiscal deficit budgeted for this year is unlikely to be reached, as the reserve considered may be too big. We expect the deficit to reach 6% of GDP this year.

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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-


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