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2022/06/14 / Erste Group Research

Slovak industry suffering from supply-side problems

The Slovak economy has not yet fully recovered from pandemic impacts (still around 1% below the pre-pandemic maximum) and is already heading to another turbulent year. In 1Q22, the effect of the elevated inflation was not visible in the economic performance; however, foreign trade has already been affected by supply tensions highlighted by the Russian war in Ukraine. In the coming months, high uncertainty and rising consumer prices will partially dampen domestic demand. For GDP growth in 2022, finding alternative suppliers and normalization in the (commodity) market are crucial, but GDP growth is still expected.

The most important driver of the inflation rate is commodities, creating broader inflationary pressures in the economies, especially coming from energy and agricultural products. Thus, inflation may reach 10.5% on average in 2022, with deceleration to 5% in 2023. As the high prices affect a large part of society, especially the most vulnerable ones (single parents, large families...), new expenditures will be needed, due to necessary support for these groups of citizens. This, combined with higher military and humanitarian spending, could lead to fiscal deficit at 6% of GDP in 2022, delaying the necessary fiscal consolidation after the pandemic crisis.

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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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