The Slovak economy will not fall into recession this year. The gross domestic product should increase by 1.3%, while annual inflation, on the contrary, could fall to 9.8%. Marcel Klimek, State Secretary of the Ministry of Finance (MF) of the Slovak Republic, said this at a press conference on Tuesday. In the fall, the department expected moderate economic growth of around 0.6% and inflation of 13.5%.
Klimek recalled that last year the expectations of the economic development were extremely pessimistic, and companies and the government took many measures, especially to eliminate the increase in energy prices. "We can say that this unprecedentedly gigantic aid helps companies, helps the economy go through this difficult period of multiple crises without major losses and shocks," said Klimek. If the measures, which include, for example, a financial package to reduce energy prices, were not adopted, there would be a threat of inflation even at the level of 30%. According to the forecast, inflation should fall to 5.3% in 2024.
The State Secretary recalled that the last macro forecast also predicted a drop in real wages by 2.7% while nominal wages grew by 10.4%. According to the current estimates of the Ministry of Finance, nominal wages will grow by 0.6%. Analysts of the Institute of Financial Policy estimated nominal wage growth at 10.5%.
The dynamics of the Slovak economy will be driven by domestic demand in 2023 against the backdrop of easing inflation and stabilized real household incomes. At the same time, half of GDP growth is to be ensured by drawing from the recovery plan.
Consumer inflation will be dampened by capped energy prices, but food and service prices may still rise. Nevertheless, thanks to higher incomes, households will create their savings anew. The drawdown of EU funds from the previous program period and the start of the recovery plan will strengthen employment. According to the Department of Finance, the labor market will remain resilient thanks to energy aid to companies and municipalities, but employment dynamics will remain low. The increase in costs and weaker sales prevent the faster creation of new jobs. (TASR)
