BRATISLAVA, March 27, (WEBNOVINY) – The National Bank of Slovakia continues to slash its estimates of this year’s economic growth. While in December it expected the growth domestic product in 2012 to grow by still rather optimistic 2.3 percent, according to a prognosis released on Tuesday, the central bank now anticipates economic growth of just 2.1 percent. The bank prognosticates economic growth of 3.1 percent in 2013. Estimates for 2014 have been published for the first time, when the bank foresees GDP growth at 4.2 percent.
As the central bank’s governor, Jozef Makuch, told Tuesday’s news conference, the March prediction was prepared in a period when uncertainty on financial markets was not growing but foreign demand was on decline. Makuch went on to say that the mid-term prognosis was influenced by favorable data on Slovak economic development in the last quarter of last year, as well as by the start of negative development on the labor market. The government added that unemployment rate will continue to be high in 2012.
In spite of just a slight downward revision of economic growth, the central bank considers risks in the latest prediction to be more negative. This is related in particular with the need of fiscal consolidation, whose structure, and also its impact on economic development, is not yet known. Makuch added that another risk is potential tightening of lending conditions home and abroad with impact on foreign demand and investment formation in Slovakia.
The central bank has moderately increased its estimate of this year’s average harmonized inflation by 0.1 percentage point to 2.9 percent. For 2013, it kept its estimate of inflation at 1.9 percent. Harmonized inflation is estimated at 2 percent in 2014. The bank sees mostly negative risks in the inflation outlook, stemming from higher foreign inflation and higher energy prices, as well as consolidation efforts if carried out via hikes of indirect taxes. However, weak local demand and more negative development on the labor market may keep a lid on inflation, said the governor.
As a result of the expected worse development on the labor market, the central bank has revised downward its forecast of employment growth from 0.5 percent to 0.2 percent this year. For 2013, employment growth outlook has been kept unchanged at 0.7 percent, while a 0.9 percent increase is anticipated in 2014.
Three months ago, the central bank revised downward its original estimate of 2012 economic growth from 3.8 percent to 2.3 percent.
SITA