BRATISLAVA, March 19, (WEBNOVINY) — Ernst & Young’s projection predicts Slovakia’s economic growth this year to slow down to 0.6 percent from last year’s 3 percent. The reason behind it is in particular the high dependence on exports, which should experience a drop due to slower growth in the eurozone. Next year, Slovakia’s economy should considerably accelerate and grow by an average of 4.5 percent between 2014 and 2016. This stems from the March Ernst & Young outlook for the euro area.
The volume of exports of goods and services is expected to decline by 1.7 percent in 2012, as the sovereign debt crisis largely influences demand for high-cost items, such as vehicles and electronic devices, which are Slovakia’s main export items. Thus, the manufacturing industry, and in particular the car industry are to suffer from a strong shortfall. A drop in exports will negatively affect the volume of investments and local firms will likely postpone investments in machinery and equipment until outlook for the region are more optimistic. This attitude will apply to other investments, too, while construction industry is expected to post weak performance this year, again.
“The outlook is complicated even more by the impending debt crisis in Europe. Concerns over liquidity development in the eurozone together with the need to ensure accordance with tighter EU capital requirements will have banks in massive pressure. It is probable that a lot of them will reduce the volume of financial recourses in its daughter companies in eastern Europe. The debt crisis may seriously hit Slovakia due to strong foreign capital participation in the local banking system,” points out Ernst & Young partner in Slovakia, Dalimil Draganovsky.
Businesses will thus likely postpone planned recruitment until demand is restored. It is expected that unemployment that reached 13.5 percent in the last quarter of 2011 may culminate at 16 percent. This development will restrict demand in the next two years. Outlook for private consumption is dim due to likely decline in real income on continuous high inflation.
With regard to the eurozone, Ernst & Young estimates GDP to drop by 0.5 percent this year, while nine out of seventeen economies should see slight growth. In 2013, the eurozone’s GDP should rise by 1 percent, and by 2 percent in 2015 and 2016.
SITA
