BRATISLAVA, June 21, (WEBNOVINY) — The Slovak economy will grow faster than originally expected, according to the June prognosis published by the Financial Policy Institute at the Finance Ministry. Nonetheless, prices are to grow at a higher pace too, while real wages are to drop. Gross domestic product (GDP) is expected to swell by 3.6 percent, which is an increase by 0.2 percentage points from the February prognosis. At the same time, the ministry has decreased the outlook for the coming years. In 2012, the economic growth estimate has been revised 0.4 points downward to 4.4 percent and 0.6 points downward to 4.2 percent for both 2013 and 2014.
Behind the improvement in economic growth outlook for this year is in particular the positive development of the external environment, which contributed to GDP growth in the first quarter of 2011 and will drive growth throughout the whole year. “In 2011, GDP growth should be driven especially by foreign demand and to a lesser extent by formation of gross capital and private consumption of households,” the institute comments. In the coming years, all components should positively affect GDP growth, while the input of foreign demand is expected to gradually tone down owing to greater contribution of domestic demand.
With the expected faster economic growth, the Finance Ministry projects a faster price growth in particular due to steeper growth of oil prices. The impact of the government austerity package remains unchanged at 0.9 percentage points. Inflation measured by the national methodology is estimated at 4.1 percent this year, up 0.6 points from the February estimate. The outlook for harmonized inflation for this year has been revised upward by 0.9 points to 4.3 percent. On a prognosticated growth of nominal wages by 3.5 percent, this would mean a 0.6 percent drop of real wages. According to the institute, this will not necessarily mean a decline in Slovaks’ living standard. In spite of a decrease in real wages, the positive development on the labor market will in real terms increase the overall income of the people as well as household consumption more than previously estimated.
The estimated employment increase has been revised to 1.6 percent, up from previously reported 1.3 percent. Employment growth next year should reach almost one percent. Thus, unemployment rate in 2011 is to decline from 14.4 percent to 13.0 percent and to 10.3 percent in 2014. Overall income of the citizens is to rise by 1.8 percent in real terms, and households consumption by 0.5 percent from last year, the institute says.
(SITA)
