Show on the labour market goes on

Economic growth boosted by the inflow of EU funds last year is over, and the Slovak economy started to slow down. In Q116, it grew 0.7% (SA), which is 3.6% in year-on-year terms. It is the first yoy growth slowdown since the end of 2012. However, there were persistently higher dynamics than recorded by the euro area and still the highest among regional peers. Nevertheless, a further deceleration of economic activity is expected in the remainder of the year. Economic growth is set to print yoy dynamics of 2.7% this year.

Private consumption is the key growth driver in the times following the 2008-14 programming period. Consumers benefit from sound labour market conditions, increasing employment, a decreasing unemployment rate and resulting wage growth.

In spite of the fact that investment activity has lost its growth momentum, it should still add positively to GDP growth. Government investment will be partially replaced by private investment due to sound domestic demand.

Import growth is stimulated by the performance of domestic demand as well, which outperforms the dynamics of exports and hence keeps the net export contribution to GDP growth in the negative.

Consumer prices are set to decrease yet again this year, dragged by food, fuel and administrative prices. Only adjusted inflation supported by rising domestic demand contributes positively to inflation. However, the price dynamics of food and fuel prices are expected to speed up at the turn of 2016/17 and thus inflation should rise to the level of 1.7%.

Autor: David Kocourek