Slovak growth tied to recovery plan’s success
Growth will depend on whether Slovakia will be able to absorb EU recovery fund money, according to experts, after the National Bank of Slovakia upped its growth forecast from the previous 0.6% to 1.3%.
Historically, Slovakia has had trouble absorbing EU funds, ranking third-worst among EU states for the 2014-2020 budgetary period, with some €6 billion still left untouched.
This year, with two-thirds of the money allocated for this year from the National Recovery and Resilience plan being absorbed, the GDP is only expected to increase by 0.7%.
However, the first signals for Recovery fund absorption are not positive.
For example, demand for housing renovation, which is one of the pillars of the Slovak recovery plan, failed to meet the expectations so far, as EURACTIV Slovakia reported.
The National Bank’s new and improved forecast can be explained by the significant easing of global energy prices. Government measures have put the brakes on the rise in regulated energy prices, but household consumption will continue to be pressured by food prices.
Moreover, Slovakia and the EU are likely to avoid a recession this year, according to the government’s Financial Policy Institute (IFP).
According to the forecast, the industry will continue to lag, but bottlenecks are gradually disappearing and so the performance of the industry will improve during the year.
Regarding real wages, the new forecast, which predicts a modest rise of less than 1%, is more positive than the previous one which predicted a drop.
Last year, the Slovak economy grew by 1.7% as consumer prices increased by 12.8%, according to the IFP.
(Michal Hudec | EURACTIV.sk)