Slovakia’s GDP is expected to expand by 2.3% in 2014 and further speed up to 3.2% in 2015 supported improving domestic demand, the European Commission said in the winter edition of its European Economic Forecast, published on February 25. In its previous forecast, released in November, the commission was expecting a 2.1% growth for 2014 and 2.9% for 2015. According to the EC, Slovakia’s economy grew 0.8% last year as domestic demand was acting as a drag on growth.

The commission said that the private consumption is expected to gradually increase in 2014 and 2015 thanks to lower inflation and improving labour market, which would boost the real incomes. The investments in Slovakia, which remained weak in 2013, are projected to stagnate in 2014.

Exports, which are the main driver of Slovak economy, are expected to rise in 2014 and 2015 helped by declining export prices and improving demand in Slovakia's main trading partners. According to the commission, imports are expected to increase in line with exports and, for 2014 and 2015, net exports are likely to give way to domestic demand as the main driver of growth.

EC noted that downside risks to the forecast could come from possible delays in the implementation of large infrastructure projects.

Inflation is expected to ease to 0.7% in 2014 on declining commodity prices and a planned reduction of regulated energy prices for households. The EC sees the budget gap at 3.3% of GDP this year and expects it to slightly deteriorate in 2015.