Ernst & Young improves outlook for Slovakias 2001 GDP growth to 3.4%.

By bne IntelliNews June 21, 2011
Slovakias economy will grow by 3.4% in 2011, consultancy Ernst & Young said in the summer edition of its Eurozone Forecast report revising upward its projection from an earlier expected growth of 3%. Exports, expected to rise by 12.9% y/y in 2011, will be the economys main driving force in 2011. Household consumption will remain weak, inching up by only 0.5% y/y, as it will be negatively affected by the governments consolidation measures. Slovakias GDP is expected to gain momentum in 2012 and 2013, when it is expected to expand by 4.1% y/y and 4. 4% y/y, respectively. The revival of the domestic demand, and private consumption in particular, will be the main factor that would support the faster growth. The unemployment rate will drop by 0.9pps y/y to 13.7% in 2011 supported by employment creation in the industry and will continue to decline in the next years. Inflation will speed up to an average of 3.5% in 2011 reflecting the VAT increase and the higher world commodity and energy prices. These factors will fade in 2012 and the average annual inflation will stand at 2.6%. Ernst &Young expects the countrys budget deficit to fall to 5.3% of the GDP in 2011 from over 8% in 2010 but higher than the governments target for a deficit of 4.6%. In 2013, the gap is seen at 3.4% of GDP, higher than the Maastricht limit of 3%. We remind that the government pledged to reduce the deficit to 2.9% in 2013. Ernst &Young said that downside risks on the forecasts are a slowdown of the euro zone growth, lower than expected investment growth and the rise of commodity prices.

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