Slovak c-bank cuts 2014 GDP forecast to 2.3%, lowers inflation outlook to 0%

By bne IntelliNews October 1, 2014

Slovakia’s central bank lowered this year's economic growth forecast to 2.3% from 2.4% reflecting expectations for weaker foreign demand, the bank said in a new forecast published on September 30. It also cut the growth outlook for 2015 to 2.9% from 3.2%. 

The bank now expects exports this year to expand by 4.5%​, much weaker than the 7.4% growth expected in June. For next year the exports growth forecast was reduced to 5.0% from 5.7%. Exports rose by 1.9% y/y in July, following an annual increase of 2.5% in June. 

As for household consumption, the bank kept its 2.4% growth forecast for 2014, but revised up expectations for next year to a 2.2% growth from a 2.0% expected in June.

The European Commission also said earlier this year that exports, which had the driving force behind the country’s economic growth last year, will have a lower contribution to the GDP in the next years as domestic demand is expected to take the lead. 

Slovakia's central bank sees the annual CPI inflation stagnating in 2014, lowering the outlook from 0.1% due to the development of consumer prices in the period from May to August. For next year, it also cut its CPI inflation forecast to 1.2% from 1.6%.

According to the latest data from the statistics office, Slovakia's CPI inflation edged down 0.2% y/y in August, following a 0.1% y/y drop the month before. On a monthly basis, prices also declined by 0.2% from July when they fell by 0.1%.

Medium-term forecast of main economic indicators, Q1 2014 2013 2014 2015 2016 2014 2015
  actual data current forecast     previous forecast  
Real GDP growth, y/y 0.9% 2.3% 2.9% 3.5% 2.4% 3.2%
Final consumption of households, y/y change -0.1% 2.4% 2.2% 2.4% 2.4% 2.0%
Final consumption of general government, y/y change 1.4% 4.1% 1.4% 1.2% 3.2% 1.0%
Gross fixed capital formation, y/y change -4.3% 5.2% 3.4% 3.6% 3.0% 3.5%
Exports of goods and services, y/y change 4.5% 5.0% 4.2% 6.5% 7.4% 5.7%
Imports of goods and services, y/y change 2.9% 6.1% 4.0% 6.0% 8.3% 5.6%
Output gap (% of potential output) -1.7% -1.7% -1.4% -0.7% -1.7% -1.1%
HICP inflation (average), y/y change 1.5% 0.0% 1.2% 1.9% 0.1% 1.6%
CPI inflation (average) 1.4% 0.0% 1.2% 1.9% 0.1% 1.6%
Unemployment rate  14.2% 13.4% 12.8% 12.1% 13.5% 12.8%
Employment, y/y change -0.8% 1.1% 0.6% 0.6% 0.7% 0.6%
Current account (% of GDP) 2.1% 1.8% 2.0% 2.1% 2.1% 2.7%
External environment            
Slovak foreign demand growth 1.7% 4.3% 4.1% 5.6% 3.9% 5.1%
Source: National Bank of Slovakia            

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