Slovak economic growth will accelerate to 4.1% in 2018 and 4.3% in 2019 from 3.3% this year, the Organisation for Economic Co-operation and Development (OECD) announced in its autumn global economic outlook.
Growth will be driven by consumer spending, which is boosted by the tight labour market, with rising wages and unemployment at record lows and record vacancies, as well as and low interest rates. Unemployment should fall to 6.6% in 2019, from 8.3% this year.
Growth will also be helped by rising investment, from the improving business climate and infrastructure spending, and rising exports built on the country’s dominant automotive sector. This will push the current account into a small surplus of 0.8% in 2019, compared to a deficit of 1.4% this year and 0.1% in 2018.
The OECD also expects harmonised inflation of 1.3% this year, rising to 1.9% in 2018 and 2.2% in 2019.
The budget will edge closer to balance, with a general government deficit of 1.8% this year, 0.9% in 2018 and 0.4% in 2019. General government debt (according to the Maastricht definition) will also continue to edge lower, from 51.9% of GDP this year, to 5.1.2% next year and 49.4% in 2019. The government intends to reach a balanced budget by 2020.
The OECD recommends that the Slovak government enhance public-sector efficiency and continue to improve tax collection. It also points out that household indebtedness has been increasing sharply, and the central bank should be ready to take stronger measures to reduce the risks of a housing bubble and strengthen financial stability.