Slovakia Economic Outlook
Preliminary data shows that annual growth moderated in Q4, bringing the 2022 growth rate to 1.7%. While a full breakdown is not available until 7 March, the statistical office highlighted that private consumption and investment were the key growth drivers. During the quarter, GDP also exceeded its pre-pandemic levels. In Q1 this year, momentum is set to be weakening further. In January, harmonized inflation rose to 15.1%, hitting real incomes. Moreover, EU funds absorption is likely to be below potential. That said, improvements in economic sentiment—perhaps due to the recently approved caps on electricity prices—and hiring intentions in January bode more positively for activity. In politics, Parliament agreed on 31 January to hold early elections on 30 September. The legislature is deeply divided over its stance on Russia, boding poorly for political stability.
Harmonized inflation inched up to 15.1% in January (December: 15.0%), as higher price pressures for clothing, recreation and restaurants and hotels more than offset lower price pressures for food and housing. Despite slowing gradually, average inflation will be elevated in 2023; our panel does not see inflation returning to single-digit territory until H2 this year.