Economic Analysis - Tight Labour Markets Raise Long-Term Risks - SEPT 2017

BMI View: The Slovak economy will remain on a robust trajectory over the coming quarters, driven by a rebound in investment, and more significantly by strong household consumption. However, Slovakia's tightening labour market will also be the source of longer - term risk to the country's growth model.

Following a robust start to 2017, we project Slovakia's economy to remain on a healthy trajectory over the coming quarters, with household consumption becoming the main contributor to headline GDP growth. The country's highly open economy will also benefit from a relatively upbeat growth outlook among Slovakia's key EU trading partners, which will be reflected in stronger export growth over the coming years. After a contraction of gross fixed capital formation in 2016, we forecast a solid rebound in 2017-2018 on the back of low interest rates, robust business confidence and a pickup in EU structural funding inflows. Overall we forecast real GDP growth of 3.1% in 2017 and 3.2% in 2018.

Domestic Consumption And Investment Rebound Driving Growth

Private Consumption Sustaining Growth
Slovakia - Real GDP & Private Consumption, % chg y-o-y
f= BMI forecast. Source: BMI Calculation/Eurostat

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