Macroeconomic Forecast Slovakia

Consumer price inflation as measured by the harmonised index of consumer prices (HICP) remained largely stable in June at 4.1% y-o-y, down only slightly from 4.2% in May. We forecast HICP to moderate to 3.2% by the end of 2011, and to average 3.7% for the year. In our view, with consumer demand still strapped by fiscal consolidation measures and still high unemployment, we expect domestic price pressures to remain subdued. Moreover, our expectation for commodity prices to continue to come down will further attenuate consumer prices given that imported inflation has been the key driver of higher prices this year.

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