Forecast: The economy will fall by 9.8% in 2020
Last update: 23.06.2020 13:05
The Slovak economy will fall by 9.8% in 2020 due to the global pandemic. Domestic and foreign demand will be lower, companies will postpone investments. The labor market will weaken significantly, unemployment will rise and wage pressures will ease. Only government consumption will support. In the second half of the year, the economy will gradually recover, which will push GDP growth in 2021 to 7.6%. The economy will remain subdued throughout the horizon and the pre-crisis level will not catch up until the end of 2022. The forecast is based on the budgetary targets presented in the Stability Program. The main negative risk is the re-spread of the disease, which would deepen the recession. On the contrary, a new Mechanism to support recovery and resilience would help the economy.
In 2020, the Slovak economy will fall by a historic 9.8% due to the coronary crisis. In response to the global pandemic, the affected countries have taken measures to restrict social contact. These measures protected the health of the population, but also brought economic costs. Economic activity in Slovakia slowed down at the end of the first quarter. In particular, investment declined and foreign trade deteriorated unusually sharply. We expect economic performance to bottom out in the second quarter, with household consumption adding to the decline in industrial and construction activity. The accommodation and catering sectors will be hit the hardest by a drop in consumption, as indicated by the April data from eKasa and retail sales. During the duration of the restrictions, car and clothing sales also fell sharply. The drop in consumption will be partially offset by higher sales of supermarkets, drugstores, and pharmacies. People's activities have shifted from work and school to households, which people have taken into account when shopping.
The loosening of measures across Europe should bring about a gradual economic recovery in the second half of 2020. However, the return to normal will be uneven across sectors. While since the second half of May, retail revenues from eKasa exceed the level of February, revenues of restaurants and accommodation facilities lag behind pre-crisis levels by 10%, resp. 60%. The performance of the export-oriented industry will also increase only gradually. Cross-border mobility was subdued at the beginning of June, when the number of kilometers driven and border crossings by freight lagged behind year-on-year by 13%, resp. 20%. Free capacities are thus being filled in the economy only slowly, which is also documented by electricity consumption, which was lower by 10% year-on-year in this period.
Ministry of Finance of the SR