Slovakia – February 2016

Major economic indicators

Following the fast pace of growth in November, industrial production growth is likely to have slowed down somewhat in December. We expect IP growth at 7.9% y/y, which is slightly above the consensus forecast of 6.9% y/y. Nevertheless, reasons for some caution remain due to the volatile sentiment in the industry (both November and December marked decreases in the industrial sentiment).

The Statistical Office will publish the flash estimate for 4Q15 GDP and employment growth on Friday. Data for the last quarter of 2015 released up to now have been mostly positive: industrial production (the running 4Q15 average thus far stands at 8% y/y), retail sales picked up and labour market improvement progressed further. Somewhat more conservative than the market consensus, we expect 4Q15 GDP growth at 3.5% y/y. Seasonally adjusted quarterly growth could thus reach 0.8% q/q.

Deflation has not yet disappeared from the Slovak economy, on the contrary – December brought about a further decrease of consumer prices to -0.5% y/y. Low oil prices coupled with the ensuing lower energy prices continue to drag down the inflation indices in the Euro Area. Flash estimate shows that annual inflation in the Eurozone increased slightly to 0.4% y/y in January, up from 0.2% y/y in December. Given the introduction of the VAT cut on selected foodstuffs (10% instead of the standard 20% VAT rate) and continued low oil prices, we expect Slovak inflation to have remained at -0.5% y/y in January.

Producer price decrease is likely to have continued at a slightly milder rate in January. We expect producer prices to have fallen by 3.6% y/y in January.

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