Slovakia – July, 2015

Major economic indicators

Foreign trade dynamics have been improving this year, albeit at slightly different speeds in the individual months. We expect stable growth of exports and imports in May, whereby the foreign trade balance could reach EUR 244 mil.

Even though industrial production growth returned to single digits recently, 2015 marks a re-invigoration of industrial production growth compared to the end of last year. We expect the momentum to have continued in May, at a similar rate of around 4.7% y/y. Sentiment in the industry has been volatile recently, thus we remain on the more conservative side (albeit still marginally higher than the consensus forecast).

Slovakia has still not quite got rid of deflation. After earlier improvements, the recovery stalled in May at -0.1% y/y (same as in April). We expect inflation to have resumed its slow recovery and our forecast sees annual consumer price inflation between 0.0% and 0.1% in June. According to the flash estimate, Eurozone annual inflation reached 0.2% y/y in June, a slight disappointment after 0.3% y/y in May.

Inflation pressures remain subdued and a return to more convincing positive inflation figures will take time. Despite steady monthly increases, energy prices continue to be at low levels. We keep our 2015 inflation forecast unchanged at 0.0% on average and expect more pronounced increases in annual CPI and HICP figures in 2016.

Producer prices have been decreasing at a steady rate in 2015. We expect this trend to have continued and estimate a 3.5% y/y decrease in producer prices in June.