HELSINK: The solid growth that Slovakia has been experiencing over the past three years should continue in 2018 and even gear up a bit close to 4 percent in real terms and possibly even more in 2019 when the Jaguar Land Rover plant in the Nitra region will start producing at full capacity. Cyclically, Slovakia is narrowing the slack in the economy, with the labour market entering a full employment scenario. This will result in growing pressure on wage costs and bringing in foreign labour. For investors looking at the longer term horizon, a growing shortfall of skilled domestic workers and other adverse demographic trends will indeed be the major structural issues to cope with in Slovakia.
The Slovak economy has done well in the first half of 2017: real GDP grew by 3.2 percent, much like in the preceding year and seems on paper to post a full-year growth of 3.4 percent. Slovakia’s positive achievements though are no exception in the region. The Czech Republic, Hungary and Poland all look likely to deliver full-year growth of 4 percent, while the Romanian economy nears 6 percent growth.
The whole region benefits from the same forces that drive the Slovak economy Strong western European demand and robust domestic consumption. It thus makes sense to look at the Slovak growth story from the perspective of the whole central European region rather than in isolation. The main difference in the growth dynamics stems from the pace of recovery of investments, especially of EU-funded projects.
Indeed, the slow drawing of funds was the main reason why Slovakia’s investment and overall GDP growth in the first half of 2017 lagged behind neighbouring countries.
