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The Slovak economy is maintaining its rapid expansion and growth is projected to exceed 4% in 2018 and 2019. Low interest rates and strong labour market outcomes will fuel consumer spending. Unemployment has already fallen to record lows, and intensifying labour shortages will boost wage growth. Investment should pick up, supported by an improving business climate and new infrastructure investment. Exports will continue to benefit from the expansion in the automotive sector, allowing the current account to reach a modest surplus. Tightening labour and product markets will push consumer price inflation above 2%.
The government intends to reach a balanced budget by 2020, implying modest consolidation in 2018-19. In order to finance inclusiveness-friendly reforms, particularly in education, the government should enhance public-sector efficiency and continue to improve tax collection.
The financial sector remains stable with profitable and well-capitalised banks and relatively few non-performing loans. Household indebtedness is low, but it has been increasing sharply in recent years due to new mortgage lending. In this respect, the central bank took several pre-emptive macro-prudential measures to reduce the risks of a housing bubble and strengthen financial stability. The authorities should stand ready to strengthen these measures if systemic risks increase.
Economic Survey of the Slovak Republic (survey page)