Economic growth is projected to accelerate further in 2015. Labour market performance will continue to improve and increasingly confident households should spend more out of rising real incomes. Export markets are set to recover, raising business sentiment and investment.
The slowdown in the pace of fiscal consolidation in 2014 was appropriate, given the economic slack. Nevertheless, budgeted further consolidation efforts are welcome to build fiscal buffers. In that regard, implementing multi-annual binding spending ceilings will reinforce budget discipline, while improving the efficiency of tax administration will support revenue collection.
Investment is still well below the pre-crisis level. Foreign investment, which has been an important driver of capital accumulation (the FDI stock is 60% of GDP), has been subdued due to the sluggish growth of Slovakia’s trading partners and competition from low-cost countries in the region. Policies to improve business climate, infrastructures, innovation and skills can give impetus to more broad-based FDI. Strengthening administrative capacities and expanding the use of simplified procedures will help to increase the use of EU structural funds.