NBS Monthly Bulletin, January 2013 - Summary
The latest data indicate that the contraction of the euro area economy is causing a slowdown in Slovakia’s economic activity. According to the most recently published indicators, the euro area’s contracting trend continued in the fourth quarter of 2012 and its industrial production declined in November.
The impact of the euro area recession on the Slovak economy started to be seen in the fourth quarter, as most of the hard and soft indicators for Slovakia showed a deterioration. It may therefore be expected that economic growth in Slovakia decelerated markedly in the fourth quarter of 2012, as projected in Národná banka Slovenska’s Medium-Term Forecast of December 2012 (MTF-2012Q4). This slowdown is assumed to reflect a deterioration in the domestic part of the economy, indications of which can be seen in the labour market data and in trade and services developments. Employment fell relatively sharply in the fourth quarter while wage growth was significantly restrained.
Despite the forecast for fourth-quarter unemployment having been revised up quite markedly, the data indicate that the actual figure was even slightly higher.
Adverse developments in trade and services and negative sentiment among households is accentuating concerns about whether consumer demand will pick up and about whether the savings ratio will descend from its record high levels. Price developments in the fourth quarter were affected by weak consumer demand. At the same time, the stabilisation of commodity prices helped prevent the price level from rising more sharply under pressure from cost-push factors in commodity prices and producer prices.
The monthly data from November and December indicate that the risks to the economic growth forecast are predominantly on the downside, especially for the first half of 2013. The risk to the inflation forecast for the first half of 2013 is slightly downward.
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