From pandemic to a war in Ukraine (March 2022)

The Russian invasion of Ukraine will negatively affect the Slovak economy which is projected to grow by 2.1 per cent this year. Exports to Russia, Belarus, and Ukraine will be hindered throughout March and the second quarter, and demand in the Euro area and in V3 countries will fall. Rising energy prices will translate into higher consumer price growth, pulling household consumption down. Manufacturing will face further component shortages and employment will rise only moderately. In the baseline forecast we assume that the economy will start to recover in the second half of the year. We expect GDP to increase by 5.3 per cent in 2023, supported by the economic revival following the end of the war and the last-minute drawing of EU funds. As the level of uncertainty is high, the forecast also includes an alternative scenario which considers a longer-lasting war in Ukraine and more serious repercussions for export activity.