Soaring prices surprise Slovak national banks

Banks have released forecasts for this summer.

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The National Bank of Slovakia admits that previous economic forecasts were not made correctly.

“Inflation will be higher than originally expected. It will be double digits this year and perhaps next year,” bank governor Peter Kazimir said on June 21, according to TASR Newswire.

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Initially, banks expected inflation to be 2.8% this year. However, prices in Slovakia should rise 10.4 percent in 2022. Next year, it should rise 1 percentage point to 11.1 percent, the bank wrote in its summer economic and currency forecasts.

Economic growth is also expected to slow.

Waiting for 2024

Gas prices have had a major impact on the overall rise in consumer prices.

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“Assuming that the rise in energy prices around the world slows or falls slightly, regulated prices can fall slightly, but only in 2024,” says Kažimír.

The governor emphasized that next year’s inflation forecast expects household gas prices to rise according to the rules currently in force. Economic Minister Richard Slick (SaS) said these prices would rise further.

National banks also make the latest claims report Its Finance Minister Igor Matovič Package of measures for family “We were able to at least partially offset the negative impact of high inflation on income.”However The president exercised the veto The minister’s package, and lawmakers, have not yet attempted to revoke the veto.

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Price pressures on goods and services could weaken as early as next year, but according to the governor, Slovak people will have to wait until 2024 for a significant drop in inflation.

People who are said to have low income

Unlike inflation, GDP growth will be slower than expected in the spring of NBS.

Instead of the previously predicted 2-3% growth, GDP should not exceed 1.4% this year and 1.9% in 2023.

National banks are more optimistic around 2024, when economic growth should reach 3.5%.

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Kajimir added that real wages will fall this year, and perhaps next year. Slovak people must be prepared to reduce real wages by 2.5 percent this year and 0.4 percent next year.

Recession was not excluded

The development of the Slovak economy depends on the war in Ukraine and the political decisions associated with this conflict, Kazimir said. For example, if Russia’s gas supply is cut off, inflation could be even higher than the National Bank’s current estimates and the economy could fall into recession.

National Bank estimates that the Slovak economy will be under pressure over the next few years due to high prices, high interest rates, low investment activity and relatively high nominal wage growth. These nominal wages should increase by 8.2 percent this year and 9.6 percent in 2023.

The governor emphasized the need for better use of EU funds to sustain economic growth. Slovakia has long been one of the worst countries to withdraw EU funds. Soaring prices surprise Slovak national banks

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