Home News The economy will pick up and inflation will drop. The Slovak economy proved to be resilient during the crisis

The economy will pick up and inflation will drop. The Slovak economy proved to be resilient during the crisis

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The economy will pick up and inflation will drop.  The Slovak economy proved to be resilient during the crisis

The growth of the Slovak economy should accelerate from last year’s 1.1 percent to 2.1 percent this year and to 2.6 percent in 2025. Inflation will gradually decrease from last year’s 11 percent to 3.4 percent this year and 2.7 percent next year. This follows from the current Economic Review of the Organization for Economic Cooperation and Development (OECD) on Slovakia, which the organization published on Monday.

According to the OECD, the Slovak economy proved to be resilient during the energy crisis, but the economic recovery after the Covid-19 pandemic slowed down. Although inflation has slowed down, it remains high. A key challenge is improving the sustainability of public finances.

Deteriorated state of public finances

“Economic growth is expected to accelerate in 2024 and 2025. Lower inflation will lead to growth in real wages and consumption. The expected revival of foreign demand and the use of European funds will support exports and investments. The risks are primarily associated with a possible renewed increase in energy prices and problems in supply chains “, the OECD explained.

According to the organization, ambitious fiscal consolidation is needed to improve the long-term sustainability of public finances, which will face a significant aging population.

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She recalled that the fiscal policy during the pandemic and the energy crisis worsened the state of public finances. “A credible medium-term strategy of fiscal consolidation is needed, which should be based on the revision of expenditures and their efficiency,” emphasized the OECD.

Digitization and the green economy

According to her, any measures to help with the rising cost of living should be targeted at households that are not sufficiently covered by existing social measures. Shifting the tax mix from labor taxation to property and environmental taxes would make it more pro-growth and environmentally friendly.

Resources from the European funds create an opportunity for ambitious consolidation without limiting investments in digitization and the “green” economy.

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According to the OECD, increasing the employment of women with small children would help reduce the wage gap between men and women in Slovakia, as well as limit the impact of a shrinking labor force. This would be helped, for example, by improved access to pre-school facilities and greater flexibility of employment contracts.

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