Page 45 - CE Outlook Regions 2022

percentage points, while in years to come the process of gradually
catching up with lost production is expected to positively impact
Slovak economic growth parameters, while the secondary effects of
component shortages on economic activity are expected to reach a
minimal level.

As the NBS analysts said, over the long term, the current
component shortages are not envisaged to impact the amounts of
production and exports.

In 2022, the Slovak current account is assumed to reach a deficit of
€590mn, according to Trading Economics analysts expectations.
VUB bank analysts forecast 12-month balance of payments to reach
2.5% of GDP.

2.6.3 Inflation and monetary policy
The Ministry of Finance predicts inflationary pressures in Slovakia to
reach an annual growth of 2.5% in 2021, followed by a growth in
consumer prices at 4.2% in 2022 and back down to 3.1% in 2023.
The rise in the price of building materials was reflected in the rise in
imputed rents, which drove up the price of services. Rising oil prices
are lifting fuel prices, and rising global demand for goods is also
leading to a temporary growth in prices of other raw materials and
inputs.

According to the EC, strong price dynamics are forecast to persist in
2021, leading the annual HICP inflation rate to reach 2.8%. As
regulated energy prices are expected to rise at the beginning of
2022, in the EC outlook inflation is assumed to stand at 4.3% in
2022. Well-anchored inflation expectations should prevent
temporary price pressures from becoming permanent, and allow
inflation to slow to 2.2% in 2023.

As shown in the Erste Group forecast, Slovak consumer prices
should reach a growth of 3% on average in 2021 before accelerating
to 5% in 2022, owing mainly to energy prices. For 2022, higher
regulated prices for energy will enter the calculation, leading to
increased expenses for energy bills and, to some extent, for goods
and services.

OECD projects higher administered energy prices to put upward
pressure on Slovak inflation in 2022, which will slow as supply chain
bottlenecks and backlogs of orders will gradually ease from
mid-2022, as assumed. Inflation could be higher if supply constraints
are prolonged and input price pressures are more strongly passed
on to consumer prices, the OECD noted.

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