Coronavirus: Significant impact on Slovakia’s economy

According to analysts, the economic impact of the spread of the new coronavirus and the follow-up measures is currently difficult to quantify, but it is certain that the Slovak economy will be impacted by it, too. So far, expected economic growth of about 2% this year is probably unrealistic. Even if the negative situation with regard to coronavirus lasted only a few weeks, economic growth would slow significantly this year.

"The situation is still very unclear. It is almost certain that it has negatively affected the world as well as Slovak economy, but we do not know how much," said Tatra bank analyst Tibor Lörincz. "In this uncertainty, our medium scenario is that the situation regarding coronavirus could begin to improve sometime in April. In that case, the estimate of Slovak economic growth would fall from about 2% to about 1%, but this decline should not have long-term consequences. In 2021 it should remain unchanged, perhaps even slightly higher for the base effect," added Lörincz.

As VUB bank analyst Michal Lehuta added, the Slovak economy can prepare for two negative shocks. The first one will come due to a decline in demand from abroad, the second one will come from the domestic environment, due to the cancellation of events, school closures and the likely further spread of the disease. "The sectors of transport, culture, tourism, but also the sale of durable goods such as cars will suffer the most. That is why the Slovak economy may be more affected than others," Lehuta says.

Institute for Economic and Social Reforms economist Peter Goliaš reminds that economic slowdown would mean even bigger problems in public finances. According to him, the current deficit, in combination with the impacts of coronavirus, can quickly approach 3% of GDP. "Unfortunately, Slovakia is not prepared for the worse times due to irresponsible management in recent years. The new government should be aware of this and abandon unrealistic plans causing massive increases in public spending," he added.

In addition to slowing economies, the spread of coronavirus is reflected in markets, too. Along with lower expectations of future sales and profits, stock prices, bonds of riskier companies and states fall, too. According to VUB Bank analyst Michal Lehuta, the situation in the upcoming weeks will depend on the pace of further spread of the disease.