Gas supplies key to lower inflation, says Slovak Central Bank

Double-digit inflation will continue in Slovakia until next year if the government does not cap rising gas prices and if Russia stops gas supplies then inflation will rise even more, Slovak National Bank estimates in a new prognosis.

The prognosis is not optimistic. The National Bank had estimated economic growth of 2.8% in March, but the new forecast cuts it by half.

The slowing of the economy will be fuelled by struggles of the export industries due to logistical problems and lower household consumption caused by higher prices. However, the central bank does not expect the economy to fall into recession next year. This may change if Russia stops gas supplies to Slovakia.

Experts also point out that inflation may be lower next year if the cap on gas prices announced by Economy Minister Richard Sulík is put into effect. Sulík recently announced that prices for households would go up by 59% starting next year or 34% if households sign a contract of 4 years or more. The current market signals indicate a rise in price by 150%.

It is still unclear if all end-users will receive the discounts and what the strategy is for small and medium-sized enterprises.

According to the central bank, the outlook for living standards in Slovakia is noticeably worse than in previous forecasts. According to Governor Petr Kažimír, the only positive news will be unemployment, which is expected to remain at around 6.5% for the next three years.

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