The Slovakian consumer continues to battle rising unemployment (an in particular long-term unemployment) and low wage growth. Domestic demand will stagnate throughout the remainder of the year, especially given the external environment weakness that is weighing down exports. We expect private consumption to be a negative contributor Slovakia's economic growth in 2013, which would mark its fourth successive year of this trend.
Headline Industry Data (local currency)
- 2013 per capita food consumption growth = +2.26% year-on-year (y-o-y); forecast compound annual growth rate (CAGR) to 2017 = +3.45%
- 2013 alcoholic drinks sales growth = +2.54% y-o-y; forecast CAGR to 2017 = +4.54%
- 2013 soft drinks sales growth = +2.40% y-o-y; forecast CAGR to 2017 = +3.57%
- 2013 mass grocery retail growth = +2.35% y-o-y; forecast CAGR to 2017 = +4.12%
Key Company Trends
Retailers Struggling in Slovakia: Retailers operating in Slovakia have been feeling the impact of an increasingly difficult operating environment. For example, while global wholesale and retail group Globus' revenues increased 9% year-on-year (y-o-y) to EUR24.6mn (US$31.9mn) in Slovakia in 2012, its net profit declined to just EUR23,000 (US$29,916) in 2012. In a related development, Dutch major Ahold is rumoured to be in discussions with Slovakia-based investment group J&T over the possible sale of its supermarkets in Slovakia, although the company has denied such plans.
Risks To Outlook
Downside Risks Remain in Play: While our GDP forecast changes incorporate most of the downside risks, risks are still tilted to the downside. In particular, export growth - the pillar of economic expansion - remains vulnerable to headwinds in the eurozone, especially Germany and Czech Republic, the two most important export markets. A concentrated industrial base also creates a risk that sector shocks have a deep impact on the wider economy. In the domestic sphere, further fiscal tightening could erode consumer and business confidence, delaying the start of the recovery and posing a downside threat to our short-term targets.