According to our experts, a feature of the economic crisis in Slovakia, which is developing against the general background of the global economic recession and the COVID-19 pandemic, is the significant dependence of the small, open Slovak economy on export earnings in industrial production, especially automotive.
According to our experts, the baseline scenario for further development of economic and epidemiological situation in Slovakia assumes that the ongoing second wave of COVID-19 will be longer than that of spring and will last from the end of the third quarter of 2020 till the middle of the second quarter of 2021. Economic losses of the Slovak economy according to the results of this year can range from 8 to 11% of GDP.
The draft state budget of the Slovak Republic for 2021-2023, developed by the Ministry of Finance of the Slovak Republic, was approved at the meeting of the Slovak government on October 14, 2020 and currently undergoes the process of adopting the relevant law in parliament. The document contains elements of economic forecasting and fiscal planning of the state in the context of the economic crisis that is developing in the Slovak Republic against the background of the global economic recession and the COVID-19 virus pandemic.
Immediately after the onset of a strong negative event (whatever the nature of such an event), analysts’ forecasts deteriorate sharply. Usually this deterioration corresponds to the extremely pessimistic scenario. But, fortunately, extremely pessimistic, as well as extremely optimistic scenarios rarely take place in practice. The coronavirus pandemic that broke out in Russia in spring of 2020 was no exception. As the economy adapts to new conditions (and in the course of accumulation of statistics), understanding of the true scale of the problems comes. And now it has become clear that current problems of the Russian economy are serious, but they are not catastrophic.
In the medium term, having achieved a high level of interconnection of the national GTS with neighboring countries and natural gas supply lines, Slovakia can offer gas transportation services in all directions (north-southeast-west) through its territory, while diversifying its sources of origin. Eustream believes that over the next 10 years, natural gas will maintain its important position in the energy balance of the European Union and will support the trend of low-carbon economic development.
The largest decline in industrial production among EU member-states is illustrative of the economic crisis in Slovakia, which is developing against the general background of the recession in the world economy. As of June 2020, Slovak industrial production decreased by 33.5% as compared to the same period of last year. A similar negative trend is observed in other Central and Eastern European countries, in particular in Hungary (-27.6% of industrial production), Romania (-27.4%), and the Czech Republic (-25%), which precede Slovakia in these figures.
The main tool for balancing public finances and stabilization of the situation in the economy of the Slovak Republic is the use of EU aid funds.
The collapse in oil prices and the subsequent decline in oil production within the OPEC++ deal have severely affected the Russian budget revenues. The restrictions introduced in the framework of the fight against coronavirus stopped the service sector and almost all non-food trade. This combination (decrease in revenues and blocking trade) has led to a very unusual nature of current crisis: the simultaneous shock of both supply and demand. This has happened for the first time with no precedents throughout post-Soviet history.
An unusual combination (a fall in both demand and supply), multiplied by insecurity at the beginning of the pandemic, gave rise to a flurry of apocalyptic forecasts.
In 2020, there will be significant changes in the Polish energy sector, which, according to our experts, will have a long-term effect on Poland’s energy policy in the next 5-10 years.
After the formation of the new Polish government of Mateusz Morawiecki, the basics of energy policy as well as plans to reform energy companies and develop new energy sectors were presented. As a part of implementation of the European policy of decarbonization of the economies of EU member states, Poland is trying to make the most of the financial resources of relevant EU funds, as well as to take measures to consolidate energy business under the control of the government.
Our experts analyzed the “Stability Program of the Slovak Republic for 2020 to 2023” (Program stability Slovenskej republiky na roky 2020 až 2023), which is the key medium-term document in the economic sphere of Slovakia. The document was developed by the Ministry of Finance of the Slovak Republic, approved at the meeting of the government of Slovakia on May 18, 2020 and should be supported by the parliament. The program defines the budget, fiscal and monetary policy of the state in the economic crisis, which is developing in the Slovak Republic against the general background of the global economic recession and the pandemic of the COVID-19 virus. The document also takes into account the economic component of the 4-year action program of the government of Prime Minister Igor Matovič, which was published on April 20, 2020.