Analysts: Inflation in Slovakia to Accelerate in Coming Months

Bratislava, May 14 (TASR) - Inflation in Slovakia is expected to accelerate in the coming months, Slovenska sporitelna analyst Marian Kocis stated in his commentary on April's inflation data published by the Statistics Office earlier on Wednesday. "In the coming months, we expect a slight acceleration in year-on-year price growth, with the peak possibly occurring in the summer at around 4 percent. According to our estimates, the average inflation rate for this year could end up slightly below 4 percent. This year’s price growth is broadly spread across various groups of goods and services and is being driven by the higher value-added tax (VAT) introduced as part of the consolidation package. We still expect a gradual filtering through of the higher VAT and rising costs (such as the tax on financial transactions) into consumer prices," he explained. According to Kocis, one important factor affecting inflation this year is the energy price cap, which the government has reintroduced. Although it's helped to reduce inflation, it also complicates consolidation efforts. "Rising prices, as well as uncertainty in the global environment, are reflected in lower levels of consumer confidence, which naturally dampens the appetite to spend and may further act against inflation. It can be expected that households, anticipating harder times, will tend to accumulate more savings," added Kocis. "Tax measures within the consolidation of public finances are significantly influencing this year's price-level developments in Slovakia. Despite a certain slowdown in the pace of price increases in April, we expect inflation to accelerate in the coming months – one reason being the introduction of the transaction tax starting in April 2025. Average inflation for the entire year could therefore exceed 4 percent," added Eva Sadovska, an analyst at WOOD & Company. Tomas Bohacek, an analyst at 365.bank, expects that year-on-year lower fuel prices related to the drop in oil prices on global markets will continue to keep inflation at lower levels. "It can be said that while domestic factors (higher VAT, the transaction tax, real-estate prices) are pushing prices up, external influences could balance them very effectively. Today, it can be stated that if it weren't for the tough negotiating trade policy of the US administration, which has contributed to a decline in the global economy and the demand for oil, inflation here would still be hitting the 4-percent mark," Bohacek pointed out. Analysts from the Monetary, Statistics and Research Department of the Slovak central bank (NBS) noted that inflation eased in April after previous acceleration. "Consumer prices were lower than expected in NBS's spring forecast. The main contributors were the milder pace of price increases for common goods and cheaper fuel," they said. Earlier in the day, the Statistics Office reported that consumer prices of goods and services in April rose by 0.1 percent month-on-month and by 3.7 percent year-on-year. For both indicators, these were the lowest values so far this year. Year-on-year inflation was 4 percent in March and 3.8 percent in February. mf/df