The U.K.’s decision to leave the European Union will curb demand for Slovak exports and constrain economic growth in the eastern European country, the government said.
Gross domestic product will expand 3.5 percent in 2017, compared with a 3.7 percent forecast from June, the Finance Ministry in the capital Bratislava said on Monday. Growth will accelerate to 4.4 percent in 2019, driven by the start of production at a new Jaguar Land Rover plant and the expansion of the existing Volkswagen AG facility, the ministry said.
The U.K. is Slovakia’s seventh-biggest trade partner with a 5.5 percent share of exports. The country, which has been a member of the euro area since 2009, may be also hit indirectly by the Brexit as uncertainty over the U.K.’s relations with the EU may feed into worsening sentiment across Europe and curb demand for Slovak products.
“Exports will accelerate, but it will be tamed by the consequences of the U.K. referendum,” the ministry said in a document posted on its website. “Brexit will increase the overall uncertainty and slow down the economies of our biggest trading partners.”
The ministry also raised its forecast for 2016 GDP growth to 3.6 percent, from the previous projection of 3.2 percent. Accelerating foreign demand, which will drive Slovakia’s car output to a record this year, and household consumption rising at the fastest pace in eight years will help offset the impact of weaker investment caused by smaller inflow of EU funds.