Slovakia is witnessing an increase in layoffs in the industrial sector as economic growth stagnates and companies seek to cut costs amid rising inflation.
In Slovakia, the industrial sector is experiencing a notable rise in layoffs, as reported by economist Ľubomír Koršňák from UniCredit Bank. He highlights that many employers have previously retained employees despite decreasing orders because the challenge of hiring in the future seemed daunting. However, this unsustainable practice is beginning to yield layoffs as orders do not grow fast enough to support the current workforce. With unemployment slowly rising in Slovakia since last year, Koršňák warns that the situation is unlikely to improve without an adequate economic growth rate, pointing out that the anticipated growth of around one percent is insufficient for job creation.
The manufacturing industry is particularly affected, with assembly production, which is sensitive to labor costs, being hit hard. Koršňák notes that industries like footwear manufacturing had already seen significant job cuts last year. International firms are increasingly opting to shift production to countries where labor costs are lower, reducing Slovakia's attractiveness as a manufacturing hub. This trend raises concerns for the Slovak economy, as it reflects broader shifts in global manufacturing dynamics where cost-effectiveness is becoming a priority.
Additionally, Slovakia is facing inflation challenges, with expectations for it to be the second highest in the European Union after Romania this year. The rising costs of energy and services play a significant role in this inflationary trend. Following a noticeable rise in restaurant prices last year, predictions suggest that there may be limited scope for further increases, indicating ongoing economic pressure. Overall, the combination of rising unemployment, challenges in the industrial sector, and persistent inflation could have serious implications for Slovakia's economic stability and growth prospects.
