SK: Slovak Inflation Probably Peaked in June

In June, Slovak headline year-on-year inflation (CPI) stood at 4.3%, slightly below our expectations. On a monthly basis, consumer prices increased by 0.2%. Core inflation reached 3.5% year-on-year.

Overall, inflationary pressures remain primarily driven by rising service prices. Core inflationary pressures persist in the Slovak economy. A significant impact on the year-on-year inflation development came from the notable price increase in the restaurants and hotels category, which rose by 9.5% (contribution of 0.7 percentage points). Prices for food services were 10% higher year-on-year, and accommodation services increased by 5%. Prices in the recreation and culture category also grew by almost 5% year-on-year (contribution of 0.4 percentage points). Food and non-alcoholic beverages rose by 4.2% year-on-year (contribution of 0.9 percentage points). In the housing and energy category, which has the greatest weight, prices increased by 2.6% (contribution of 0.6 percentage points), although the growth rate was more moderate. Notable increases were seen in imputed rent (+1.9% y/y) and actual housing rent (+3.3% y/y). On the other hand, cheaper fuel (-5% y/y) helped dampen the year-on-year price growth. On a month-on-month basis, the most significant upward pressure on inflation came from transportatiton prices, particularly a 5.2% increase in transport services (mainly due to more expensive road and combined passenger transport).

This year's increase in prices is broadly spread across various groups of goods and services, driven by the higher value-added tax (VAT) introduced as part of the consolidation package. A gradual pass-through of higher VAT and rising costs, such as the financial transactions tax, into consumer prices is still expected. A key factor influencing inflation developments this year is the governments reintroduction of the energy price cap, which has helped bring inflation down, albeit at the cost of complicating fiscal consolidation efforts.

We expect that inflation reached its peak for the year in June. In the second half of the year, we anticipate a moderate slowdown in the year-on-year pace of price growth, although inflation is likely to remain near 4% during the summer months. In the 4Q25, year-on-year inflation could dip below the 4% threshold. According to our estimates, the average CPI inflation rate could end the year slightly below 4%.