BRATISLAVA -- Growth in the Slovak economy, which depends heavily on its auto industry, will slow by 0.1 to 0.2 percentage points this year and by up to 0.3 percentage points in 2017 as a result of the UK's decision to exit the EU, the country's finance ministry said.
An expanding car sector is a major driver for the central European country. With a population of just 5.4 million, Slovakia is the world's top automaker per capita and is home to plants run by Volkswagen Group, Kia Motors and PSA Group. Last year, production in the market exceeded 1 million vehicles for the first time.
The UK is Slovakia's seventh biggest trade partner and cars make up almost half of Slovakia’s exports to Britain.
The Slovak ministry previously forecast economic growth of 3.2 percent this year, accelerating to 3.7 percent in 2017 and 4.1 percent in 2018. It will present an updated outlook in September.
In the report today, the ministry said a UK departure from the EU will slash between 0.1 and 0.9 percentage points off growth by 2019, depending on different scenarios.
An optimistic scenario expects the situation to calm down and current trade relations with Britain to continue.
Jobs at risk
A more realistic one sees the creation of trade barriers, prolonged uncertainty and worsened economic sentiment in the EU. Under this, Slovakia would lose almost 4,000 jobs by 2019.
The ministry's most pessimistic scenario counts on a more serious disruption of mutual trade, a recession in the UK and a significant economic slowdown in the EU.
"The pound's depreciation against the euro will decrease the attractiveness and accessibility of our products for the British consumers," the ministry's Institute for Financial Policy said. "Even stronger will be a secondary effect of a slowdown in our key trade partners - Germany, Poland, France and the Netherlands," it said.
Credit rating firm Standard & Poor's said on Wednesday the risk of lower economic growth in central and eastern Europe had started to rise in the wake of Brexit.
Kia builds the Cee'd compact car, Sportage SUV and Venga minivan in Zilina, Slovakia, according to the Automotive News Europe plant assembly map, while PSA produces the Peugeot 208 subcompact and C3 Picasso small minivan at its Trnava factory.
VW Group's factory in Bratislava builds the VW Touareg and Audi Q7 large SUVs, VW Up, Seat Mii and Skoda Citigo minicars, as well as bodies in white for the Porsche Cayenne and Bentley Bentayga SUVs.
Jaguar Land Rover said in June the British vote to exit the EU would not affect its plans to build a new plant in Slovakia, which is due to start production in 2018.
Automotive News Europe contributed to this report