BRATISLAVA, Slovakia -- The UK's decision to leave the European Union may curb some demand for Slovak exports and constrain the market’s economic growth, but this will be offset by a boost in auto production due in 2019, the Slovak government said.
Gross domestic product will expand 3.5 percent in 2017, compared with a 3.7 percent forecast from June, the country's Finance Ministry 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 in Nitra and the expansion of the existing Volkswagen Group facility in Bratislava, the ministry said. VW Group, which currently builds Porsche Cayenne bodies in white at the plant, plans to begin final assembly of the model exclusively at the factory starting in 2018. The Cayenne's final assembly currently takes place in Leipzig, Germany.
The automaker also builds the Audi Q7, VW Touareg, Bentley Bentayga SUVs together with the VW Up, Seat Mii and Skoda Citigo minicars at the Bratislava site, according to the Automotive News Europe plant assembly map.
The UK 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, also may be hit indirectly by the Brexit as uncertainty over the UK'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 UK 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 effect of weaker investment caused by smaller inflow of EU funds.
Automotive News Europe contributed to this report