Jaguar Land Rover plant in Nitra (source: TASR)
Slovakia’s economy at the end of 2018 significantly lagged behind both expectations and the previous quarter as well.
The constant price gross domestic product grew by 3.6 percent year-on-year. After seasonal adjustment, it rose by 4 percent as compared with the previous year, and by 0.8 percent compared with with the previous quarter, according to the data of the Statistics Office.
The volume of GDP at current prices in the fourth quarter of 2018 amounted to €23 338.4 million, which is 5.3 percent more than in the same quarter of 2017.
The slow-down of economic growth is lower than that estimated by both the Slovenská Sporiteľňa bank (4.1 percent) and the markets (4.4 percent), said analyst Katarína Muchová from Slovenská Sporiteľňa.
“The reason for the more significant slow-down of Slovakia's economic growth dynamics at the end of the year probably lies in the external environment that was reflected in the lower numbers for domestic industry,” Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia, wrote in a memo.
Industrial production remained in the black, mostly thanks to the launch of production at the Nitra-based plant of Jaguar Land Rover in October 2018, he added.
The remaining industrial sectors either dropped into the red or showed signs of slower growth dynamics. Moreover, it seems that some service sectors also reported worse numbers, the analyst continued.
Employment on the rise
The economic growth still demands a new labour force, which is reflected in the increase in employment, according to Koršňák.
The total employment in the final quarter of 2018 amounted to 2.4 million people, up by 1.7 percent y-o-y. After seasonal adjustment, total employment rose by 1.8 percent y-o-y and by 0.4 percent quarter-on-quarter, the Statistics Office data suggests.
Despite the growth, its annual dynamics dropped from 2 percent to 1.7 percent, Koršňák pointed out.
Outlook
“We expect that economic growth will slow down to 3.4 percent, taking into consideration the development of the external environment and the presence of negative risks,” Muchová wrote in a memo.
The risks are represented by the slower growth of China, Germany and the eurozone, with unsolved protectionism and Brexit as factors.
“The peak of the economic cycle has already passed, and we are gradually returning to potential growth,” she continued. “The more we can moderate or limit external risks, the smoother the influence on growth will be.”
Koršňák is even more pessimistic as they have lowered their estimate for this year from the former 4.3 percent to 3.2 percent.
