The Finance Ministry has refused to revise its GDP forecasts for 2000 after disappointing results for the first quarter cast doubt on the government's economic plans for this year.
Figures released June 15 showed a 1.5% growth in GDP for the first quarter of the year, way below the predictions of many analysts, far short of the government's own GDP prediction for 2000 of 2.5% - a figure upon which the budget was based. The Statistical Office immediately revised its year-end GDP forecasts to 1.6% after the data were published.
"I would not overestimate the importance of the first quarter," Finance Minister Brigita Schmögnerová said after the release of the figures. She added that there were no plans for a revision to her ministry's forecast in light of the data, and that she expected the low domestic demand and household consumption that had been a feature of the Q1 results to recover in the second half of the year.
However, officials at the ministry admitted that they had been disappointed with the figures. The markets also reacted to the news with the crown opening weakly on June 15 and falling to 41.9 to the euro after the GDP figures were issued, compared with 41.85 when trading stopped the day before.
"We will analyse the numbers published and talk to the Statistical Office about their methodology. At the moment we don't know exactly what's changed," said Finance Ministry spokesman Peter Švec. "But we are not happy with the figure that came out. We expected higher growth and we are not very happy. But the second quarter should be better - industrial production is high and we hope that the GDP figure for the year will be higher," he added.
Despite the lower-than-predicted figures, many analysts agreed with the government that the last two quarters of the year would produce better results.
"[Finance Minister Brigita] Schmögnerová said that there was no reason to change her forecast and I agree with that. I think we will see stronger figures in the second half of the year," Radomír Jač of Commerzbank Capital Markets told The Slovak Spectator. However, he added that the original forecast from the ministry had been "optimistic right from the start".
Despite the general expectation that Slovakia's GDP growth will pick up by the end of the final quarter of this year, the Statistical Office figures showed a worrying fall in domestic demand and household consumption that is of greater concern to the budget than GDP.
"It will make little difference to the budget at the end of the year if GDP is at 2% or 2.5%, that won't decide the final budget [performance of the government]" said Jac. "But what may be a problem for the government is household consumption. If that is in deep trouble, the budget will be too."
The drop of 6.4% in household consumption recorded in the first quarter, if continued throughout the rest of the year, would severly dent the state's tax income. But given the 3.1% drop in real wages seen in 1999 and the 6.1% slump in the first quarter of this year, the prospects for growth in domestic demand are not encouraging.
"The hope lies in exports, currently they are terrific," said Jac. Slovakia recorded its first trade surplus for the last five years in April this year, and government officials have been keen to stress the performance of the county's exporters.
Jač added that growth in the EU would give Slovakia a positive environment for exports and that GDP growth would be spurred on by net export performance by the end of the year.
