AFTER 13 months of suffering, Slovakia’s industrial sector has posted the first year-on-year results that market watchers are able – with at least a little more confidence – to refer to as signs of recovery. Industrial output grew by 1.5 percent in November 2009 compared to the same month in 2008, according to Slovakia’s statistics authority. Though pleasing to the crisis-weary eye, the data has not brought much surprise to the markets, since improving foreign demand and the low basis effect from the previous year had already signalled likely growth. But they say December 2009 might turn out to have been an even stronger month in terms of production growth.
The Slovak Statistics Office reported the largest year-on-year increase – 16.2 percent – in the production of vehicles, which is one of the main drivers of Slovakia’s economy. Production of machinery and equipment rose by 8.2 percent year-on-year and the production of electrical appliances posted 7.3-percent growth. Production of metals grew by 4.7 percent when compared to November 2008.
“The November data for industry has not really brought anything surprising, since the overall growth in production into the positive zone had been expected,” VÚB Banka senior analyst Martin Lenko said. “The improving trend, backed by reviving foreign demand and the basis effect from last year, should continue in the forthcoming months.”
Mária Valachyová senior analyst with Slovenská Sporiteľňa, another bank, had also expected growth.
“Industrial production has been gradually increasing and compared to its nadir in December 2008, after cleaning the data of seasonal influences, it is now approximately 20 percent higher, even though it has still not reached pre-crisis levels,” Valachyová told The Slovak Spectator.
According to Lenko, this trend is also confirmed by the December data for confidence in industry, in which forecast production for the next three months has significantly improved.
“We expect that industrial production in the last month of 2009 grew by 10 percent year-on-year,” Lenko told The Slovak Spectator.
Valachyová agrees that the same factors, the low comparison basis and growth during the year will mean there was significant year-on-year growth of approximately 15-20 percent.
“The data can be interpreted as a revival of the economy even though the most significant month-on-month growth emerged in the summer and autumn,” Valachyová said. “We expect that month-on-month growth will, in the coming months, be milder since the effect of the old-car scrapping bonus is evaporating and interest in new cars will be smaller because people who had been considering purchase of a car will obviously have done so using the discounts.”
The key sectors of the economy – production of vehicles, production of machines, electronic appliances and production of iron – have fuelled this growth, said Lenko.
However, the analysts also suggested that even though industry might have put its worst times behind it, this does not mean that milder impacts of the crisis, at least, will not still be felt.
“I dare to say that despite the improving economic activities all [economic] branches will continue to feel to a smaller degree the negative impacts of the crisis,” Lenko said. “Though demand is reviving, it is doing so only very slowly.”
Slovakia’s foreign trade balance posted a surplus in November 2009 of €259.4 million, compared with a revised surplus in October of €352.6 million. The cumulative 11-month foreign trade surplus amounted to €1.393 billion. During the same period a year ago, Slovakia recorded a foreign trade deficit of €391 million, according to the statistics authority.
Exports in November posted year-on-year growth for the first time in 2009, up by 2.7 percent to €3.995 billion. In the previous month, exports had declined by 11.7 percent year-on-year. Imports recorded their lowest figure this year in November, though the indicator did not reach 2008 levels, the SITA newswire wrote.
“I personally had expected a drop in exports in November of 4 percent,” said Lenko. “There is no market consensus about the growth of exports. In the same way, detailed data for foreign trade in November are not available – these will be released next month – and thus it is impossible to tell with certainty what was behind the year-on-year growth.” However, based on the industrial branches, all export-oriented, which had previously retarded the growth of industry it is possible to assume that exports of cars, machines and metals were the drivers, said Lenko.
“We expect that in December exports will grow further, while the fall in imports should flatten out,” said Lenko. Valachyová too assumes that year-on-year growth in exports will be more significant in upcoming months for the same reasons that are propelling growth in industrial production: the low basis and improving foreign demand for industrial products seen during the previous months. Slower imports have also contributed, along with the increase in exports, to the significant foreign trade surplus, she said. The structure of foreign trade has not yet been published.
“I assume, however, that lower imports are a reflection of the same tendencies from the preceding months: lower inward foreign investment, imports of industrial products and most probably also consumer goods,” Valachyová concluded.
