Economy surges ahead 6.6 percent in second quarter

THE SLOVAK economy surprised market watchers with stronger than expected growth of 6.6 percent y-o-y in the second quarter, according to a flash estimate by the Slovak Statistics Bureau, up from 6.3 percent in the first quarter.

The latest rate again makes the Slovak economy the fastest-growing in Central Europe, ahead of the Czech Republic (6.4 percent), Poland (5.2 percent} and Hungary {3.6 percent}, according to estimates by the ČSOB bank.

The preliminary growth estimate does not contain complete data from all households and corporates, and a final figure will be presented next month. Nor does it contain enough information to allow analysts to identify what is driving the high growth, although most cite fixed investments and household consumption.

The growth figure has again raised the question of whether the Slovak economy is beginning to overheat, with inflation now up to 5 percent and the National Bank of Slovakia having raised rates three times this year already, from 3 to 4.5 percent.

ČSOB analyst Dušan Gabriš said he expected the NBS to raise key interest rates once more this year to 5 percent and again early next year to 5.5 percent, and added that he believed the economy was “moderately overheating”.

On the other hand, Viliam Pálenik, an economist with the Slovak Academy of Sciences, called the GDP development “healthy and stable growth that corresponds to the real capability of the Slovak economy”. He added that inflation was growing slowly, and on the back of higher energy and oil prices.

“Overheating happens when you get inflation that can’t be easily explained,” he said. “The current inflation is explainable by concrete factors.”

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