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ANALYSTS RED-FACED AFTER PREDICTING OVER 10% RISE

GDP grows 8.9% in first quarter

A YEAR ago, economic growth of almost nine percent would have delighted Slovak analysts. This spring it has left them disappointed.
The Statistics Bureau released a flash estimate of year-on-year GDP growth on May 15 that showed the economy expanded by 8.9 percent in the first quarter of 2007. A detailed breakdown will not be available until June 1.

A YEAR ago, economic growth of almost nine percent would have delighted Slovak analysts. This spring it has left them disappointed.

The Statistics Bureau released a flash estimate of year-on-year GDP growth on May 15 that showed the economy expanded by 8.9 percent in the first quarter of 2007. A detailed breakdown will not be available until June 1.

But with analysts predicting record figures of 10.2 to 10.8 percent leading up to the flash estimate, the news left them dumbfounded.

"The market was really betting on the positive figures from industry and construction that were published ahead of the GDP estimate," said UniCredit Bank analyst Viliam Pätoprstý .

The crown weakened slightly on the growth figures, but by the end of the day was back to the morning's level of Sk33.55 to the euro.

The Statistics Bureau was not amused by the analysts' prognoses. "We regard it as the height of un-professionalism," said the Bureau's spokeswoman, Eva Kelemenová. "It creates chaos on the market."

The growth figure was down for the third quarter in a row, after 9.6 percent GDP growth in the fourth quarter of 2006, and 9.8 percent in the third quarter. However, analysts noted that it still left Slovakia with the second-highest growth in the EU-27 behind Latvia (10.7 percent), and predicted that the Slovak GDP would finally break the 10-percent mark in the second quarter, and thereafter cool off.

The Slovak economy has been growing strongly since early 2006. Economic experts have ascribed its performance to liberal economic reforms launched under the previous government from 2003 to 2005.

"Any growth rate above six percent is still regarded as high," said the SLSP bank's main economist, Juraj Kotian. "We expect that after the second quarter, the growth will start to slow down, but that it will not have any impact on the standard of living."

In 2006, the Slovak GDP grew at 8.3 percent, while this year the central bank expects 8.9 percent growth. "The first quarter growth figure thus still beat the average growth rate for last year, and is exactly in line with predicted growth for this year," said VÚB bank analyst Martin Lenko.

Given that detailed growth figures are not yet available, analysts were only able to guess at the reasons the economy did not meet their expectations. Allianz Slovakia analyst Mário Blaščák said he believed that both investments and warehoused supplies had fallen, and that exports had not grown as fast as predicted in February and March.

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