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MACRO NOTES

Getting to the bottom of GDP growth

The Slovak economy grew 1.5% in the first quarter of 2000 as opposed to predictions of 3.5 to 4%. However, the growth was 'artificially' boosted by calendar effects, meaning that adjusted output has probably actually fallen.
Also, without any prior announcement, the Statistical Office changed the methodology used to calculate the figures; the current available data set starts only from the first quarter of 1992. This leaves us on thin ice in interpreting the data. But a close look at the data after it has been transformed from the new methodology to the old suggests that:
a) Slovak output adjusted for seasonal and calendar effects probably decreased for the 3rd consecutive quarter

The Slovak economy grew 1.5% in the first quarter of 2000 as opposed to predictions of 3.5 to 4%. However, the growth was 'artificially' boosted by calendar effects, meaning that adjusted output has probably actually fallen.

Also, without any prior announcement, the Statistical Office changed the methodology used to calculate the figures; the current available data set starts only from the first quarter of 1992. This leaves us on thin ice in interpreting the data. But a close look at the data after it has been transformed from the new methodology to the old suggests that:

a) Slovak output adjusted for seasonal and calendar effects probably decreased for the 3rd consecutive quarter

b) as expected, export growth of 20% supported GDP growth while import growth was restrained at 8%

c) a real wage fall of 6.1% dragged household consumption sharply down by 6.4%


On the demand side there was a dramatic fall in household consumption, as falling purchasing power reduced domestic demand by 5.2%. Household consumption alone contributed to a 3.3% fall in GDP growth. On the other hand, the downward spiral in investments has abated and fiscal austerity measures have also brought down the cost of Slovak bureaucracy, the consumption of state administration falling 5%. This was largely because of a fall of 9% in real wages in the public sector translating to a contribution of -0.9% to GDP growth.

We are now more certain of the falling trend seen recently in GDP data. Since calendar effects will have a negative effect in the remaining three quarters, we now expect a mere 1.4% growth in 2000, down from 1.9% a year ago.


Ján Tóth is senior analyst at Dutch investment bank ING Barings in Bratislava. His Macro Notes column appears monthly.

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