Spectator on facebook

Spectator on facebook

Analysts view GDP growth news with caution

An export-led rise in first quarter real gross domestic product (GDP) brought some cheer to Slovakia's fragile economy, but analysts cautioned against any undue optimism for the long-term economic outlook.
Slovakia's economy grew by a real 1.8% year-on-year in the first quarter of 1999, up from 0.5% growth in the last quarter of 1998 and 4.4% for the whole of last year, the Slovak Statistical Office said on June 15.
The figures were much as expected but analysts drew some comfort from the strong impact of exports versus imports. Exports were up by a real 4.7% compared with minus 4.2% for imports.

An export-led rise in first quarter real gross domestic product (GDP) brought some cheer to Slovakia's fragile economy, but analysts cautioned against any undue optimism for the long-term economic outlook.

Slovakia's economy grew by a real 1.8% year-on-year in the first quarter of 1999, up from 0.5% growth in the last quarter of 1998 and 4.4% for the whole of last year, the Slovak Statistical Office said on June 15.

The figures were much as expected but analysts drew some comfort from the strong impact of exports versus imports. Exports were up by a real 4.7% compared with minus 4.2% for imports.

"In terms of GDP structure it's a turn for the better, since the GDP is growing on the basis of net exports and a lot less depends on domestic demand," said Ján Tóth of ING Barings.

"It is clearly positive that the effect of the trade balance has improved significantly," reflected Ivan Chodák, a macroeconomic analyst at CA IB. "This has a major effect on GDP, since we are a very open economy."

The Slovak government officially expects 1999 GDP growth at 3.0%, but analysts have long warned the target would be difficult to meet.

Despite the improvement in economic growth, analysts cautioned against getting too optimistic. "We don't need to lie to ourselves... It does not mean the GDP is beginning to grow faster," said Tóth.

"There has (compared with recent years) been a significant slowdown in growth, but the numbers were widely expected," said Chodák.

The slowdown in the economy has been accompanied by a government austerity programme designed to cut the fiscal deficit to around 2.0% from 5.0% of GDP in one year. Foreign borrowing to finance infrastruture products has also been curbed, putting a further brake on growth.

Chodák explained that the austerity programme, which includes a 7% import surcharge and a rise in the VAT tax, would "help to reduce the negative impact that import figures had on GDP growth last year," but that the slow-down in household consumption to be expected from the tax hike and increases in regulated prices would largely offset the positive effects of the surcharge.

"Household consumption accounts for about 49.5% of GDP in Slovakia," he said. "These price increases will create pressure on consumption, with consequent impact on GDP growth."

All analysts questioned by Reuters said they expected full-year growth of around one percent, but some did not rule out the possibility of a contraction. "Overall, the economic situation is much worse than in the last few years," said Miloš Bozek, an analyst at J&T Securities.

Top stories

Crates and boxes. Slovaks discover new ways of grocery shopping

Farmer’s boxes are gaining customers in Slovakia as people slowly become more conscious about quality and the origin of the food they eat.

Blog: Are flying cars coming to the skies?

At least 19 companies, including a Slovak one, are currently developing flying car planes, but there are still many issues that must be worked out.

AeroMobil

What kind of expectations do some Slovaks have for world leaders?

Among EU member states, opinions of the United States declined in all but two — Poland (which makes some sense) and Slovakia (which does not).

Donald Trump

The biggest antiquarian bookshop from Leopoldov is stored in Trnava Photo

The new year could bring a new cultural centre in antiquarian bookshop.

Archive photo