Slower industrial output no threat to GDP

A lower-than-expected rise in Slovak industrial output in March should not have a significant influence on overall GDP growth, analysts said on May 13.
The Slovak Statistical Bureau (ŠÚSR) said March industrial output rose 1.5 percent year-on-year, down from a 2.2 percent rise in February. A Reuters poll of analysts on May 12 predicted March output may increase by as much as four percent.
"Even though we had expected the figure to be higher, the slower growth is not very surprising due to remaining structural problems in the entire economy," an analyst with ING Barings in Bratislava, Martin Barto, said. "But the slower increase will probably not endanger GDP growth since a major part of it should be boosted by services, just as it was in 1996."

A lower-than-expected rise in Slovak industrial output in March should not have a significant influence on overall GDP growth, analysts said on May 13.

The Slovak Statistical Bureau (ŠÚSR) said March industrial output rose 1.5 percent year-on-year, down from a 2.2 percent rise in February. A Reuters poll of analysts on May 12 predicted March output may increase by as much as four percent.

"Even though we had expected the figure to be higher, the slower growth is not very surprising due to remaining structural problems in the entire economy," an analyst with ING Barings in Bratislava, Martin Barto, said. "But the slower increase will probably not endanger GDP growth since a major part of it should be boosted by services, just as it was in 1996."

Barto added low output growth should continue in the coming months, since the pace of restructuring small and medium-sized firms was an obstacle to its acceleration.

Juraj Renčko, an analyst in the economic forecasting department at the Slovak Academy of Sciences, also noted that problems on the export side of the economy were the main factors behind the slower output growth. "There are several factors behind the slow growth, such as the economy's structural aspects, a stronger crown and rising wages, which altogether make our exports less competitive than in previous years," Renčko said. Slovakia exports only a narrow range of value-added goods such as oil products or cars from Volkswagen's Bratislava plant, with semi-finished materials accounting for a major part of overall exports.

"It's sometimes hard to find room for such products on highly competitive target markets - the EU and the Czech Republic," Renčko added.

The Slovak economy is strongly linked to the development of its main export partners since its small domestic market - 5.5 million people - does not create enough demand for strong sustained economic growth. Renčko said he saw average industrial production rising between 3.0 to 3.5 percent in the first half of 1997. "I am optimistic about industrial growth in the near future since the central bank's restrictive measures are already bringing results to the trade balance," Renčko said. "The budget also showed positive development in the [first] three months of 1996."

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