Analysts cautious over 15% July export improvement

A STRONG improvement in July exports was greeted cautiously by domestic economic analysts, who said the result did not yet spell a long-awaited turnaround in the worrying Slovak trade deficit.
July exports reached a 14-month high at just over Sk59 billion, growing 15.6 per cent over the same month a year ago. Imports, on the other hand, were up only 11.4 per cent to Sk66.3 billion.
The trade deficit for the month was Sk7.2 billion, over 14 per cent less than in July 2001.

A STRONG improvement in July exports was greeted cautiously by domestic economic analysts, who said the result did not yet spell a long-awaited turnaround in the worrying Slovak trade deficit.

July exports reached a 14-month high at just over Sk59 billion, growing 15.6 per cent over the same month a year ago. Imports, on the other hand, were up only 11.4 per cent to Sk66.3 billion.

The trade deficit for the month was Sk7.2 billion, over 14 per cent less than in July 2001.

The improvement did not have a marked impact on the year-to-date trade deficit, however, which at Sk48.9 billion at the end of July was only Sk1 billion less than the same time last year.

Slovakia has been warned by the International Monetary Fund that its enduringly high trade deficit could create pressure for a currency devaluation, pressure which could mount as the inflow of foreign capital through privatisations dried up.

One of the sources of caution among market watchers was the fact that the promising import trend had been heavily influenced by a stronger Slovak crown, meaning the cost rather than the quantity of imports had declined.

"The crown strengthened by 3.3 per cent against the dollar in July, resulting in a Sk7.6 billion year-on-year drop in import costs for raw materials," said Ľudová Banka analyst Mario Blaščák.

Slávia Capital analyst Pavol Ondriška estimated that if the exchange rate between the crown and the main currencies in which Slovakia carries out its foreign trade transactions had not changed, the July deficit would have been Sk4 billion higher.

The analysts also noted a link between high exports and high imports, saying that the imports driving the trade deficit - machinery, mineral raw materials, transportation means and metals - were precisely those supporting Slovakia's main export sectors, such as steel products and automobiles.

"These are commodities on which our exports are based," said UniBanka analyst Viliam Patoprsty.

Ondriška added that Slovak industry was still being affected by poor economic growth in EU countries, which absorb over 60 per cent of Slovak exports, and that the situation was not likely to change over the next six months.

Given fears that a rise in global oil prices might send the Slovak trade deficit back up, Ondriška said he was leaving his estimate of the end-year deficit unchanged at Sk100 billion, only slightly below last year's record Sk103 billion.

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