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Upbeat GDP news? Not yet

MARKETS are thirsty for positive news. The Slovak statistics authority failed to quench the country’s thirst for an optimistic forecast when it released its updated figures on June 3 on the performance of Slovakia’s economy in the first quarter of 2009. The country’s GDP fell 5.6 percent year-on-year in the first three months rather than by the 5.4 percent reported earlier in the Slovak Statistics Office’s flash estimate, the office said.

MARKETS are thirsty for positive news. The Slovak statistics authority failed to quench the country’s thirst for an optimistic forecast when it released its updated figures on June 3 on the performance of Slovakia’s economy in the first quarter of 2009. The country’s GDP fell 5.6 percent year-on-year in the first three months rather than by the 5.4 percent reported earlier in the Slovak Statistics Office’s flash estimate, the office said.

The Statistics Office predicts that the country’s economy will contract by 3.5 percent over 2009. The finance minister and the governor of the central bank, however, said that the Statistics Office was being overly optimistic in its prediction. The number of unemployed increased in the first quarter of 2009 by 500 people year-on-year to reach 281,000 jobless, but the unemployment rate remained unchanged at 10.5 percent, the office said.

The updated GDP figures were not a surprise for Eva Sárazová, analyst with the Poštová Banka.
“As we had expected, a drop was recorded in all the components of GDP,” Sárazová told The Slovak Spectator. “Only public finance spending has shown slight growth.”

A fall in industrial production, a significant drop in revenues from exports, less investment, weaker domestic demand for goods and services and also shopping tourism by Slovaks to neighbouring countries kept market watchers reserved when preparing their predictions, Sárazová added.

Domestic demand dropped by 4.6 percent while foreign demand fell by 24.3 percent; imports of products and services dipped by 22.6 percent while household consumption declined by 1.2 percent, the Statistics Office said.

GDP in the first quarter of 2009 reached €14.648 billion, 6.1 percent less, in constant prices, than the same quarter last year, according to the Statistics Office.

Sárazová said that the natural gas crisis in the first-half of 2009, which led to temporary production shutdowns at some of Slovakia’s business giants after Russia turned off its gas supply over a dispute with Ukraine, also contributed to the fall in GDP to some degree.

In its prognosis, the Statistics Office said the economy might contract by 3.5 percent for the whole of 2009 while it estimates total GDP will reach €66.3 billion for the year. Overall employment might fall by 2.5 percent, with 2.373 million people having jobs, the Statistics Office predicts.

“The whole-year forecast is a bit optimistic,” said Finance Minister Ján Počiatek, whose ministry has been criticised for working with a government budget plan that still assumes economic growth at 2.4 percent for 2009. “It will be slightly worse,” he said.

Počiatek said the ministry’s forecast is now being updated and would be finished in the upcoming weeks and that the ministry will then make the necessary adjustments to this year’s budget, reported the SITA newswire.

Sárazová is predicting a 2.7 percent fall for the Slovak economy for all of 2009, while conceding that the numbers might turn worse. “We do not exclude the possibility that under the influence of further, rather negative news, we might revise downward both the estimates of quarterly economic activity and also the entire year,” she said.

In its revised GDP estimate released on April 7, the National Bank of Slovakia said that Slovakia’s economy would contract by 2.4 percent over the course of 2009. Its projection at the end of 2008 had foreseen growth of 2.1 percent throughout 2009.

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