Foreign demand provides fuel for Slovakia's economic engine

ECONOMIC sections of newspapers will continue disappointing readers who seek stories about a definitive end to the economic crisis, a sudden jump in employment, or more responsible fiscal policies by governments. However, the latest figures on Slovakia’s economic growth do provide some degree of compensation: GDP grew in the first quarter of 2010 by 4.8 percent, Slovakia’s Statistics Office reported, rounding up its May flash estimate by 0.2 percentage points. The country’s gross domestic product reached €15.072 billion and market watchers say that it is mostly foreign demand that has been pouring fuel into Slovakia’s economic engine.

The long-term unemployed are finding it difficult to find work.The long-term unemployed are finding it difficult to find work. (Source: TASR)

ECONOMIC sections of newspapers will continue disappointing readers who seek stories about a definitive end to the economic crisis, a sudden jump in employment, or more responsible fiscal policies by governments. However, the latest figures on Slovakia’s economic growth do provide some degree of compensation: GDP grew in the first quarter of 2010 by 4.8 percent, Slovakia’s Statistics Office reported, rounding up its May flash estimate by 0.2 percentage points. The country’s gross domestic product reached €15.072 billion and market watchers say that it is mostly foreign demand that has been pouring fuel into Slovakia’s economic engine.

Martin Lenko, senior analyst with the VÚB Bank, in reviewing the structure of the reported GDP growth, said it was clearly fuelled by stronger foreign demand, with exports from Slovakia increasing by almost 17 percent year-on-year.

“Domestic demand remained weak, but here too some improvements appeared: household consumption grew slightly; governmental consumption remained robust; and the decline in the level of investment softened,” Lenko told The Slovak Spectator.

Regarding the economy’s ability to maintain its current vigour, market watchers have said that the basis effect, the sharp fall in output recorded in the first quarter of 2009, which makes the data for the first quarter of 2010 look better by comparison, will slowly dissipate this year.



“We expect that the basis effect, which is largely behind the recorded GDP growth, to slowly withdraw in the next quarter and the level of economic growth will gradually slow down in the second half of the year to around 2 percent,” Lenko said. “For the whole year, we expect the growth of real GDP to be at 3 percent year-on-year.”

Lenko’s estimate is close to the prognosis made by the Institute of Informatics and Statistics (Infostat) which predicted 3.3 percent year-on-year growth for all of 2010, the SITA newswire wrote.

Infostat suggested that relative incremental growth in GDP formation will gradually shrink not only under the influence of the shrinking basis effect, but also because of expected cuts in public spending due to the “enormously growing deficit in the state budget,” SITA wrote.

As for the gloomier data, Slovakia’s Statistics Office reported that the country’s unemployment rate in the first quarter of 2010 rose 4.6 percentage points from a year earlier and now stands at 15.1 percent.

The army of Slovak jobless now has 407,100 members, an increase of 126,100 since the first quarter of last year. Lenko notes, however, that the Statistics Office calculates this jobless rate based on a labour force survey which it conducts quarterly. He said its calculated jobless rate of 15.1 percent contrasts with statistics prepared from the number of jobseekers registered at the country’s labour offices, calculated on a monthly basis. Lenko said the registered rate of unemployment based on this method started dropping mildly in April and March, producing a rate of 12.5 percent for these months compared to 13 percent in February.

“It is difficult to judge which of the statistics better captures reality, but in my opinion we have currently passed the peak of growth in the unemployment rate,” Lenko said.

With the exception of people who had last worked in the education sector, the number of jobless people rose in all economic sectors compared with the first quarter of last year. The overall unemployment rate was significantly influenced by a large increase in the number of people who lost jobs in the industrial sector, in construction, and in accommodation and food service facilities, as well as in trade, SITA wrote.

The numbers of long-term unemployed, those people who have been jobless for more than a year, grew by 61,100 in the first quarter to 217,700 and now represent 53.5 percent of the total unemployed.


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