Economic growth is exceeding estimates

THE GROWTH of the Slovakia’s economy during the first quarter of 2015 exceeded estimates when it grew 3.1 percent in the year on year comparison, propelled by the domestic demand as well as foreign trade.

(Source: TASR)

In quarterly terms, the growth of the gross domestic product accelerated to 0.8 percent when seasonally adjusted. This is double the average growth in the EU and eurozone. The positive development may result in upward revision of economic growth estimates for 2015.

“The flash estimate of GDP for the first quarter of 2015 has confirmed the acceleration of the growth of the Slovakia’s economy,” Andrej Arady, analyst with the VÚB bank, wrote in his memo. “After the revision of previous data of quarter to quarter seasonally adjusted growth it was shown that he Slovakia’s economy increased for the second consecutive time – from 0.6 percent in the third quarter of 2014 to 0.7 percent in the fourth quarter of 2014 finally to 0.8 percent in the first quarter of 2015.”

Katarína Muchová, analyst of the Slovenská Sporiteľňa (SLSP), praised the economic growth as well.  

“This represents the fastest year-on-year growth since the end of 2011,” Muchová wrote in her memo, adding that the growth dynamics exceeded estimates by SLSP as well as the market.

In the first quarter of 2015 the gross domestic product (GDP) at constant prices increased by 3.1 percent as compared to the same quarter of 2014, up from 2.4 percent registered during previous two quarters. After seasonal adjustment GDP rose by 2.9 percent as compared to the first quarter of 2014 and by 0.8 percent in comparison with the previous quarter. The volume of GDP at current prices in the first quarter of 2015 reached €17.807 billion, the Slovak Statistics Office announced on May 13. The office will reveal detailed data on June 5.

The economy of the European Union as well as the eurozone grew 0.4 percent in the first quarter of 2015 in the quarterly comparison, Eurostat announced on May 13. In case of the EU the growth remained unchanged while it accelerated from 0.3 percent in the final quarter of 2014.

SLSP expects that the domestic demand was supported by an improvement on the labour market and the string growth of real wages and has remained to be the main driving force of growth.

“Revival of the foreign trade is a good news for the GDP growth,” said Muchová. “It indicates that the foreign trade might again contribute positively to the growth of economy when the net contribution of the foreign trade to the GDP growth was moderately negative at about -0.1 percent in 2014.”

Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia, expects that all elements of GDP accelerated during the period in question.

“Domestic demand probably kept on the growth trajectory.” Koršňák wrote in his memo. “While retail sales were of a disappointment at the beginning of the year, stronger car sales have probably compensated for this and thus we expect that also consumption of households kept the growth trend.”

Koršňák also expects that public expenditures keep growing up to parliamentary elections next spring. 

The economic growth exceeded estimates of several banks while according to VÚB monthly data about activities in industry, construction and retail trade already indicated that the flash estimate would exceed banks’ estimates. The monthly data also indicate that the growth should be better balanced between domestic and foreign demand.

Outlook of economic growth

Based on the flash estimate and monthly production and foreign trade statistics SLSP has already revised its economic growth estimate for 2015 to 3 percent, up from 2.5 percent.

“Domestic demand should remain to be the main driving force while the foreign trade should help too,” wrote Muchová, adding that Slovakia’s foreign trade began to revive also thanks to a better economic situation of the eurozone, especially Germany. 

Banks plan to revise revise their official estimates only after detained data are published. While VÚB estimates the economic growth in 2015 at 2.7 percent, U niCredit currently sees the economic growth for this year at narrowly above 3 percent.

GDP growth strong enough to generate new jobs

Total employment in the reference period reached 2.244 million persons and in comparison with the first quarter of 2014 it increased by 1.8 percent. Seasonally adjusted total employment rose by 1.7 percent as compared to the first quarter of 2014 and by 0.2 percent as compared to the fourth quarter 2014, the Statistics Office announced.

“In line with our expectations, the growth of employment slowed down after temporary effects from previous terms faded away,” Arady wrote. “But the economic growth has achieved the level when work places are naturally created.” 

In general the economic growth of 3 percent is considered to be the level from which the economy starts creating new jobs.

According to Arady, while the year-on-year growth dynamics of the growth of new work places decreased from 2.1 percent in the fourth quarter of 2014 but it still keeps still sound 1.8 percent during the first quarter of 2015.


Consumer prices increased by 0.2 percent in April compared with the previous month, reducing the year-on-year decline dynamics to -0.1 percent, according to Koršňák.

“We can see, similarly to March, reasons of the April growth of prices, respectively slowdown of the year-on-year decline of prices especially at prices of food and motor fuel,” said Koršňák.

Fuel prices increased by 3.3 percent in April, responding to the increase of oil prices on world markets. According to Koršňák, fuel prices in Slovakia, especially of petrol, responded relatively sensitively to the growth of oil prices on world markets.

Food prices increased in April by 0.6 percent compared with March while after the seasonal adjustment they grew 0.4 percent.

“Thus after 12 months of uninterrupted year-on-year decline food prices increased moderately in April, by 0.1 percent,” wrote Koršňák.

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