Slovakia recorded negative trade balance in August 2018

Analyst: The real deficit has been smaller than originally expected, however.

Illustrative stock photoIllustrative stock photo (Source: Sme)

Slovakia’s foreign trade produced a deficit of €81.7 million in August 2018, which is a drop of €23.1 million year-on-year, the Statistics Office reported on October 9.

Total exports amounted to €6.248 billion, up by 5.8 percent y-o-y, while total imports increased by 5.3 percent to reach €6.330 billion, the TASR newswire wrote.

In the January to August period, exports grew 7.5 percent y-o-y to €51.641 billion and imports rose 7.4 percent y-o-y to €49.851 billion. Thus, Slovakia reported an eight-month trade balance surplus of €1.79 billion, up €149.6 million from the same period of last year.

Good eight months

Eight-month exports to other EU-member countries were up by 8.2 percent y-o-y to equal 85.7 percent of Slovakia’s overall exports. Conversely, imports from EU countries comprised 67.8 percent of overall imports, up by 9.2 percent y-o-y.

Exports outside the EU countries swelled by 3.5 percent y-o-y in the January-August period to account for 14.3 percent of the country’s overall exports, according to TASR. Meanwhile, imports from non-EU countries increased by 4 percent in the same period to make up 32.2 percent of imports.

Machinery and transport devices – as the most traded items – made up 59.8 percent of all exports and 47.9 percent of overall imports in the first eight months of this year.

After seasonal adjustments, overall exports reached €6.640 billion (up by 5.8 percent y-o-y), with overall imports reaching €6.458 billion (up by 5.2 percent), thus posting a surplus of €182.6 million (42.3 million up y-o-y).

Deficit in summer usual, 2018 even smaller

Foreign trade was expected to drop into negative in August 2018, but the volume of deficit was milder than foreseen, Ľubomír Koršňák, macroeconomic market analyst of the UniCredit Bank Czech Republic and Slovakia, wrote in a press release.

The balance of foreign trade usually worsens in summer due to summer holiday production shutdowns in plants, he added. This year, a higher deficit resulting from “advance imports” of supplies connected to new production in autumn (especially in the Nitra plant of the Jaguar Land Rover carmaker) has not materialised so far.

Nevertheless, the growth of turnover in foreign trade has lagged behind the strong figures from July, and partially confirmed the hypothesis that compared to 2017, some summer holidays were postponed to August. Both exports and imports were reduced after a seasonal adjustment, and this has resulted in a considerable slow-down of the dynamics of their year-on-year growth, the analyst points out.

On the other hand, exports partially maintained high dynamic growth thanks to the acceleration of y-o-y growth of export prices in the past two months. The growth dynamics of exports have probably slightly slowed-down in reality, even though it has still remained relatively strong, according to Koršňák.

The faster growth of imports is greatly connected with price factors, mostly more expensive crude oil.

Outlook for the near future

In the upcoming few months, a strong domestic demand – both the import of technologies for new car plant and the higher industrial deliveries before the start of production – should affect imports and temporarily worsen the balance of foreign trade. Then new export capacities in the country should considerably encourage the growth of exports – although they may partially be reflected in imports, due to the bigger imports of materials and goods for production.

On the other hand, the cyclic slowdown of growth in Europe could dampen the growth of machinery and electric devices exports. However, the effect of strong automotive growth should prevail, and foreign trade surpluses should start expanding considerably again from the end of the year.

A possible risk for foreign trade remains the potential trade war between the EU and the USA, or the hard Brexit, both being mostly felt by the automotive industry in Slovakia, directly as well as indirectly, Koršňák sums up.

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