Slovakia’s economic growth speeds up to 0.9% y/y in Q2, matches flash estimate

By bne IntelliNews September 4, 2013

Slovakia's annual economic growth accelerated to 0.9% in the second quarter of 2013 from 0.6% in the previous quarter, helped by a faster rise in exports, while domestic demand remained subdued, the country statistics office said, confirming its flash estimate released last month. Compared to Q2 2012, the growth was by 1.7pps lower. The volume of the gross domestic product (GDP) at current prices reached EUR 18.255bn in Q2, up 2.4% from a year ago. Slovakia's output grew by a seasonally-adjusted 0.3% q/q in Q2, following a 0.2% growth in the previous quarter.

Slovakia’s economic growth was achieved on the back of a growth in foreign demand, which offset a decline in domestic demand, the statistics office said. Exports widened by 4.7% y/y in Q2 2013, speeding up from a 4.2% growth in Q1. Imports grew by 1.3% in Q2 2013, slowing down from a 1.6% rise in Q1. Domestic demand remained a key concern, as it shrank by 3.3% y/y in Q2 following a 3.4% contraction in the previous quarter, as most expenditure indicators worsened. Gross capital formation shrank by 18.5% y/y, deepening from a 14.6% drop in Q1, but the decline in production of gross fixed capital softened to 6.4% from 8.4%. The consumption of the public administration shrank by 0.1% in Q2, after a 0.6% contraction in Q1. On the positive side, household consumption increased by 1.5% y/y, posting its first annual growth since Q3 2009.

Regarding the different sectors of the economy, the Q2 GDP was driven up mainly by a 19.1% growth in the financial and insurance sector, a 4.6% growth in the information and communication sector, and by a 3.9% growth in industry (including 6% in manufacturing). The sharpest annual decline was recorded in construction - by 13.7%.

For the first half of 2013, Slovakia’s economy expanded by 0.8% y/y, easing from a 2.7% rise in H1 2012.

IntelliNews comment: After reaching the slowest annual growth since the 2009 recession in Q1, the export-driven Slovak economy rebounded somewhat in Q2 and accelerated also on a quarterly basis. The brightest spot is the recovery of household consumption, which had been falling since Q4 2009 despite the economic upturn in 2010-2012, affected by persistently high unemployment and falling real wages. But real wages have increased this year, backed by a sharp drop in inflation, and have supported household consumption. We have observed a growth in retail sales in each of the four months to July, following 10 consecutive months of declines.

On the negative side, the significant decline in gross capital formation is a major concern, as it suggests an increased reluctance for investments. The fall in public spending is in line with the government’s austerity drive and with the reduced inflow of EU funds.

Slovakia’s 2% economic growth last year was fuelled solely by exports, while domestic demand and household consumption shrank. Exports were driven mainly by booming car production as new capacities came on stream. But there are no new capacities planned to be installed this year and the growth in output and sales of the auto manufacturing industry decelerated significantly in Q2, while the industry’s new orders even fell in annual terms in May and June, indicating that the economy is losing steam.

Foreign demand is anticipated to remain soft this year, which coupled with the government's austerity drive, is likely to dent Slovakia’s full-year economic growth to below 1%, while domestic demand is seen staying subdued.

y/y change Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 full-year 2012
GROSS DOMESTIC PRODUCT 0.9% 0.6% 0.7% 2.1% 2.6% 2.0%
Final consumption, total 1.1% -0.9% -1.0% -0.5% -0.7% -0.6%
--households 1.5% -0.9% -1.2% -0.6% -0.3% -0.6%
--non-profit institutions serving households -2.6% -1.8% 0.0% -0.3% -0.9% -0.6%
--government -0.1% -0.6% -0.3% -0.4% -2.1% -0.6%
Gross capital formation -18.5% -14.6% -5.8% -10.2% -18.2% -10.3%
--gross fixed capital formation -6.4% -8.4% -5.0% -3.7% -2.5% -3.7%
Exports of goods and services 4.7% 4.2% 7.1% 11.6% 10.8% 8.6%
Imports of goods and services 1.3% 1.6% 4.2% 5.7% 1.6% 2.8%
Source: Statistical Office of the Slovak Republic            

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