Slovakia still surprisingly resilient to crisis

By bne IntelliNews July 13, 2012

Tim Gosling in Prague -

With EU industrial production - most pertinently in Germany - pepping up in May, Slovakia continued its strong performance with another double-digit expansion for the month at 15.6% on year. The figure bodes well for the economy's continued robust performance despite the Eurozone crisis.

Turnover in Slovakia's industrial sector showed its fastest growth this year, according to data released by the Statistics Office on July 12, with new orders reaching €3.663bn. The 15.6% rise came on the back of a 14.9% advance in April, and constituted a 2.5% rise on a monthly basis, according to Sita. The strong performance accompanies an apparent recovery in German industrial output, with April's disappointing 0.5% pullback turning to a 1.5% expansion in May.

That leaves Slovak industrial production with average growth of 13.3% over the first five months of the year, which given its high exposure to demand for industrial exports - cars and electronics in particular - suggests the economy is set to continue its relatively strong growth performance in the second quarter of the year. Recording industrial production growth of over 12% in the first three months of 2012, GDP growth came in at 0.8%, to follow up the EU-wide best of 0.9% in the last quarter of 2011.

Slovakia continues to shrug off worries over its excessive exposure to Eurozone markets. Weak employment leading to poor domestic demand leaves exports the only significant driver of the economy, and with over 80% of them headed into crisis-struck Europe, analysts have been fretting that it could tip into free-fall.

However, alongside a reasonably low base from 2011, demand has held up relatively well, thanks to both better-than-expected demand in the Eurozone for cars produced in its high-efficiency, low-labour cost factories, as well as strong sales into emerging markets such as Russia and China.

Sentiment has been pushed through the year by bullish statements from the local units of Volkswagen and Kia, who have both committed to expanding output, whilst hitting new production records and predicting that their facilities will work at full capacity through to the en of 2013.

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