An Island of Growth in the EU

SLOVAKIA’S economic growth 3 percent in the first quarter of 2012 was higher the average of other countries in eurozone as as the average of all the other 26 countries of the European Union. Prime Minister Robert Fico called the economic performance good news though the upbeat numbers were anticipated May 15 when the Slovak Statistics Office released its flash estimate of GDP growth 3.1 percent.

Even the final measurement of gross domestic in the first quarter demonstrated Slovakia was a small island of growth amid sea of stagnating European economies, František Bernadič, the director of macroeconomic statistics Slovakia’s Statistics Office, told the media on June 6 that the growth dynamics of the Slovak economy are slowing.

“We can say that Slovakia is still keeping head above water to net exports,” stated Bernadič, as quoted the TASR newswire, while adding that deceleration growth is likely to continue.

The first quarter data showed a slight dip from the 3.4-percent growth GDP recorded in the final quarter of 2011, and according the Statistics Office, the GDP data indicate that slower first quarter growth was caused by a significant deceleration foreign demand.

Finance Minister Peter Kažimír told media that the sustainability of Slovak economic growth will vulnerable several external factors linked to developments within the eurozone. Kažimír said that negative outcome, a decline in retail revenues, is already seen in Slovakia with retail sales falling in April after rising three straight months during the first quarter. The minister said the April figure shows “the [Slovak] population has reacted external concerns”, as quoted by SITA.

A slowdown in external demand contributed slower economic growth at beginning of the year and another significant factor is a drop domestic demand. Household consumption dropped by 0.1 percent in the first quarter, Bernadič told the press, to reduced purchasing power Slovaks after average real salaries fell in the first quarter as as concerns about high levels of unemployment.

Kažimír said government spending had increased in the first quarter, SITA wrote.

“Today the Statistics Office officially confirmed the quarter-on-quarter growth in government spending, is from the last quarter of 2011 to the first quarter of 2012, increased by more two percent and by 0.4 percent year-on-year,” stated Kažimír, quoted by SITA, adding that this spending increase by the previous government has had a negative impact the state budget deficit.

Slovakia’s automobile industry recorded year-on-year growth output of 25 percent and detailed data released the Statistics Office confirmed that car exports were a strong driver GDP growth, SITA reported.

Though growth in overall exports decelerated to 2.7 percent year-on-year the first quarter compared to 4.4 percent in the fourth quarter of last year, low domestic demand pushed down the level of imports, dropped by 1.3 percent year-on-year in the first quarter, to Ľubomír Koršňák, an analyst with UniCredit Bank.

Koršňák reported that domestic demand Slovakia remains weak and had a negative impact growth in GDP in the first quarter.

“Higher domestic consumption was restricted mainly a combination of high unemployment and a drop real wages,” stated Andrej Arady, a macroeconomist with VÚB Banka.


Adapted from: The Slovak Spectator, June 8, 2012.