5% GDP - 2nd quarter of 2010 - Slovakia’s economy has best GDP growth among all countries in the European Union

In the second quarter of 2010 Slovakia’s economy is posted the best GDP growth among all countries in the European Union.

The growth is spiking but it is not yet the stellar numbers achieved in the past given the international situation. Still Slovak growth looks set to remain strong for the rest of the year. Germany energising economy is a very big trade partner for Slovak business, and it certainly helped to generate the nearly 5-percent pro rata jump in Slovakia’s GDP.

In the second quarter, the country’s GDP grew by 4.6 percent year-on-year, following just slightly stronger growth of 4.8 percent in the first quarter, according to a flash estimate released by Slovakia’s Statistics Office on August 13. Total GDP in the second quarter reached €16.340 billion.

“The ongoing strength of the growth in the second quarter real GDP in Slovakia was, overall, more of a positive surprise,” Vladimír Vaňo, chief analyst with Volksbank.

In the first half of 2010, Slovak exports increased on average by 20.7 percent year-on-year, accounting for a similarly stellar recovery in Slovakia’s annual industrial production by an average of 22 percent in the first six months, Vaňo noted.

“Compared with expectations of other market watchers of around 4 percent year-on-year and our estimate of 4.3 percent, the year-on-year growth of GDP was faster than expected,” Martin Lenko, senior analyst with VÚB Banka, said.

Though the detailed structure of the growth in Slovakia’s GDP is not fully known yet, Lenko said that household consumption in Slovakia probably recorded only a moderate increase in the second quarter, similar to its performance in the first quarter, due to the country’s still high unemployment rate (mostly in the east of the country) which is falling only very slowly.

“Slovak quarterly expansion of 1.2 percent quarter-on-quarter runs ahead of results of similarly open economies of the Czech Republic or Hungary,” Vaňo said. “However, the overall eurozone economy, a destination for roughly half of Slovak exports, recorded a quarterly real growth of 1.0 percent in the second quarter. In other words, recovery of the export markets alone does not suffice in explaining the resilience of the Slovak economy.”

According to Vaňo, gauging from these comparisons as well as from the strength of the recovery in industrial production in the first half-year together point to Slovakia continuing to reap the benefits of euro introduction via a more resilient economic recovery. He believes this is explained by a competitive edge brought to Slovak exporters by the euro through lower interest rates but more importantly because of exchange rate stability and significant savings in the administrative costs of foreign trade.

“The faster than expected growth of GDP in Slovakia, and also in Germany, in the first half of the year is forcing us to revise the estimate of annual growth of GDP in 2010,” Lenko said. “We estimate that growth in real GDP will reach an average of 4.2 percent year-on-year in 2010 as opposed to our original estimate of 3 percent.”

The rosier growth numbers for Slovakia’s GDP have not yet been reflected in significant job growth in the country’s labour market.

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