Analysts: Slovakia's GDP Growth Slowing, Predictions to Be Revised
14. augusta 2019 12:16
Bratislava, August 14 (TASR) - The latest data published by the Slovak Statistics Office attest to the fact that Slovakia's economy has already started to slow down, say bank analysts, adding that they will probably reduce their GDP-growth estimates for this year accordingly.
Slovakia's GDP grew by 1.9 percent year-on-year (y-o-y) in the second quarter of this year, decelerating from 3.7 percent y-o-y in the first quarter, according to 2Q19 figures released by the Statistics Office.
"The GDP figures for the second quarter were disappointing. Although they were probably partly influenced by some one-off factors, the mood in the EU economy indicates that there's no point in expecting any significant upward correction in the upcoming quarters, either," stated UniCredit Bank Czech Republic and Slovakia analyst Lubomir Korsnak. According to analysts, Slovakia's economy should mainly be influenced by weakening external demand, which should be reflected both in household consumption and investments.
Uncertainty regarding Brexit and the extent and timing of global economic measures can be viewed as the main risks of an external environment on which a small and open economy like Slovakia's is very much dependent. In an extreme case simultaneous effects might completely erase GDP growth," warned Korsnak.
Global developments aren't good news, either. Germany's economy, which has a strong ties to Slovakia's in terms of trade, is reporting a deceleration, as is China's. "Germany's economy is flirting with recession again. It fell by 0.1 percent in the second quarter when compared to the first one. If a fall is posted in the ongoing quarter as well, and this can't be ruled out due to a fatal deceleration in China's industrial output, Germany will officially find itself in recession," noted Czech Fund chief economist Lukas Kovanda.
The next GDP data will be published in September. "We assume that growth has been hampered by net exports. The trade balance was evidently worse than at the beginning of the year. It's possible that a certain weakness in German industry has been transferred to Slovakia's. Investments in the second quarter were influenced by last year's high base level related to the construction of a fourth automotive plant," stated Slovenska sporitelna analyst Katarina Muchova.
UniCredit analysts will probably revise their GDP growth estimate for Slovakia downwards, from 3 percent to 2.5 percent. "Following relatively robust economic growth, worse times are probably ahead for the Slovak economy, and it seems that [Slovakia] hasn't prepared very well for this. Lagging investments that in the previous economic cycle culminated at significantly lower levels than in the one before that are reducing the potential for a rapid recovery after the primary external shocks fade," said Korsnak.
Slovenska sporitelna analysts originally predicted GDP growth at 3.4 percent. "However, we currently see moderate downward risks, and we'll revise the projection later. Clouds above the external environment haven't yet disappeared. Decelerations in economic growth in Germany, the eurozone and China as well as unresolved disputes in foreign trade and the threat of protectionism will play a role as well," noted Muchova.