US embassy cable - 04BRATISLAVA880

UNCLAS BRATISLAVA 000880 
 
SIPDIS 
 
 
DEPT PASS TO USTR FOR RDRISCOLL 
 
TREASURY FOR CHRISTOPHER GREWE 
 
USDOC FOR MROGERS AND STIMMINS 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ETRD, LO 
SUBJECT:  EXCELLENT RESULTS FOR THE SLOVAK ECONOMY 
 
 
1.  Summary.  The Slovak economy rose at a real annual rate of 
5.4 percent in the second quarter of 2004, beating the market 
forecast of 5.0 percent.  Household consumption and robust 
investment led the growth, replacing external demand, which had 
been powering the economy for the previous six quarters.  The 
Slovak GDP expanded by 4.2 percent in 2003 and 5.5 percent in the 
first quarter of this year, making it the second fastest growing 
market in Central Europe, trailing only Poland.  End Summary. 
 
2.  The Slovak economy showed a strong real growth rate of 5.4 
percent (9.7 percent in nominal terms) during the second quarter 
of 2004.  Though down from the first quarter's rate of 5.5 
percent, the growth still exceeded the average market forecast of 
5.0 percent.  In real prices, the second quarter GDP equaled USD 
9.95 billion.  Analysts characterized the growth as well balanced 
and had "ideally diversified" support from both internal and 
external factors.  The driving force of the increase was, 
however, domestic consumption. 
 
3.  The second quarter's overall domestic demand increased by 5.8 
percent from 2003. Household consumption expanded by 2.8 percent, 
its second consecutive increase after a two-year decline caused 
by austerity measures of the GOS.  This change reflects the 
gradual growth in nominal wages that the Central Bank expects to 
expand by between 7.9 and 9.5 percent in 2004.  In addition, the 
gross fixed capital formation rose by 0.9 percent from the first 
quarter of 2004 and by 3.5 percent from 2003.  Gross investments 
(gross fixed investment plus change in stocks) increased by a 
sharp 13.8 percent, reflecting the start of large-scale 
investments such as the Peugeot auto plant. 
 
4.  Exports continued to rise, increasing by 16.4 percent from 
2003 during the second quarter.  There was little change in the 
trade balance, however, as imports accelerated by 17 percent, up 
from only 12 percent in the first quarter of 2004.  The 
significant increase is likely a result of capital purchases 
related to foreign direct investment. 
 
5.  The unexpected growth prompted the Slovak Statistics Office 
to improve its GDP growth forecast to 5.5 percent for 2004.  Many 
analysts followed suit, raising their forecasts to levels above 
5.0 percent.  The Ministry of Finance and Central Bank, however, 
maintained their projections of 4.7 and 4.4 percent growth 
respectively. 
 
WEISER 
 
 
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