Analysts: Households and Investments Pulled Slovak GDP Up in 3Q17

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(Stock photo by TASR/AP)

Bratislava, December 5 (TASR) – Not only households, but also investments pulled Slovakia’s economy up in the third quarter of 2017, UniCredit Bank Czech Republic and Slovakia analyst Lubomir Korsnak stated on Tuesday.

Domestic demand in 3Q17 was bolstered by all components except for government consumption, which was down by 1.4 percent year-on-year. The annual investment growth was driven by a low comparison basis from last year, but it needs to be noted that investments experienced quite a dynamic upward movement also on the quarterly basis, stressed Korsnak.

On the other hand, the robust fixed investment growth was at least partially offset by a relatively slower piling up of stocks, probably due to the fact that part of the investments was in the final phase, so some construction investments moved to the area of fixed investments. Investments overall increased by 7.4 percent y-o-y in 3Q17.

Korsnak stated that he wouldn’t change the GDP growth outlook for 2017 as a whole, keeping it at 3.4 percent y-o-y. At the same time he’s upped his estimate for 2018 from 3.8 percent to 3.9 percent, mainly due to better than previously expected improvement in the external environment (mainly the eurozone).

GDP growth on the turn of 2018-19 should exceed 4 percent, despite an expected cyclical deceleration of economic growth in Europe. A strong car output, which Korsnak named an ‘offer shock’ due to the arrival of Jaguar Land Rover to Nitra, should ensure that Slovakia will experience its economic climax somewhat later than the rest of the eurozone, while a cyclical slowdown of domestic demand will already have been visible by late 2018 or early 2019.

Slovenska sporitelna bank analyst Katarina Muchova noted that positive developments on the labour market were among the chief factors behind household consumption, as nominal salaries in the third quarter grew by 5.2 percent y-o-y – the best figure since 2008. Muchova expects Slovakia’s GDP growth to stand at 3.3 percent at the end of this year, due to be driven mainly by domestic demand, mainly of households.

“A slump in public investments was only partly offset by private investments. However, a reoccurrence of the positive contribution of investments towards GDP growth is expected in 2017, due to the gradual drawing of new EU funds. The outlook is also relatively favourable for private investments due to be supported by the good economic situation. Meanwhile, the contribution of foreign trade to the economy’s growth should be rather dampened,” added Muchova.