Strong economic growth in 3Q08 was driven by household consumption and investments
- Statistical Office revised its 3Q08 real GDP growth a notch down to 7.0% y/y from preliminary estimate at 7.1% y/y.
- The growth structure was similar to the one from the second quarter, when the main driver was domestic demand - both household consumption and investments, which posted yet another strong increase.
- Household consumption increased by real 6.0% y/y in 3Q owing to the strong employment gains on domestic market (according to ILO methodology the employment increased by 4.5% y/y while unemployment rate declined to 9.0%). Real wage growth increased by 3.5% y/y, which was slightly above our forecasts. However, the wage growth still lagged productivity gains.
- Fixed investments rose by real 7.3% y/y (YTD the investments increased by almost 9% y/y), which is positive for the future growth prospects. We expect the investment growth to gradually decelerate over coming quarters due to financial crises and slowdown in foreign demand.
- Net exports contributed positively to the growth, albeit by a small amount (real exports increased by 2.7% y/y outpacing the increase in imports of goods and services standing at 2.0%).
- Outlook: the growth rate in the final quarter of 2008 will slowdown sharply due to one-off basis effect (in 4Q07 the real GDP growth reached exceptional 14.3% y/y, thanks to pre-stocking by cigarettes ahead of the hike in excise taxes). This year, pre-stocking will repeat, nevertheless, the higher taxes are valid since February, so we expect majority of the pre-stocking to occur in January 2009. Next year, we expect weak foreign demand and financial crises to have bigger impact on Slovak economy when we anticipate the growth rate at around 4.5-5.0% as compared to anticipated 7% for this year.
