Slovak Economy Slows in 3Q

Slovak economic growth slowed in the third quarter as a decline in European Union-funded projects reduced investment, offsetting stronger foreign demand and household spending, data showed on Tuesday.

The economy expanded 0.7% from the quarter before, slower than the second quarter’s 0.9%, statistics office data showed, confirming preliminary estimates, Reuters reported.

On an annual basis, growth eased to 3% in the quarter after a revised 3.8% rise the quarter before. Growth was fuelled by foreign demand. Domestic demand contracted for the first time since 2013 as gross fixed capital formation declined, the statistics office said.

“The contraction was caused by a higher comparative base from last year, when the government drew money from EU funds at a higher pace,” said Vladimir Vano, a Sberbank Europe economist.

Central European countries rushed to draw EU funds last year at the end of a regular financing period. They are now seeing lower investments as a new funding period gets underway, making projects scarcer at the moment.

Household consumption, though, remained strong, fuelled by rising real wages and unemployment at its lowest level since 2009. The real average wage in Slovakia rose by 4% year-on-year in the third quarter, separate data showed Tuesday, following a 3.4% rise in the second quarter.

Slovakia’s Finance Ministry expects the economy to grow 3.6% this year and 3.5% in 2017, above 1.9% average growth forecast for the eurozone.

Slovakia’s economy is driven by car production at three plants, and a fourth one is expected to come online in 2018. The government expects a strong economy and higher tax revenue will allow it to cut the public finance deficit and aim for a balanced budget in 2019.