Slovak economy remains hot in Q4, 2006 sees record

    By Peter Laca 
    BRATISLAVA, March 6 (Reuters) - Slovakia's economy remained 
red hot in the fourth quarter, pushing gross domestic product to 
record expansion in 2006 as investments in the auto industry 
helped boost export capacities, data showed on Tuesday. 
    The Statistics Office of the ex-communist European Union 
member said fourth quarter GDP growth hit 9.6 percent, slightly 
less than the 9.8 percent posted in the third quarter, the 
fastest rate ever for the small central European nation. 
    Slovakia has been showing one of the highest growth rates in 
the EU in the past two years, and 2006 GDP data showing 8.3 
percent growth brought the country of 5.4 million people to the 
ranks of the world fastest rising economies, such as China and 
the Baltic states. 
    Data also showed a shift towards a healthier structure of 
Slovak GDP growth and analysts said rising exports signalled the 
country's fast growth did not pose a major threat to the 
inflation outlook and the country's goal to adopt the euro in 
2009. 
    "The main message is that exports and foreign demand are 
becoming the key factors behind economic growth," said Lucia 
Steklacova, senior economist at ING Bank in Bratislava.  
    "This is in line with expectations that net exports will be 
the main driver of growth this year." 
    Fast economic growth bodes well for leftist Prime Minister 
Robert Fico, who beat a centre-right government in June 2006 
elections, as it will boost state income and help finance part 
of his agenda of bigger spending on the poor. 
    Slovakia's economic growth is expected to accelerate further 
this year -- the central bank predicts GDP growth of 8.6 percent 
in 2007 -- after two new car factories of French PSA Peugeot 
 and South Korean Kia Motors  boost 
production. 
     
    NO OVERHEATING RISK 
    Despite the rising role of exports in economic growth, 
analysts said household consumption growth of more than 6 
percent still showed some inflation risks in the economy. 
    "Monetary policy easing is coming closer, but it is not a 
question for this month," said Miroslav Plojhar, the chief 
economist at Citibank Czech Republic. 
    "The first interest rate cut in Slovakia should come in four 
or five months, so the differential against the euro zone could 
be brought to zero in one year or a year and a half," he said. 
    The Slovak central bank's key two-week repo rate stands at 
4.75 percent. 
    The Statistics Office said economy would accelerate further 
in future, adding that growth was healthy and sustainable. 
    "We think there is no danger of economic overheating," Pavol 
Balaz, head of the Statistics Office's National Accounts 
Department, told journalists. 
    Apart from the rising car sector, Balaz said the economy 
will get a further boost from the electronics industry, which 
features a factory of South Korea's Samsung Electronics 
. 
  (Additional reporting by Martin Dokoupil and Martin Santa)