Slovak Aug trade gap widens on car plant holidays

...summer holidays.

The Statistics Office said the foreign trade deficit totalled 7.6 billion crowns ($320.8 million) in August, compared with a revised gap of 2.5 billion in July and above the consensus market forecast of a 3.0 billion crown deficit.

Market watchers said the jump appeared to be a one-off phenomenon and they expected improved trade figures in the near future.

The Statistics Office did not release a detailed breakdown of the trade data, but analysts said they did not come as a major suprise as lower industrial output growth for August had suggested a slowdown in key exports.

"Both exports and imports fell sharply, but the former more significantly," said Piotr Matys, an analyst at 4Cast in London.

"However, exports will improve in the coming months once car manufacturers increase production after the summer, which is used for re-tooling and general maintenance," Matys said.

Slovakia's booming economy is driven mainly by the automotive sector, centred on car assembly plants of Volkswagen , PSA Peugeot Citroen and Kia Motors . Swings in the car industry influence the country's entire economic performance.

The Slovak crown showed only muted reaction to trade data. The unit was quoted at 33.620 to the euro at 0800 GMT, compared with 33.550 early in the session.

The Statistics Office also revised full-year 2006 trade data due to methodology changes. The deficit was reduced to 75.3 billion crowns from the previously reported 93.1 billion.

Lucia Sramkova, senior analyst at ING Bank in Bratislava, said the downward deficit change would also positively influence the revision of 2006 gross domestic product growth. Original data showed record strong growth of 8.3 percent in 2006.

Slovakia's external balance is expected to improve significantly in 2007 from last year as two car assembly plants are gradually boosting their export-oriented production.

The central bank forecasts the full-year trade deficit will total 35 billion crowns in 2007, which should amount to 1.9 percent of GDP.

[BRATISLAVA/Reuters/Finance.cz]