Slovak trade surplus surprises mkt, GDP to quicken

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Slovak foreign trade swung into a surprise surplus in September, with data on Friday hinting the red-hot economy will expand even faster than previously expected this year.

Foreign trade booked a surplus of 4.7 billion crowns ($208.6 million), compared with a revised deficit of 5.2 billion in August, the Statistics Office said. Economists in a Reuters poll had forecast a 3.5 billion shortfall for September.

"We expect the car and electronics industries to be behind this positive surprise," said Lucia Sramkova, senior economist at ING Bank in Bratislava. "Overall these data show the foreign trade contribution to gross domestic product (GDP) growth will be higher."

The office also revised the cumulative trade gap to 7.4 billion crowns for January-August, from a previous 16.5 billion estimate, due to methodology changes that analysts said would raise first half GDP growth rates.

The booming car and electronics sectors are driving Slovakia's economic growth, which at 9.4 percent in the second quarter was the second fastest in the European Union after Latvia. A flash third quarter GDP estimate is due on Nov. 13.

Analysts said foreign trade was likely to end the year in surplus for the first time since 1995, after a deficit of 75.26 billion crowns in 2006.

The deficit had widened in recent years due largely to high technology imports for investments such as the new car factories of PSA Peugeot Citroen or Kia Motors .

"We see as realistic that the whole year will end in a surplus because investment imports will not be as high as in the previous years," said Juraj Valachy, analyst with Tatra Banka.

Analysts still expect the central bank (NBS) to leave its key two-week repo rate at 4.25 percent in the coming months as the strong crown helps keep inflation in check.

"The central bank should not change policy settings based on these figures," Valachy said.

"Strong economic growth continues as expected, but the central bank does not have to watch strong domestic demand so carefully now with retail sales indicating a slowdown in consumption," he said.

Other data on Friday showed retail sales growth slowing to 1.9 percent in September from 5.1 percent in August.

(For data details, click on [ID:nBSD000049] [ID:nBSD000050])

(Additional reporting by Martin Dokoupil; Writing by Martin Dokoupil and Martin Santa; editing by Ruth Pitchford)

($1=22.53 Slovak Crown)

Keywords: SLOVAKIA ECONOMY/TRADE

[BRATISLAVA/Reuters/Finance.cz]