UPDATE 1-Slovak Q3 GDP beats forecast on stronger trade

...

By Peter Laca

The Slovak economy grew 9.4 percent year-on-year in the third quarter of 2007, data showed on Tuesday, and analysts said growth beat market expectations thanks to stronger exports.

Third quarter growth matched the 9.4 percent reading from the second quarter and was above the 8.6 percent forecast by analysts in a Reuters poll.

"Acceleration of GDP was related to growth of added value in manufacturing, particularly in manufacturing of machinery, electrical equipment and transportation means," The Statistics Office said in a statement.

"From the expenditure side, GDP growth was influenced mainly by continued foreign demand, alongside persistent growth of domestic demand."

The Statistics Office did not release any detailed data in its flash estimate. It will publish the breakdown on Nov. 30.

The higher-than-forecast third quarter growth was not a major surprise for the market because data last week showed an unexpected trade surplus for September and a downward revision of the cumulative trade deficit for January-August.

"The figure is a partial surprise. We do not know the structure yet but we can expect that firming pressures on the crown will remain," Miroslav Plojhar, a JP Morgan economist.

"The structure will probably show a stronger contribution of foreign trade than previously. This would mean that the GDP growth is healthier than before," he said.

The Slovak crown's reaction was muted. It rose to an eight-month high of 32.870 per euro after the release but quickly retreated to 32.910.

The Slovak economy has charted one of the highest growth rates in the European Union in the past few years, helped by rising car export volumes and solid domestic demand as household consumption rises after years of belt-tightening reforms.

Investment has also increased in the past year, mainly thanks to large project such as car factories of French PSA Peugeot and South Korean Kia Motors .

Market watchers did not expect any monetary policy implications from third quarter GDP data.

"We saw increase in household consumption in the second quarter, but even if we see further rise in the third quarter, the NBS should be comfortable since productivity growth outpaces wage growth," said Piotr Matys, an analyst at 4Cast in London. (Additional reporting by Martin Dokoupil, editing by Mike Peacock)

Keywords: SLOVAKIA GDP/

[BRATISLAVA/Reuters/Finance.cz]