UPDATE 1-Slovak GDP shows record growth in Q3, crown rises

 (Writes through with more analyst comments on rate outlook) 
    By Peter Laca 
    BRATISLAVA, Nov 15 (Reuters) - Slovakia's economy expanded 
by a record 9.8 percent in the third quarter, putting the 
country among the ranks of the world's fastest growing nations 
and boosting the crown to its strongest ever level against the 
euro. 
    The preliminary flash estimate of third quarter GDP, 
released by the Statistics Office on Wednesday, was well above 
the market forecast of a 6.6 percent year-on-year rise. 
    Slovakia has been showing one of the highest growth rates in 
the European Union since it joined the bloc in 2004, thanks to 
accelerating household consumption and rising investments in the 
key automotive industry. 
    "The third quarter data clearly confirmed Slovakia's leading 
position in the central European region, with economic growth 
comparable with fast expanding economies of China and the Baltic 
states," said Martin Lenko, an analyst at VUB Bank, a unit of 
Italy's Banca Intesa. 
    The Statistics Office said in a statement that the latest  
GDP growth figures, up from 6.7 percent in the second quarter, 
were influenced by continued foreign demand and growth in 
inventories of materials and finished products. 
    It did not release any breakdown of the third-quarter GDP 
structure, but the strong headline number pushed the crown to an 
all-time high of 35.720 per euro. 
    The record crown rate was 7.7 percent above parity in the 
exchange rate mechanism 2 (ERM 2), the precursor to the euro 
which Slovakia joined last year as part of its plan to adopt the 
European single currency in 2009. 
     
    MARKET AT ODDS 
    Because of the lack of details, market watchers were at odds 
over the implications of the strong economic growth. 
    "This figure means that growth is healthy, and surprisingly 
high imports in the previous months will translate into exports 
in the future, and not into consumption, as some may have 
feared," said ING Bank senior economist Lucia Steklacova. 
    Steklacova said healthy growth structure would give room for 
more crown firming, which would reduce the need to tighten 
monetary policy. 
    But others, including Danske Bank analysts, said the strong 
GDP readings meant the economy was overheating and that the 
central bank will have to raise rates further to tame upward 
pressure on shop prices. 
    The central bank has raised interest rates by 175 basis 
points in four steps this year, bringing the key two-week repo 
rate to 4.75 percent, to fend off inflation risks stemming from 
high energy prices and rising domestic demand. 
    The central bank will be in a difficult position when 
assessing its interest rates at the end of November as it will 
have to weigh the strong headline GDP figure against signs of 
improving structure, economists said. 
    "Economic growth has jumped through the roof, but the 
structure is changing in favour of non-inflationary growth as it 
will be driven by foreign demand," said Miroslav Plojhar, the 
chief economist at Citibank Czech Republic. 
 (Additional reporting by Martin Santa) 
 ((Reporting by Peter Laca, editing by Stephen Nisbet; Reuters 
Messaging: peter.laca.reuters.com@reuters.net; +40 21 315 
8320;)) 
  Keywords: ECONOMY SLOVAKIA GROWTH