Slovak GDP at record high, feeds rate hike talk

    By Peter Laca 
    BRATISLAVA, Dec 7 (Reuters) - The Slovak economy grew by a 
record 9.8 percent in the third quarter, data showed on 
Thursday, and analysts said the fast expansion may bring another 
interest rate hike in the coming months. 
    The GDP figure confirmed a flash estimate released by the 
Statistics Office last month. The Office also said it had 
revised its full-year GDP growth forecast to 7.7 percent, from 
previously expected 6.5 percent. 
    "The key drivers were investments, shown in inventories, and 
domestic demand," said Slovenska Sporitelna senior economist 
Maria Valachyova. "Inventories will transform into exports, and 
growth should remain strong in the future." 
    Slovakia has had the highest growth rates among the four 
largest new EU members from central Europe over the past few 
years, and the third quarter figure brought it to the ranks of 
the world's fastest growing economies. 
    Growth has been helped by rising household consumption after 
years of belt-tightening reforms. 
    Investments have also increased, mainly thanks to large 
projects such as the car factories of French PSA Peugeot 
<PEUP.PA> and South Korean Kia Motors <000270.KS>, which will 
boost exports next year. 
    "The growth structure suggests the increasing potential of 
the economy, rather than its overheating," said ING Bank senior 
economist Lucia Steklacova. 
    The Slovak central bank will have a tricky task in weighing  
conflicting rate policy signals such as fast economic growth and 
slowing inflation. 
    The bank has raised the key two-week repo rate by 175 basis 
points this year because inflation risks from high energy prices 
and economic growth could endanger the goal of adopting the euro 
in 2009. 
    But a crown <EURSKK=> rise by 5.7 percent in the past three 
months has limited shop price growth and allowed the central 
bank to keep rates on hold for the second month in a row in 
November. 
    The crown firmed slightly after the GDP data, to 35.445 to 
the euro, matching its all-time highs, from 35.465. 
    Analysts said the GDP data did not point to an immediate 
need to raise interest rates further, but more monetary policy 
tightening may be needed in the coming months. 
    "A slight acceleration in household consumption may mean the 
central bank will maintain a cautious monetary policy approach. 
We still maintain our prediction of a 25 basis point rate 
increase in the near term, depending on the crown exchange rate 
moves," Slovenska Sporitelna's Valachyova said. 
  ((Reporting by Peter Laca; editing by Ruth Pitchford; Reuters 
Messaging: peter.laca.reuters.com@reuters.net; +421 2 5341 8402)) 
  Keywords: SLOVAKIA ECONOMY/GROWTH