UPDATE 1-Slovak FinMin raises 2006, 2007 GDP forecasts

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The Slovak finance ministry has revised upwards its economic growth forecasts for 2006 and 2007, the ministry's Web site showed on Monday, as the country benefits from rising car exports.

The finance ministry predicted real gross domestic product growth of 7.9 percent in 2006, up from the previous forecast of a 6.6 percent increase.

The ministry also increased its forecast for 2007 real GDP growth to 7.4 percent from the previously predicted 7.1 percent.

The ministry did not comment on the new forecasts, which followed record GDP growth of 9.8 percent posted in the third quarter of 2006.

Slovakia has been showing one of the strongest growth rates in the European Union in the past years, and analysts expect further acceleration thanks to its booming car industry.

"We expect economic growth to be a bit stronger in 2007, at 7.9 percent, due to the launch of new export capacities from past investments," said Marek Gabris, an analyst at CSOB bank in Bratislava.

Car makers PSA Peugeot Citroen and Kia Motors launched commercial production in their new Slovak-based assembly plants in 2006. Both plan to boost their output this year.

Fast economic growth is expected to help cover some expenditure plans of Slovakia's new government under Prime Minister Robert Fico, who won a June 2006 election on promises to raise social spending.

The updated forecasts also predicted a slowing in consumer price inflation, which would be in line with Slovakia's plan to adopt the euro in 2009. The ministry predicted average inflation of 2.5 percent in 2007 and saw price growth slowing to an average 2.0 percent in 2008.

Rising car industry exports should also curb the current account deficit to 3.8 percent of GDP in 2007, from 7.7 percent predicted for 2006.

[BRATISLAVA/Reuters/Finance.cz]