Slovak growth wheels drag in Q3, worst since 2009 crisis

BRATISLAVA Thu Dec 6, 2012 10:20am EST

BRATISLAVA Dec 6 (Reuters) - Slovakia's economy grew between July and September at its slowest pace since the euro zone crisis erupted three years ago, data showed on Thursday.

Even so, Slovakia's car industry helped it to buck the trend in the neighbouring Czech Republic and the euro zone, which have slid into recession under austerity measures intended to curb sovereign debt.

Strong foreign demand for cars made in Slovakia by Germany's Volkswagen and South Korean Kia Motors Corp dr ove t he 0. 6 percent quarter-on-quarter r ise i n gro ss domestic product (G DP), s easonally adjusted, in the third quarter.

Annual growth slowed to 2.1 percent from 2.6 percent in the second quarter and 2.9 percent in t he f irst quarter, h eld back by weak dome stic demand. [I D:nP7E8K702G]

It was the weakest year-on-year GDP reading since a 3.7 percent drop in the fourth quarter of 2009.

The 69-billion-euro ($90-billion) economy is likely to rank among the fastest growing in the European Union in the next th ree years, according to the European Commission, t h anks to th e automotive sector and gradually rebounding domestic demand.

However, th e centre-left government 's decision to push up taxes on companies and the rich to plug a budget deficit are expected to sl ow a recovery in h ouseholds' s p ending.

"The domestic economy continues to drag down overall growth," said Juraj Valachy, senior analyst at Tatra Banka.

While exports grew 11.6 percent in the third quarter, from 10.8 percent in the previous period, household and government spending fell.

"We cannot, with vanishing effects of the rise in the car production and no further growth impulse in sight, expect a turnaround in the economy's development. The year-on-year slowing of the economy, observed this year, will therefore continue," Valachy added.

The finance ministry sees GDP growing 2.1 percent in 2013. The Slovak central bank and the European Commission forecast a 2.0 percent expansion. ($1 = 0.7652 euros) (Reporting by Martin Santa; Editing by Ruth Pitchford)

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