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UPDATE 1-Slovakia cuts 2013 growth outlook as crisis hits exports
September 17, 2012 / 10:33 AM / 5 years ago

UPDATE 1-Slovakia cuts 2013 growth outlook as crisis hits exports

* Weakening foreign demand to slow Slovak 2013 growth

* Strong car exports keep 2012 growth outlook on track

* Recovering foreign, domestic demand to spur growth later (Adds background, detail)

BRATISLAVA, Sept 17 (Reuters) - Slovakia’s economy will grow more slowly than previously expected next year due to weaker demand for its exports as well as the impact of government austerity measures, the Finance Ministry said on Monday.

The country’s export-led economy has so far managed to buck the euro zone slowdown, mainly thanks to booming demand for cars from Volkswagen and Kia Motors Corp. which have started up new production capacity at Slovak plants. [I D :nL5E8KCC3L]

Slovakia has seen a stream of new car plant investments in the past decade, attracted by far lower labour costs than its western European neighbours.

But a weakening in the global economy is starting to have an impact, prompting the ministry to cut its forecast for the heavily export-reliant economy’s growth to 2.1 percent in 2013, from a previous estimate of 2.6 percent. It kept this year’s growth outlook at 2.5 percent.

“The economy growth outlook is hindered mainly by worsening outlook of our key business partners,” (which includes Germany), the finance ministry’s think-tank Institute for Financial Policy said.

“An additional slight impact will come from consolidation measures needed to reach a fiscal deficit below 3 percent of the GDP,” it said.

The government of Prime Minister Robert Fico, in power since April, has pledged to cut the fiscal gap to 4.6 percent this and 2.9 percent next year and has designed a tax-the-rich austerity package to do so.

The ministry said in August that additional 629.3 million euros ($827.37 million) in budget savings or new revenues were needed to hit the 2013 fiscal target.

Slovakia’s economy grew 0.7 percent in the second quarter on a quarterly basis, helped by car exports, but was set to slow in the coming two quarters, while still outshining its richer euro zone peers.

The central European country’s economy should grow 3.5 percent in 2014, versus a previous forecast of 3.9 percent, and reach 3.6 percent in 2015, the ministry said.

The central bank will publish its updated quarterly forecasts on Tuesday. ($1 = 0.7606 euros) (Reporting by Martin Santa; Editing by Michael Winfrey and Jane Merriman)

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