Slovakia and Romania Report Increases in Q4, 2007 GDP

>Contrary to the slowdowns taking place in the United States and Western Europe both Slovakia and Romania reported increases in economic activity in the last quarter of 2007. Slovakia reported a resounding increase of 14.26% and Romania an increase of 6.6%. The year to year increases in real GDP in Slovakia and Romania are shown in the first chart along with the year to year increases in GDP in the Euro Area.

Part of the 14.26% increase Slovakia' GDP in the fourth quarter was due to a big stockpiling of cigarettes by wholesalers to avoid the tax increase that took effect on January 1, 2008. However, even without the one time stockpiling, economic activity in the fourth is estimated to have risen 9.7%. The accounting for the stockpiling may also have had some anomalous effects on the deflator. In the fourth quarter of 2007 the deflator was 2.41% below that of fourth quarter of 2006 indicating deflation. While inflation has been subdued in Slovakia, there has been no suggestion of deflation. In general the deflator has been the smaller part of the increase in nominal GDP, with real GDP providing the larger part. By contrast, inflation has provided the greater part of the increase in nominal GDP in Romania. The second and third charts show the changes in the real and nominal GDP and in the deflator for the two countries.

Both Slovakia and Romania are members of the European Union (EU). In dollar terms Romania's GDP was $121.9 billion in 2006 and Slovakia's, $56.3. With a population of 21.6million, almost four times Slovakia's population of 5.4 million, Romania' per capita GDP was $5,651 in 2006, compared to $10,439 for Slovakia.