Slovak recovery slows in Q4, foreign demand key driver

                                
 * Foreign demand, investments key drivers
                                
 * Domestic demand picks up in Q4, but seen staying weak
                                
 
                                
 By Martin Santa
                                
 BRATISLAVA, March 3 (Reuters) - Slovakia's recovery slowed
in the fourth quarter but the economy still expanded at a
healthy pace driven mainly by external demand, accompanied by a
picking up domestic consumption, data showed on Thursday
                                
 The euro zone country's growth matched the February flash
estimate of a 0.9 percent on the quarter in the last three
months of 2010 and 3.5 percent on the year, slowing from 3.8
percent in the third quarter, the statistics office said.
[ID:nnPRA005478]
                                
 Slovaks returned to growth last year driven by foreign
demand and investments, with analysts saying the euro zone's
recovery remains key for the Slovak economy outlook.
                                
 The central European country expanded by 4.0 percent in 2010
to recover from a 4.8 percent contraction in the previous year,
when appetite for the country's key export items, such as cars
and electronics dried up in the West due to the global crisis.
                                
 Household consumption showed its first rise in five quarters
in the October-December period, with a 0.5 percent increase, but
analysts expected it to pick up only slowly due to high jobless
rate of 13 percent, and the labour market's stressed situation.
                                
 Gross fixed capital formation jumped by 10.6 percent on the
year in the fourth quarter, up from 4.8 percent rise in the
previous quarter and well above a 16.9 percent decline seen in
the same period last year.
                                
 The 65.9 billion euro economy is strongly driven by the car
manufacturing sector, centred around assembly plants of
Volkswagen <VOWG.DE>, PSA Peugeot Citroen <PEUP.PA> and Kia
Motors Corp. <000270.KS>, and the electronics industry.
                                
 "The Slovak economy benefited from an ongoing recovery in
the euro zone, mainly Germany, throughout the last year and it
was driven by exports and investment," said Maria Valachyova,
senior analyst with Slovenska Sporitelna.
                                
 "After a sharp decline in investments in 2009, we saw a
rebound in investment activity, on filling up inventories and
also an acceleration in gross fixed investments in the second
half of the year," she added.
                                
 The finance ministry and the central bank expect the central
European country's output to continue rising this year, albeit
at a slower pace of 3.4 percent and 3.0 percent respectively.
                                
 The government of Iveta Radicova, in power since July,
introduced a 1.75 billion euro austerity package, composed of
tax hikes and public spending cuts, to slash the fiscal deficit
to 4.9 percent of GDP this year from 7.8 percent in 2010.
                                
 (Editing by Toby Chopra)