The merchandise trade surplus narrowed by 8.4% m/m from the upwards revised (almost doubled) EUR310m surplus in January but was by 33% higher than the year ago surplus of EUR214m, the stats office data published on Tuesday showed. The February print thus came into a slightly negative surprise to markets that expected a surplus of some EUR306m in the month. Similarly to January, the pace of expansion of exports outstripped that of imports, which we believe is related to the new automotive capacities in the country. Thus, the foreign trade surplus more than doubled y/y to EUR593m in January-February with exports rising by 10.5% y/y and imports — by 7.9% y/y. Note that foreign trade in machinery and transport equipment, accounting for 61.9% of exports and 50.5% of imports, continued driving both the exports and imports expansion in both January and the first two months of the year. Thus, the foreign trade surplus in the twelve months ending in February widened to EUR2.8bn from EUR2.7bn in the twelve months ending in January and EUR2.46bn in 2018.
We see solid reasons to expect exports growth to remain robust or even accelerate in the next months and the strong growth of imports to be preserved going forward. Exports will be boosted by new automotive capacities that were opened in October 2018 by Jaguar Land Rover in its EUR1.4bn car plant in Nitra and that started exporting cars already at the turn of the last year. Yet, they will remain constrained by potentially gradually slowing down economic activity in the country’s main trading partners, if the most recent IMF’s and EC’s forecasts materialised. Existing labour shortages in some industrial sectors such as car manufacturing might limit production growth, hence exports as well, in our view. Protectionist measures in foreign trade may also limit export expansion. As for imports, we believe that they are likely to be supported by both strong consumer and investment demand. The household consumption is to be supported by the likely to continue improvements on the labour market and the strongly growing wages in view of the still persisting labour shortages. As for investments, we believe that their expansion this year is mostly to reflect public investments related to the intensifying EU funds drawing and major infrastructure projects such as the Bratislava bypass as private investments are to moderate on high comparison basis related to Jaguar’s major investment last year. Last but not least, the imports of materials and semi-finished products for the new automotive production are also to support their expansion going forward.