Slovakia: Second reading confirms GDP growth at year-low in Q2
A second national accounts release confirmed that GDP growth fell to 1.9% year on year in Q2, deteriorating from Q1’s 2.7% and marking the worst result in a year. That said, the Slovak economy outpaced the Euro area average of 0.6%.
On a seasonally adjusted quarter-on-quarter basis, economic growth ebbed 0.4% in Q2, following the previous period’s 0.6% growth and marking the slowest growth since Q1 2023.
Domestically, the annual slowdown was broad-based. A slower increase in real wages, pessimistic consumer sentiment and tight financing conditions weighed on household budgets: Private consumption growth slowed to 2.5% year on year in the second quarter (Q1: +3.6% yoy). Furthermore, fixed investment growth fell to a two-year low of 0.7% (Q1: +1.7% yoy), and government spending lost momentum to 4.8% (Q1: +6.5% yoy).
On the external front, exports of goods and services increased 2.5% on an annual basis in the second quarter, which was above the first quarter’s 1.8% expansion. That said, imports of goods and services growth picked up to 6.0% in Q2 (Q1: +2.9% yoy), marking the strongest reading in one-and-a-half years.
Our panelists expect the economy to be expanding robustly in the third quarter, with the external sector likely leading the upturn. However, a higher unemployment rate paired with accelerating inflation and elevated interest rates is set to limit the contribution from domestic demand. Overall in 2024, our Consensus is for economic growth to rise from current and 2023 levels on rebounds in exports plus private and public expenditure.
Analysts at the EIU commented:
“The latter half of 2024 will be marked by stronger growth in the industrial sector as business sentiment and new orders strengthen, in line with stronger consumption demand throughout the EU. REPowerEU funds are helping energy-intensive firms to transition towards electrified production processes, dampening the impact of higher energy costs. The outlook for government consumption is strong, as the new government is pushing for new regional projects, and private initiatives are supported by EU funds.”