GDP growth improves in the fourth quarter

GDP reading: GDP growth accelerated to 4.4% year on year in the fourth quarter from 3.8% in the third quarter. Over 2024 as a whole, GDP grew 4.3%, below 2023’s 5.1% print but comfortably above the preceding 10-year average of 3.4%. On a seasonally adjusted quarter-on-quarter basis, economic growth picked up to 1.4% in Q4, compared to the previous period's 0.7% rise, marking the strongest increase since Q2 2023.

Stronger domestic demand outweighs slowing external sector: Private consumption growth ticked up to 3.3% yoy in Q4 compared to a 3.2% expansion in Q3. In addition, government spending hit a two-and-a-half-year high of 1.6% in the fourth quarter (Q3: +0.9% yoy). Moreover, fixed investment bounced back, growing 12.1% in Q4, following the 1.4% contraction recorded in the prior quarter. On the external front, exports of goods and services growth slowed to 5.5% in Q4 (Q3: +7.1% yoy). Conversely, imports of goods and services growth picked up to 7.2% in Q4 (Q3: +3.3% yoy).

GDP growth to soften in 2025: Our panelists expect GDP to expand at a similar rate to Q4 in Q1 2025 but to grow less quickly overall this year compared to 2024 due to slowdowns in private spending and exports. Risks are skewed to the downside and include rising domestic insecurity hampering investment and tourism inflows, higher-than-expected U.S. tariffs and reduced U.S. nearshoring under the Trump administration.

Panelist insight: Analysts at the EIU commented: “Private consumption will lead the slowdown [in 2025], given that more moderate nominal wage growth and the return of inflation will result in a much slower expansion in real wages. This impact on the labour market will mean that unemployment will tick up slowly during the year.”

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