Economic growth slows to 18-month low in Q3

Growth decelerates: A second release confirmed that yearly GDP growth decelerated to 1.2% in the third quarter (Q2: +2.0% yoy), marking the softest result since Q1 2023. On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 0.3% in Q3 from the previous period's 0.2% growth.

Broad-based decline drives the downtick: Looking at the details of the release, the annual downturn was broad-based, with all GDP expenditure subcomponents posting weaker readings. Domestically, household spending growth fell to 1.5% in Q3 (Q2: +2.5% yoy), marking the weakest result since Q4 2023. In addition, public consumption growth cooled to 0.9% (Q2: +5.6% yoy). Moreover, fixed investment contracted 8.0% in Q3 (Q2: +4.4% yoy)—dragged on by a high base of comparison—posting the first decline in two years. On the external front, exports of goods and services contracted 0.2% on an annual basis in Q3, contrasting the second quarter's 3.6% expansion. Meanwhile, imports of goods and services deteriorated, contracting 0.3% in Q3 (Q2: +7.0% yoy).

Stable growth in 2025: In Q4, our panelists expect GDP growth to strengthen. Turning to 2025, our Consensus is for the economy to expand at a similar pace to 2024’s projected figure. A recovery in fixed investment, supported by lower interest rates and EU funds, along with rising exports growth driven by stronger EU demand, will offset weaker growth in both private and public spending.

Panelist insight: Commenting on the reading, Matej Hornak, analyst at Erste Bank, stated: “Cost-increasing measures for companies, stemming from consolidation efforts announced by the government a few weeks ago, are expected to negatively impact investment activity and GDP growth in the coming years. Due to these consolidation efforts, GDP could weaken by half a percentage point in each of the next two years, as reduced consumption and investment activity may dampen growth over a longer horizon. The pressure on corporate budgets will also affect the ability to raise wages, although a relatively tight labor market will still favor employees.”

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