Slovakia: Drawing of EU funds prompts GDP to decelerate in Q1
June 8, 2016
Reduced European Union funds took their toll on economic growth at the start of the year. However, resilient private consumption due to falling unemployment continued to shore up growth. In Q1, GDP grew 3.5% annually, which represented the weakest expansion in three quarters. The print was a notch above the 3.3% growth reported in the preliminary estimate and undershot the 4.3% increase tallied in Q4. On a sequential basis, the economy grew a seasonally-adjusted 0.7% in Q1, which was below Q4’s 1.0% increase.
Growth in gross fixed capital formation slowed to a 10-quarter low due to withdrawing EU development funds (Q4: +19.4% year-on-year; Q1: +1.5% yoy). On the other hand, an improving labor market continues to support private consumption, which expanded 2.5% annually in Q1 (Q4: +2.9% yoy). Meanwhile, the pace of government spending was broadly unchanged at 3.1% in Q1 (Q4: +3.2% yoy).
On the external front, still weak oil prices drove imports of goods and services to slow to 0.4% growth (Q4: +10.5% yoy), while exports expanded 0.2% (Q4: +9.2% yoy). As a result, the external sector’s net contribution to overall economic growth improved from minus 0.7 percentage points in Q4 to minus 0.2 percentage points in Q1.