Slovakia: Economy contracts at record pace in Q2 amid Covid-19 fallout
September 4, 2020
A second estimate confirmed that the economy shrank 12.1% on an annual basis in Q2, matching the preliminary release and dropping at a significantly faster pace than Q1’s 3.7% contraction. Q2's reading marked the largest decline in the series’ history and reflected the impact of the Covid-19 pandemic on economic activity.
Fixed investment plummeted 14.6% year-on-year in Q2 (Q1: -4.8% yoy), marking the worst reading since Q4 2016. Similarly, household spending dropped 4.3%, contrasting Q1’s 1.0% expansion, as containment measures suppressed consumption. In addition, public spending declined 10.4%, swinging from Q1’s 1.1% increase.
On the external front, exports of goods and services nosedived 26.8% in Q2 amid disrupted global supply chains and subdued global demand (Q1: -6.8% yoy). Moreover, imports of goods and services collapsed 27.0% in the second quarter (Q1: -1.5% yoy). Both results marked the worst readings on record.
On a seasonally-adjusted quarter-on-quarter basis, economic activity fell 8.3% in Q2, also matching the preliminary release (Q1: -5.2% s.a. qoq) and once again marking the worst contraction on record.
GDP is expected to contract this year, as Slovakia’s open economy is plagued by subdued global demand. Moreover, the unpredictable course of the pandemic, a resurgence of Covid-19 cases domestically and slowing recoveries in European trading partners pose downside risks.