Slovakia: Economy contracts at sharpest rate in over a decade in Q1
June 5, 2020
A second estimate revealed the economy shrank 3.7% on an annual basis (previously reported: -3.9% year-on-year) in the first quarter, contrasting the fourth quarter’s 2.1% expansion. Q1's reading marked the largest decline since Q4 2009 and reflected the impact of the coronavirus pandemic and associated containment measures.
The first quarter’s downturn was chiefly driven by a marked contraction in fixed investment, falling 4.8% in Q1, contrasting the 7.4% increase in the previous quarter. Moreover, household spending growth moderated to 1.0% in Q1 from 2.4% in Q4, while public expenditure slowed to 1.1% from Q4’s 4.7% rise.
On the external front, exports of goods and services contracted 6.8% in Q1 amid disrupted global supply chains and collapsed global demand, marking the worst result since Q3 2009 (Q4: -0.5% yoy). In addition, imports of goods and services fell at the steepest rate since Q4 2009 (Q1: - 1.5% yoy; Q4: -0.5% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth fell 5.2% in Q1 (previously reported: -5.4% quarter-on-quarter), contrasting Q4's 0.6% increase. Q1's reading marked the sharpest decrease since Q1 2009.
Looking ahead, GDP is expected to contract this year. Containment measures to halt the spread of Covid-19 are constraining private consumption, while a weak European trading environment and severed global value chains are crippling exports. Although fiscal and liquidity-boosting measures should mitigate the fallout, a potential re-emergence of the virus is a downside risk.
Author: Hanna Andersson, Economist