Slovakia: Economy in Q4 expands at fastest pace in five years
March 8, 2016
Healthy dynamics in the job market continued to support private consumption in Q4, while support from European Union funds strengthened investment. Moreover, still resilient exports shored up activity in the external sector. As a result, in the fourth quarter, GDP grew 4.3% annually, which represented the fastest acceleration in five years. The print was a notch above the 4.2% growth reported in the preliminary estimate and overshot the 3.7% increase tallied in Q3. On a sequential basis, the economy grew a seasonally-adjusted 1.0% in Q4, which matched the result tallied in Q3.
As expected, domestic demand led growth in Q4, with private consumption expanding 2.9% annually (Q3: +2.7% year-on-year) and gross fixed capital formation accelerating to an over 10-year high (Q3: +17.3% yoy; Q4: +19.4% yoy). On the contrary, the ongoing consolidation process drove growth in government spending to moderate in the final quarter of 2015 (Q3: +5.2% yoy; Q4: +3.2% yoy).
On the external front, a weak euro supported the 9.2% expansion in exports of goods and services in Q4 (Q3: +7.3% yoy). Growth in imports followed suit and rose to 10.5% (Q3: +9.9% yoy). As a result, the external sector’s net contribution to overall economic growth improved from minus 1.7 percentage points in Q3 to minus 0.7 percentage points in Q4.
In the full year 2015, Slovakia’s economy expanded 3.6%, which was above the 2.5% rise tallied in 2014.In the political arena, Robert Fico’s ruling Smer-Social Democracy party (Smer-SD) won the 5 March parliamentary election. While the (Smer-SD) lost its majority, Fico managed to build a four-party coalition. The new government plans to cut taxes on businesses and increase social spending. These initiatives will delay the target for a balanced budget by two years to 2020.