Slovakia: Economic growth hits a two-year high in the first quarter
According to a preliminary estimate, the Slovak economy gained steam in the three months to March, expanding at a two-year high of 2.7% on an annual basis. The upturn came in above Q4 2023’s 2.1% rise and beat market expectations.
On a seasonally adjusted quarter-on-quarter basis, economic activity rose 0.9% in Q1 (Q4 2023: 0.5% yoy), the sharpest increase since Q2 2021.
According to the statistical office, Slovakia’s annual upturn largely reflected improving private consumption and public spending; the former was likely buoyed by rising economic sentiment, a lower unemployment rate and plunging inflation.
A complete breakdown will be released on 6 June.
Our panelists expect growth to slow in Q2 but then to pick up in subsequent quarters. Over 2024 as a whole, the economy should accelerate from 2023 levels but fall short of the prior decade’s average of 2.4%. Recovering exports plus private and public spending will more than offset cooling fixed investment growth.
EIU analysts commented:
“The household sector will be the main driver of growth in 2024. Slowing inflation is leading to positive real wage growth, and, while retail sales are showing only modest signs of improvement, household savings are set to recover, which will boost consumption in the latter half of the year. However, continued weakness in the industrial sector will dampen the scale of the economic rebound.”
Erste Bank’s Matej Hornak added:
“The Slovak economy has started the new year with a relatively strong momentum. After a year-long decline in household consumption, there seems to be a revival in this most important component of economic performance. Additionally, this year should see a continued positive impulse from the drawdown of European funds, especially the Recovery Plan. A visible rebound of foreign trade will come hand in hand with the rising activity in the most important trade economies, especially Germany, which we expect in the second half of the year.”