Slovenia: Economy expands at slowest pace in four years in Q3
November 29, 2019
The economy grew 2.3% year-on-year in the third quarter, down slightly from the second quarter’s 2.5% upturn, according to detailed data released by Slovenia’s Statistical Institute on 29 November. The third quarter’s expansion was the weakest since Q3 2015. Meanwhile, on a seasonally- and working-day adjusted, quarter-on-quarter basis, GDP growth climbed 0.8% in the third quarter, after flatlining in the second quarter
A negative contribution by net exports underpinned the further year-on-year slowdown, contrasting the positive contribution made in the second quarter. Export growth of goods and services decelerated in Q3, falling to 4.5% from 5.0% in Q2, with the Eurozone slowdown weighing on overseas sales of cars, which contracted in July and August. Meanwhile, imports of goods and services climbed more rapidly, thus translating into a greater drag on growth by the external sector (Q3: +6.7% year-on-year; Q2: +4.9% yoy). Taken together, the external sector deducted 1.2 percentage points from the overall print in Q3, in contrast to the 0.5 percentage-points contribution in Q2.
On the upside, domestic demand strengthened in the third quarter after losing steam in the previous two quarters (Q3: +3.8% yoy; Q2: +2.1% yoy). This was underpinned by an acceleration in private consumption growth (Q3: +4.3% yoy; Q2: +3.8%), along with an acceleration in government spending (Q3: +1.8% yoy; Q3: +1.0%). Stronger total consumption more than compensated for a marked slowdown in fixed investment growth, which slid to 1.2% in the third quarter from 6.9% in Q2, as firms reduced capital spending amid a fall in business confidence.
Looking ahead, the economy is seen losing steam next year on a continued slowdown in domestic activity and a downbeat external sector. Reduced absorption of EU funds and lower levels of capacity utilization will curb fixed investment growth, while the government’s tighter fiscal stance is set to drag on overall domestic demand. Private consumption should remain healthy, however, supported by higher wages.