Slovenia: Economy records best result since Q4 2019 in the first quarter, but remains below pre-pandemic levels
May 31, 2021
GDP rebounded in the first quarter, growing 1.6% year-on-year and contrasting the 4.5% contraction recorded in the fourth quarter of last year. Q1's reading marked the fastest expansion since Q4 2019. That said, the print was flattered by a favorable base effect and was not enough to restore the economy to its 2019 levels.
The upturn reflected improvements in private consumption, fixed investment and exports. Despite the tight restrictions in place in the quarter, household spending bounced back amid a rather favorable base effect, growing 0.4% year-on-year in Q1 following a 14.5% contraction in Q4. Notably, consumption of durable goods rose, more than offsetting lower consumption of other goods and services. Meanwhile, public spending contracted 1.7% (Q4 2020: +2.8% yoy). Lastly, fixed investment growth accelerated to 7.6% in Q1 from 2.0% in the prior quarter, thanks to a spike in spending on machinery and equipment, with transport equipment investment up by roughly a third.
On the external front, exports of goods and services rebounded in the first quarter, growing 0.8% year-on-year, which marked the best reading since Q4 2019 (Q4 2020: -0.4% yoy). In addition, imports of goods and services bounced back, growing 0.5% in Q1 (Q4 2020: -2.0% yoy).
On a seasonally-adjusted quarter-on-quarter basis, the economy expanded 1.4% in Q1, rebounding from the 0.6% contraction recorded in Q4 2020.
Looking at Q2, although domestic restrictions were temporarily tightened on 1 April, they have been eased significantly since then, boding well for activity. Indeed, our panelists forecast a marked acceleration in economic momentum in the quarter. Early signs are positive: Retail sales expanded in April, suggesting private consumption might have picked up at the outset of the quarter. In addition, consumer and business sentiment improved in May.
Author: Frederico Teixeira de Abreu, Junior Economist