Slovenia: Economy slows considerably in Q1 2018
May 31, 2018
The economy lost momentum in the first quarter of the year after having logged a stellar growth rate in the previous quarter. According to the Statistical Office, annual GDP growth decelerated to 4.6% in Q1 2018, down from 6.0% in Q4 2017. Behind the slowdown was considerably weaker growth in exports.
On the domestic side of the economy, internal demand grew more rapidly. Domestic demand grew 5.3% in Q1, up from 4.5% in the previous quarter. The upturn was driven by a surge in gross capital formation, which expanded at a notably faster pace of 14.7% in Q1, close to double of the rate of growth in Q4. This was likely thanks to an ongoing boom in construction investment. Conversely, government consumption slowed considerably, growing 0.6% in Q1 compared to 5.6% in Q4. Meanwhile, private consumption expanded at broadly the same pace as the previous quarter (Q1: +3.4% year-on-year; Q4: +3.3% yoy).
The external sector dragged on growth, however, as export growth lost steam. Exports rose at a solid rate of 7.4% in Q1, but this was a significant deterioration from the 12.3% expansion seen the in the previous quarter. Imports also grew at a notably slower pace, as the rate of increase slid to 8.7% in Q1, down from 11.1% in Q4. As exports were outpaced by imports, the external sector’s contribution to growth swung into negative territory, deducting 0.2 percentage points from growth. This contrasted a 1.7 percentage point contribution to growth in the previous quarter.
On a seasonally- and working day-adjusted, quarter-on-quarter basis, the economy grew 0.6% in the first quarter, which marked a notable drop from a revised expansion of 1.9% in the final quarter (previously reported: +2.0% quarter-on-quarter). In seasonally- and working-day adjusted annualized terms, GDP growth fell to 5.0% in Q1, down from a revised figure of 6.0% in Q4 (previously reported: +6.2% yoy.
Slovenia GDP Forecast
The Central Bank expects GDP growth of 4.2% in 2018 and 3.6% in 2019. FocusEconomics Consensus Forecast panelists expect the economy to grow 4.5% in 2018, which is up 0.1 percentage points from last month’s forecast. They see growth moderating to 3.5% in 2019.
Author: Nihad Ahmed, Economist