Slovenia: GDP contracts as austerity measures bite in
September 4, 2012
In the second quarter, GDP fell 3.2% over the same period last year, which contrasted the 0.2% expansion observed in the previous quarter. The decline marked the sharpest contraction recorded since the last quarter of 2009 and exceeded market expectations of a 1.2% drop, as the government's austerity measures dented consumption and investment. The deterioration in Q2 was driven by a sharp contraction in domestic demand (Q1: -2.1% year-on-year; Q2: -6.8% yoy). Private consumption fell 3.0% over the same quarter last year, contrasting the 0.6% increase recorded in the previous quarter, while government spending contracted 2.0% (Q1: 0.0% yoy). Moreover, fixed investment plunged 8.9% in the second quarter, which nonetheless represented a slight improvement from the 10.5% contraction seen in the first quarter. Meanwhile, the external sector, which has been Slovenia's main growth engine, continued to slow on the back of the deteriorating economic situation in Europe. That said, the external sector's net contribution to overall economic growth stepped up from 2.2 percentage points in the first quarter to 3.4 percentage points in the second. Exports of goods and services fell 0.5% (Q1: +2.0% yoy), while imports contracted a steeper 5.4% (Q1: -1.1% yoy). A quarter-on-quarter analysis corroborates the deterioration seen in the annual figures, as GDP fell 1.0% over the previous quarter in seasonally and working-day adjusted terms, down from the flat reading recorded in Q1.