Slovenia: GDP contracts in fourth quarter as domestic demand plunges
March 1, 2012
In the fourth quarter, GDP shrunk 2.8% over the same period the previous year. The contraction followed the 0.5% drop observed in the third quarter and exceeded market expectations of a 0.9% fall. In fact, the Q4 print represents the steepest decline since Q4 2009. In the full year 2011, the economy declined 0.2%, which contrasts the 1.4% rise observed in the previous year. The deterioration was primarily driven by a sharp contraction in domestic demand (Q3: -1.4% year-on-year; Q4: -4.4% yoy), amidst a harsh fiscal consolidation process. Private consumption fell 1.8% over the same quarter the previous year, contrasting the 0.5% increase recorded in the previous quarter. Government spending continued to decline (Q3: -0.9% yoy; Q4: -2.6% yoy) as the government aims to reduce its fiscal deficit. Overall investment also deteriorated further (Q3: -6.4% yoy; Q4: -12.3% yoy) due to slower stockpiling, while fixed investment fell for the thirteenth quarter in a row (Q3: -12.0% yoy; Q4: -6.9% yoy). The external sector, which is Slovenia's main growth engine, continued to slow on the back of the deteriorating economic situation in Europe. Exports of goods and services moderated to 3.0% (Q3: +5.5% yoy), while imports slowed further to 0.3% (Q3: +4.4% yoy). As a result, the external sector's net contribution to overall economic growth stepped up from 0.8 percentage points in the third quarter to 1.8 percentage points in the fourth. A quarter-on-quarter analysis corroborates the deterioration seen in annual figures, as GDP contracted 0.7% over the previous quarter in seasonally and working-day adjusted terms (Q3: -0.4% quarter-on-quarter).