Economic growth moderates in Q1

GDP expanded 2.1% year on year in Q1 2024, slowing slightly from Q4 2023’s 2.2% rise. On a seasonally adjusted quarter-on-quarter basis, GDP recorded a flat reading in Q1, compared to the previous period's 0.9% growth.

Domestically, households felt the pinch of still-elevated inflation and tight monetary policy as private consumption growth slowed to 0.9% in the first quarter (Q4 2023: 1.2% yoy). Moreover, fixed investment growth fell to 0.6% in Q1, marking the worst result since Q4 2020 (Q4 2023: +9.1% yoy). That said, public spending limited the slowdown, improving to a nine-quarter high expansion of 5.1% in Q1 (Q4 2023: +4.8% yoy) amid reconstruction efforts from last year’s floods. On the external front, exports of goods and services slid at a milder rate of 0.6% in the first quarter, which marked the best reading since Q2 2023 (Q4 2023: -2.3% yoy). In addition, imports of goods and services dropped at a more moderate pace of 0.9% in Q1 (Q4 2023: -4.0% yoy), marking the best reading since Q1 2023. Consequently, the external sector added 0.2 percentage points to GDP—deteriorating from Q4’s 2.8 percentage point contribution.

Looking ahead, the economy should slowly gain momentum in the coming quarters. Over 2024 as a whole, GDP growth should accelerate from 2023 levels, according to our Consensus. Recovering EU demand should help exports rebound, while receding inflation should speed up private spending growth.

EIU analysts commented on the fixed investment outlook: “The investment picture remains mixed, with capital spending among a majority of businesses still constrained by tight financing conditions, softer export demand and subdued industrial activity in Germany and Italy, Slovenia's main trading partners (along with Switzerland). […] However, capital spending on infrastructure and construction will remain elevated, supported by inflows of EU funds and new spending related to post-flood reconstruction, although labour shortages will affect the pace of works, with Slovenia historically struggling to absorb funding quickly.”

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