Economic growth slows in the first quarter

GDP growth waned to 3.9% year on year in the first quarter of 2024, from 4.4% in the fourth quarter of last year. On a seasonally adjusted quarter-on-quarter basis, economic growth waned markedly to 1.0% in Q1, from the previous period's 2.0% increase.

Government spending growth slowed to 1.0% in Q1 (Q4 2023: +4.6% yoy). More positively, private consumption growth accelerated to 6.0% in Q1 compared to a 5.3% expansion in Q4, supported by lower inflation. In addition, fixed investment growth sped up to 10.8% in Q1, from the 6.0% expansion in the prior quarter. Meanwhile, the external sector detracted from the headline reading. Exports of goods and services contracted at a slower pace of 2.0% in Q1 (Q4 2023: -4.4% yoy), while imports of goods and services bounced back, growing 2.2% in Q1 (Q4 2023: -7.1% yoy), marking the highest reading since Q4 2022.

Our panelists expect the economy to expand at a slower pace in the coming quarters as investment activity loses steam. That said, over 2024 as a whole, the economy is set to register one of the fastest expansions in the Euro area, supported by stronger private spending growth and a rebound in exports.

Alen Kovac, analyst at Erste Bank, commented on the outlook: “We reiterate a strong private consumption outlook amid tight labor market conditions, especially strong wage dynamics, particularly in the public sector […] along with employment gains (expected in 1.5-2.0% band for 2024) and real wages remaining close to the double-digit region throughout most of 2024.”

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