Economic growth records slowest increase since Q4 2020 in Q4

GDP growth lost momentum, slowing to 2.1% year on year in the fourth quarter from 2.6% in the third quarter. Q4's reading marked the softest growth since Q4 2020. On a working-day and seasonally-adjusted quarter-on-quarter basis, economic growth moderated to 0.6% in Q4, following the previous quarter's 1.3% increase. In 2023 as a whole, the economy grew 2.5%, easing from 5.1% in 2022.

Q4’s deceleration was driven by a smaller expansion in household spending and a contraction in exports. Private consumption growth fell to an over-two-year low of 3.0% in the fourth quarter (Q3: +4.5% yoy). On the flip side, public consumption bounced back, growing 0.3% in Q4 (Q3: -0.5% yoy). Moreover, fixed investment growth sped up to 45.7% in Q4 from a 19.2% increase in the prior quarter. Looking at the external sector, exports of goods and services contracted 6.1% in Q4 (Q3: +2.5% yoy). The decline was solely due to a sharper fall in goods exports; services exports gained marginal steam. In addition, imports of goods and services growth waned to 4.1% in Q4 (Q3: +6.9% yoy).

This year, the economy is seen growing at a similar pace to 2023. A rebound in exports is set to roughly offset cooling domestic demand. The pace of absorption of EU funds is a key factor to track, while additional spillovers from the wars in Ukraine and the Middle East pose downside risks.

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