GDP grows at softest pace since Q4 2020 in Q4

According to a preliminary reading, GDP growth lost momentum, easing to 2.1% year on year in the fourth quarter from 2.6% in the third quarter. Q4's reading was the weakest in three years. On a working-day and seasonally adjusted quarter-on-quarter basis, economic growth waned to 0.8% in Q4 from the previous quarter's 1.1%.

The flash estimate did not include a detailed breakdown, merely stating that the hospitality, transportation, trade and information sectors supported growth. Meanwhile, monthly data suggests that the external sector struggled in the quarter: Merchandise exports shrank over 30% yoy in Q4 (Q3: +26.9% yoy), while tourist arrivals growth lost steam. A full breakdown is set to be released on 1 March.

In 2024, the economy is forecast to expand at a similar pace to last year. Stronger export growth amid a robust tourism sector will underpin momentum. On the flip side, domestic demand is set to soften due to the lagged effects of monetary policy tightening. 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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