The economy stagnates in the fourth quarter

According to a preliminary estimate, GDP flatlined year on year in the fourth quarter, above the 0.4% contraction tallied in the third quarter but below market expectations. Q4's reading marked the best result since Q4 2022. On a seasonally adjusted quarter-on-quarter basis, GDP also flatlined in Q4, down from the previous quarter's 0.8% expansion. A complete breakdown will be released on 5 March.

According to the press release, the year-on-year result came on the back of falling output in the industry and construction sectors offset by rising agricultural production.

The economy should bounce back this year. Declining inflation and interest rates, together with real wage growth, will translate into rebounds in household spending and investment. The industrial sector will also return to growth amid stronger external and domestic demand. A potential agreement with the EU on the further disbursement of funds poses an upside risk.

Commenting on the release, ING’s Peter Virovacz and Dávid Szonyi stated: “With this weak fourth-quarter performance, the so-called carry-over effect in 2024 will also be much weaker than expected, which, based on our calculation, is around 0.4%. In other words, with a full year of stagnation, annual economic growth in 2024 would be around 0.4%. However, with a good end of the year, it could have been double or even triple that.”

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