GDP growth slows for the fourth consecutive quarter in Q2

GDP growth slows to over one-year low: According to a preliminary estimate, GDP growth moderated to 0.1% on a seasonally adjusted quarter-on-quarter basis in Q2, from 0.3% in Q1, marking the fourth consecutive slowdown and the lowest reading since Q1 2024. On an annual basis, economic growth waned to 1.5% in Q2, from Q1’s 2.2%, marking the worst reading since Q2 2024.

Weaker private consumption hits GDP growth: On the domestic front, household spending contracted 0.4% in Q2 (Q1: +0.4% s.a. qoq), the first decline since Q3 2023, as consumer sentiment deteriorated. Meanwhile, public spending growth accelerated to 0.8% (Q1: +0.5% s.a. qoq) and fixed investment rebounded 1.5% (Q1: -2.1% s.a. qoq), driven by stronger outlays in transport equipment. Externally, exports of goods and services grew 0.9% in Q2 (Q1: +0.2% s.a. qoq), while imports of goods and services growth jumped to 2.6% (Q1: +0.4% s.a. qoq), narrowing the trade surplus.

Exports and private spending to drive 2025 GDP growth: Our panelists expect GDP growth to remain underwhelming over the coming quarters. That said, the economy should gain momentum in 2025 as a whole compared to 2024, supported by a recovery in exports of goods and services, which make up the bulk of GDP. Moreover, household consumption growth should strengthen as both interest rates and inflation ease. In addition, fixed investment should rebound on cheaper financing. A downside risk stems from rising political uncertainty ahead of October’s snap general elections.

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