GDP growth stable in Q4

GDP growth remains steady in Q4: A second release confirmed that annual GDP growth remained at 3.3% in Q4, unchanged from Q3’s upwardly revised print. On a seasonally adjusted quarter-on-quarter basis, economic growth gathered traction, rising to 1.1% in Q4 from the previous quarter's 0.5% expansion. Looking at 2024 as a whole, the economy grew 3.9%, above 2023’s 3.8% and the preceding 10-year average of 2.8%.

Imports slowdown flatters Q4’s reading: Domestic demand lost some steam in Q4 amid widespread anti-government protests. Household spending growth fell to 3.8% in Q4 (Q3: +3.9% yoy), marking the weakest expansion since Q4 2023. Moreover, public consumption dropped 0.3%, the sharpest contraction since Q3 2023 (Q3: +2.6% yoy). In addition, fixed investment growth fell to 1.2% in Q4 (Q3: +9.1% yoy), marking the worst result since Q4 2022. Meanwhile, external demand remained a drag on the economy. That said, it detracted 2.8 percentage points from growth in Q4, significantly less than Q3’s 7.1 points due to a moderation in imports growth. Exports of goods and services increased 3.1% on an annual basis in the final quarter, which was below the third quarter's 3.6% expansion. Meanwhile, imports of goods and services growth moderated to 7.1% in Q4 (Q3: +14.7% yoy).

Healthy growth ahead: Our panelists expect the economy to gradually gain steam throughout 2025, with overall growth expected to be slightly above 2024’s. Exports should strengthen thanks to healthier EU demand, and fixed investment should edge up on lower interest rates. That said, private spending growth is projected to ease due to a slowdown in wage growth. Greater domestic political instability, rising tensions with Kosovo and weaker-than-anticipated EU demand are downside risks.

Panelist insight: EIU analysts commented on the challenges that the government is facing: “Political instability and increasing pressure on the president may also make it more difficult for the authorities to deliver on their reform agenda. In December the government agreed a 36-month Policy Co-ordination Instrument with the IMF. The government hopes that continued coordination with the IMF will allow it to drive through necessary reforms, including the modernisation of the state-owned enterprise sector, and lower public debt through spending restraint. However, on February 7th the government drastically increased the higher education budget in a bid to appease the (mainly young) protesters. Further spending relaxation is possible if the president does decide to hold an election.”

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