Economy posts slowest expansion in one-and-a-half years in Q3

GDP reading: According to a preliminary estimate, the Slovak economy lost further momentum in the third quarter, expanding 1.2% year on year and marking the softest reading since Q1 2023. The result came in below Q2’s 2.0% rise and surprised markets on the downside. That said, Q3’s reading outpaced the Euro area average of 0.9%. On a seasonally adjusted quarter-on-quarter basis, economic growth slowed to 0.1% in Q3 from the previous period's 0.4% expansion, marking the worst reading since Q2 2022.

Drivers: According to the statistical office, private consumption and public spending both rose at a softer annual pace in the quarter, denting economic activity; household consumption was likely dragged on by renewed pessimism among consumers, rising inflation and a higher unemployment rate. Meanwhile, goods exports declined at a softer pace in July–August compared to Q2, hinting at stronger external demand in the third quarter. A complete breakdown will be released on 5 December.

GDP outlook: Our panelists have penciled in an acceleration for the fourth quarter and expect growth to rise in 2024 as a whole from 2023 on the back of rebounds in exports plus private and public spending. In 2025, the economy is forecast to expand at a similar rate to 2024, supported by ECB interest rate cuts and stronger EU demand.

Panelist insight: Erste Bank's Marian Kocis commented: “We remain cautious about the threat of increased protectionist measures and trade wars, as Slovakia is a small and open economy. […] Cost-increasing measures for companies, stemming from consolidation efforts announced by the government a few weeks ago, are expected to negatively impact investment activity and GDP growth in the coming years. […] The pressure on corporate budgets will also affect the ability to raise wages, although a relatively tight labor market will still favor employees.”

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