Slovenia Government Consumption (ann. var. %)

Economy records slowest growth in two years in Q4

GDP growth moderated to 0.2% year on year in the fourth quarter, from 3.3% in the third quarter. Q4’s reading marked the slowest growth since Q4 2020 and was due to a base effect, as in sequential terms, the economy sped up. The Q4 reading brought the growth rate for 2022 to 5.4%, in line with our panelists’ expectations.

The downturn was broad-based, with growth in private consumption, public spending, fixed investment and exports weakening. Household spending growth fell to 2.6% in Q4, marking the weakest reading since Q1 2021 (Q3: +3.3% yoy). Government spending contracted 1.0% (Q3: -0.6% yoy). Meanwhile, fixed investment growth slowed to 5.9% in Q4, marking the worst reading since Q4 2020 (Q3: +8.7% yoy).

Exports of goods and services contracted 2.5% in Q4 (Q3: +11.9% yoy). Imports of goods and services also deteriorated, declining 1.5% in Q4 (Q3: +12.6% yoy).

On a seasonally-adjusted quarter-on-quarter basis, economic activity bounced back, expanding 0.8% in Q4, contrasting with the previous period’s 1.3% decrease.

Growth is set to remain weak in Q1 this year, as elevated inflation will continue to weigh on private consumption. That said, activity will likely rebound from Q2 onwards, in line with much lower price pressures. Higher-than-expected interest rates are a downside risk.

On the outlook, EIU analysts commented:

“Overall activity will be subdued [this year], with private consumption constrained by reduced purchasing power, higher interest rates and weaker sentiment […] Investment and net trade will face headwinds from tighter financing conditions and secondary effects from a downturn in the EU.”