Slovenia: GDP contracts in third quarter as external sector weakens
November 30, 2011
In the third quarter, GDP shrank 0.5% over the same period last year. The contraction contrasted the revised 0.8% expansion recorded in the second quarter (previously reported: +0.9% year-on-year) and fell short of market expectations of a 0.8% increase. In fact, the reading represented the first decline in economic activity since the first quarter of 2010. A quarter-on-quarter analysis confirms the deterioration seen in the annual figures, as GDP contracted 0.2% over the previous quarter in seasonally and working-day adjusted terms (Q2: +0.0% qoq). The slowdown was driven by a deterioration in the external sector. Meanwhile, domestic demand remained depressed (Q2: -1.7% yoy; Q3: -1.9% yoy). Private consumption added a paltry 0.2% over the same quarter last year, which was, nevertheless, slightly up from the 0.1% increase recorded in the previous quarter. Government spending continued to decline (Q2: -0.9% yoy; Q3: -0.5% yoy) as the government aims to reduce its fiscal deficit. Investment deteriorated (Q2: -6.7% yoy; Q3: -8.1% yoy) due to slower stockpiling, while fixed investment fell for the twelfth quarter in a row (Q2: -15.3% yoy; Q3: -13.0% yoy). The external sector, which is Slovenia's main growth engine, weakened in the third quarter as demand from Europe waned. Exports expanded 5.6% over the same quarter last year (Q2: +8.5% yoy), while imports rose 3.7% (Q2: +4.8% yoy). As a result, the external sector's net contribution to overall economic growth stepped down from 2.4 percentage points in the second quarter to 1.3 percentage points in the third. At the sector level, the industrial sector slowed from a 4.7% expansion in the second quarter to a 0.3% increase in the third. Services continued to deteriorate and fell 0.9% (Q2: -0.5% yoy) as the construction sector remains mired in recession (Q3: -19.7% yoy). Meanwhile, agriculture contracted 2.5%, the same as in the previous quarter.