Economic growth at 2.5% in 4Q08 was driven by household consumption
- The Statistical Office slightly revised its estimate of real GDP growth in 4Q08 from previous 2.7% down to 2.5% y/y. Also, the third quarter growth was revised down to 6.6% from previously reported 7.0% y/y.
- As expected, the key GDP driver was household consumption (increasing by real 4.7% y/y) despite the fact that real wages declined by 0.2% y/y. Contradictory to the unemployment rate calculated monthly by Labour Bureaus, the unemployment rate obtained from quarterly surveys fell to 8.7%. We expect nominal wage growth to stay modest in the quarters ahead, however, combined with falling inflation should put the real wage growth at around 2.5% on average in 2009. We expect household consumption to stay the main growth contributor throughout 2009, along with the higher government consumption (which increased only by 2.3% y/y in 4Q08).
- Investments decelerated due to financial crises and higher cautiousness of financial sector, as well as due to lower demand (worries about future income and sales have likely entered into the decision making of both firms and households). The growth of fixed investments thus slowed down from 7.3% y/y in 3Q08 to 1.4% in 4Q08.
- Recession in the Euro area showed up in the decline of foreign demand as was indicated by the monthly foreign trade data. Indeed, real exports of goods and services declined over the same quarter year ago by 7.8% while at the same time imports declined by 6.7% y/y.
- The ongoing weak performance of Euro zone countries will translate into lower demand for Slovak production also in coming months. The Slovak economic sentiment indicator dropped further in February; in addition, outage of gas supply could show up in the first quarter GDP growth rate even though some of the missed production could have been caught up in February and March. Therefore, it is likely that the real GDP growth slowed down further in 1Q09. At the moment we see downside risks to our full-year GDP growth estimate at 2.5%.
