The Slovenia Times

GDP Expands 1.9% Y/Y in Q1

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The second consecutive quarter of year-on-year growth came despite a slight contraction in domestic consumption, according to preliminary economic data released by the Statistics Office on Friday.

Adjusted to working days and season (the gauge used by the EU statistics office Eurostat), GDP was down by 0.3% compared to the fourth quarter of 2013, but expanded 1.5% year-on-year.

The positive external trends from the last quarter of 2013 continued, with exports representing a substantial chunk of the expansion in economic activity, said the Statistics Office.

The Slovenian economy is becoming increasingly dependent on foreign demand, the office's expert for national accounts An┼że Podnar said.

In the first quarter of 2014, exports grew by 4.7%, boosted by growth in external demand for electrical devices and motor vehicles.

Imports were meanwhile up by 2.3%, which is slightly less than in the previous quarter.

According to Podnar, the external balance contributed two percentage points to economic growth as domestic consumption continued to stagnate.

Domestic consumption in the first quarter shrank slightly year-on-year (by 0.2%), but dropped more pronouncedly compared to the previous quarter, when it was up by 3%.

While gross fixed capital formation was up 2.4% year-on-year on the back of a 25% increase in investment in buildings, this was offset by a decline in inventories.

Consumption was also hindered by a continued drop in government spending, which was down 2% over the first quarter last year.

"On a more positive note, household spending saw the first uptick in 18 months, growing by 0.6%," said Podnar.

Meanwhile, many of Slovenia's economic sectors saw expansion in the first quarter. "Companies are seeing value added increase as a result on greater external demand and stable domestic consumption coupled with lowering of costs," according to Podnar.

The biggest expansion was registered in construction, which grew by 15.8%. The agriculture forestry and fisheries sector expanded by 9.1% as a result of the increased activity stemming from the clean up efforts in the aftermath of the February ice storm.

The manufacturing sector grew by 3.1% and value added in services was up 1%.

Podnar says there is reason for confidence about the prospects for the Slovenian economy the rest of the year. "I think that private consumption will remain stable, while the growth in construction should persist."

Moreover, exports are expected to remain the engine of the economy. The export sector has become very price competitive in recent years and productivity is expected to increase in this sector, he added.

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