GDP growth records slowest increase since Q4 2022 in Q1

GDP reading below expectations: According to a flash estimate, economic growth softened markedly in the first quarter, with GDP expanding 2.0% year on year (Q4 2024: +3.3 yoy). The figure surprised markets on the downside and marked the worst reading since Q4 2022.

Subdued domestic demand likely hampers growth: The release did not include a comprehensive breakdown, but monthly data suggests that domestic demand cooled, while the external sector likely continued to hamper growth; both retail sales and industrial output lost steam in the quarter, and the trade balance remained in the red. Moreover, persistent anti-government protests throughout the period and the government’s collapse likely dented momentum further. A detailed breakdown is set to be published on 2 June.

Panelist insight: Mate Jelic, analyst at Erste Bank, commented: “Looking ahead, the outlook has deteriorated in recent months. Student-led protests led to the collapse of the previous government. Although a new administration has recently taken office, valuable time and economic momentum have already been lost. Meanwhile, protests are ongoing, adding to political instability. On the external front, the global geopolitical environment remains highly uncertain, largely due to unpredictable developments under the new U.S. administration.”

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