SK: Domestic demand driving economy in 4Q24

The Slovak economy increased by 1.8 % y/y in 4Q24, while compared to the previous quarter, seasonally adjusted GDP rose by 0.5 %. This result is slightly above both market consensus and our expectations. For the full-year figure, GDP growth landed at 2 %, in line with our expectations.

As this is a flash estimate, we do not yet have a detailed breakdown of the figure. However, the press release from the Statistical Office announced that the drivers of economic activity were household spending as well as government consumption. According to our estimates, we expect a positive contribution also from changes in inventories, while we anticipate a negative contribution from foreign trade.

Employment decreased slightly by 0.2% year-on-year in the last quarter of 2024 (stagnating on a quarterly basis in seasonally adjusted terms).

Investment activity, driven by resources from the Recovery Plan, could provide a positive boost, though this largely depends on the ability to implement reforms and channel funds into the real economy. On the other hand, the Slovak economic growth could be threatened by external challenges, such as geopolitical tensions or a slowdown in foreign demand. Due to fiscal consolidation, the GDP growth forecast for the next two years has been reduced by half a percentage point, as lower consumption and weaker investment activity could dampen long-term economic growth. In 2025, GDP growth is expected to reach 2%, with a similar rate projected for 2026. Risks to growth include rising economic protectionism and new measures hindering international trade.