Slovakia's annual economic growth accelerated to 2.4% in the first quarter of 2014 from 1.5% in the previous three months, supported by rising exports and domestic demand, the country’s statistics office said on June 4 confirming its flash estimate released last month. Domestic and foreign demand contributed positively to the economic growth for the second consecutive quarter in Q1.

On a seasonally-adjusted basis, the Q1 gross domestic product (GDP) grew by 0.6% q/q. In nominal terms, the GDP amounted to EUR 17.02bn in Q1, up 1.9% y/y.

Exports rose 9.6% y/y in Q1, speeding up from a 6.6% growth in the last three months of 2013. The annual growth in imports also strengthened to 10.8% from 7.4%. Domestic demand increased by 3.9% y/y in Q1, after rising 2.2% y/y in the previous quarter, affected mainly by rising investments and higher government spending, the statistics office said.

Gross capital formation grew for the second straight quarter in Q1, going up by 5.3% y/y and following a 7.7% annual rise in Q4. Gross fixed capital formation increased by 3.6% y/y in Q1, easing from a 4% annual increase in the previous quarter. Government consumption grew 4.4% in Q1 after rising 2.5% in the previous quarter, and household consumption rose by 3.4% y/y, compared to a 0.4% growth in Q4 2013.

Looking at the breakdown by sectors, the first-quarter GDP growth was supported mainly by a 6.3% rise in financial and insurance activities and a 3.8% rise in wholesale and retail trade, repair of motor vehicles and motorcycles. The only annual decline, of 4.9% y/y, was recorded in the  arts, entertainment and recreation sector.

For the full 2013, Slovakia’s economy expanded by 0.9% y/y at current prices.

IntelliNews comment: The Slovak economic growth is expected to further gain speed this year and in 2015 supported by an increasing domestic demand and rising exports on the back of a recovery in the euro zone, the country’s main trading partner. Domestic demand grew for the second quarter in a row in Q1 after declining for 10 consecutive quarters. Household consumption was backed by a drop in consumer prices in February and March. However, Slovak inflation is expected to pick up in the second half of 2014 due to the expected recovery in domestic demand. Data showed retail sales rising for the fifth straight month in March 2014 with the annual growth speeding up 5.7% y/y from 4% y/y the month before.  The rise in the Slovak retail sales reflect rising wages and improving consumer confidence. The European Commission expects Slovakia’s economy to expand by 2.2% this year, while the International Monetary Fund (IMF) sees a 2.3% economic growth in 2014.