Provisional data (1) for GDP growth in Q1/2024 issued by NIS on Friday show that GDP advance stood at 0.4%, compared with the previous quarter (revised slightly downwards against the previous signal data of 0.5%).
Economic growth in Q1/2024 stood at 0.1% year-on-year, the same as in the first press release of NIS.
The main driver of GDP advance in the first quarter of the year came from demand, the final consumption of households contributing 2.6 percentage points to the 0.1% GDP increase against the same quarter of 2023, followed by investments (gross fixed capital formation – GFCF) with +1.3 percentage points.
Net exports and inventories recorded the biggest negative contributions to GDP growth in Q1/2024 yoy, with -2.6 percentage points and -1.6 percentage points, respectively.
GDP formation contribution: Industry drops towards 18%, trade heads for 24%, IT reaches towards 9%
The structure is quite weak in terms of supply. Trade and services recorded a negative overall contribution of -0.2 pp, of which retail registered -0.4 pp, professional, scientific and technical activities, -0.2 pp, while information technology and communications, as well as cultural and recreational activities each added +0.2 pp.
Industry had a negative contribution of -0.2 pp, while constructions recorded a negative contribution of -0.1 pp. Agriculture had a neutral contribution to GDP growth in Q1/2024:
BCR analysts expect an acceleration of GDP growth for this year compared with 2023, to 2.6% from 2.1%, while remaining below potential. Private consumption is estimated to be supported by second-round effects of strong real wage increases, amid lowering inflation and minimum wage increase starting July, pensions increase scheduled for the fall and government spending.
Investments are expected to continue contributing to GDP growth but at lower pace compared with 2023.
EU funds inflows from both the Multiannual Financial Framework and Next Generation EU could represent approximately 2% of GDP in 2024 compared with 3.3% of GDP in 2023.
The ECB revised its outlook for Eurozone GDP growth upwards to 0.9% in 2024 from the March forecast of 0.6% pp. Better prospects for foreign demand should also support the local economy.
Other estimates by domestic or international institutions vary from 2.8% to 3.3% for this year:
- European Commission: 2.9% increase in 2024 and 3.2% increase in 2025
- IMF: 2.8% increase in 2024 and 3.6% increase in 2025
- the National Commission for Prognosis, more optimistic, banks on a 3% increase this year and of 4% in 2025
- World Bank: 3.3% increase in 2024 and 3.8% increase in 2025
- Reuters (based on the survey of economists): estimates a 2.8% increase in 2024 and 3.3% in 2025.
***
