The Economy Is Still Losing Pace


Information about the growth of the economy for 2012 has recently been published and it shows a modest growth of 0.8% for the year. The economic performance entirely coincides with our expectations of a prolonged stagnation and slow growth around 0,7-0,8% last year. A couple of days ago the national statistics also announced that according to its final data for 2011, growth was 1.8% or 0.1 percentage points higher than first announced. Hence the economic slowdown in 2012 is even more sensible if the revised data are taken into account.


What is the GDP data for 2012 showing?

1/ Gross value added of economic sectors has increased only by 0.3% last year.

2/ GDP growth of 0.8% is due to an increase by 3.8% in the so-called correctives (taxes minus subsidies), which on the other hand is explained by the higher revenue from indirect taxes – due to higher fuel prices, export growth and the e-connection of a number of businesses with tax authorities in the course of 2012, which brought to light a part of the formerly grey economy?.

3/ On the supply side, the annual growth is mainly due to agriculture (+3.5%) and industry (+1.9%), while construction and the majority of the services sectors (finance, information and communication) are showing decrease. The only exception is in the sub-sector of trade, transport and tourism, which is growing by 1.8% due to the good year for tourism.

4/ There is an alarming tendency of gradual deceleration of growth during the year, as the last quarter showed the poorest performance on an annual basis, according to the seasonally adjusted and the unadjusted data. On a quarterly basis, the last quarter marks a 0% growth (seasonally adjusted).

5/ On the demand side it is obvious that the (unadjusted) individual consumption marks its first for 2012 decrease in the last quarter (on an annual basis), which actually explains the general decline of consumption. The seasonally adjusted data does not indicate a drop, but a significant slow-down of growth in the last quarter is also evident.

6/ Investments also move into the red in the last quarter with their first drop (if unadjusted data are considered) after three consecutive quarters of slight increase. The latest slew of statistics questions the sustainability of the recovery of investment in the economy. It also supports our argument that most likely investments have already reached a bottom, but a more serious boost of these would hardly be seen without resumed inflows of large-scale foreign investment.

In general, the most recent data on GDP are a cause of concern, because they show a further slowdown of the economy, even against the modest pace of growth in the earlier part of the year. The information also helps understand (parts of) the reasons behind citizens’ protests in previous weeks – the economy is barely advancing for a third year in a row, at the end of 2012 it has slowed down to a sanitary growth minimum, inflation keeps its positive values (3% average for 2012), while employers continue to lay off workers.

The export oriented industry and tourism remain the main hopefuls for economic growth in 2013. Individual consumption will also receive some boost from higher budget expenses on pensions, salaries in the budget sphere and social payments. However, it is highly unlikely that consumption will mark a growth rate of above 2-3% for the year, if one takes into account the continuing process of job shedding and loss of incomes for the working population. If the current political crisis and its impact on investment and business activities is taken into account (in the form of postponed projects), 2013 will most likely preserve the pattern of modest economic growth from the last couple of years, i.e. not grow by more than 1%. Considering the state of the economy, a stable government after the elections and quick reforms to ease the burden on businesses are necessary more than ever.