GDP fall decelerated in Q3

The second estimate confirmed that GDP was down 4.6 percent in the third quarter of 2020 on an annual basis. The quarter-on-quarter change was an increase of 11.4 percent, a partial recovery after the 14.6 percent plunge in the second quarter.

On the production side, the pace of decline markedly softened in industry and in services (to -2.4 and -4 percent, respectively) from double-digit paces in the second quarter. Industry revived after the initial shock, particularly the auto industry lockdown in the second quarter. The fall of both market services and public services eased – the latter primarily to the rebound of healthcare services that temporarily plummeted in the second quarter. The fall in construction value added, however, even accelerated in the third quarter.

On the expenditure side, a strong positive turn in the net export position took place, as the export of goods posted a slight positive growth after plummeting in the second quarter. As a result, the positive growth contribution of the net export of goods almost entirely offset the continuing negative contribution of the net export of services (the latter is partially due to the continuing loss of revenues from inbound tourism).

As for final domestic use, no positive turn could be observed, only a moderation of the negative trend. The moderation is due to the partial recovery in private consumption. On the other hand, the pace of decrease of fixed capital formation even accelerated further, due to the deterioration in business investment activity.

In the fourth quarter, another negative turn is expected to take place, due to the second wave of the pandemic, which will be primarily reflected in the reacceleration of the decline in private consumption. We expect the GDP to contract by more than 6 percent in 2020.