Investments fueled GDP growth in the first quarter

According to the final data, GDP rose by 4.2% in the first quarter of 2017 on an annual basis, a sharp acceleration against the rates registered in the previous quarter and in 2016 as a whole. The working day adjusted and the seasonally and working day adjusted GDP growth rates grew by 3.9% and 3.8%, respectively.

On the production side, industrial value added growth accelerated to 6.8%, following a negative y-o-y growth in the previous quarter, and construction value added skyrocketed, in accordance with the expectations. Services, on the other hand, grew by 3%, a good pace in itself, but not an improvement compared to 2016. Agricultural value added contracted by more than 6%.

On the expenditure side, gross fixed capital formation was the primary driver of growth, due to its dramatic rise of 28.4%. According to the investment statistics, this rise was supported by EU funds, private firm investments and households alike. Private consumption expenditures, on the other hand, lose some steam, instead of accelerating, to 3.5%. One possible explanation is that the official wage statistics overestimates the actual wage growth, due to, among others, the „whitening„ of wages, a reaction to drastic raise of the wage minimum. Actual induvidual consumption grew at an even lower rate and public consumption tanked. As a result, skyrocketing fixed investments constituted indeed the only component that made the very dynamic growth of domestic demand (by 4.1%) possible.

While the net export of goods contributed negatively to GDP growth, the export of services kept outpacing the import of services. As a result, the growth contribution of overall net exports remained positive, and thus GDP growth could minimally surpass the growth of domestic demand.

GDP growth is expected to decelerate somewhat during the rest of the year. Among others, the calendar effect will be negative in the remaining quarters, especially affecting industrial growth. On the expenditure side, fixed capital formation growth will moderate somewhat, yet the annual growth contribution of fixed investments will be higher, and that of household consumption will be lower, than previously expected.

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