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2020/06/12 / Erste Group Research

Strongest negative impact on GDP yet to come

The first effects of the coronavirus crisis were already visible in the 1Q20 figures, where, despite solid short-term data for Jan-Feb, the economy contracted by 2.3% y/y, amid a weak domestic demand performance. The strongest impact is still to be seen in the 2Q20 figures, as the domestic side of the economy takes a hit due to lockdown measures, while the deteriorated EU growth outlook will hit external demand. Thus, we expect the economy to bring a double-digit decline in 2Q20, before starting to gradually bounce back from 2H20 onward. Taking into account the latest GDP figures, we see the economy contracting around the 8% region, with risks looking a bit more balanced, but still tilted to the downside.

Low energy prices and dented demand-side pressures pushed CPI into negative territory, while we see the deflationary tone remaining present in the coming period. The budget balance is seen dipping significantly into the negative area, as government efforts to cushion the coronavirus crisis impact should result in rising pressures on the expenditure side. This, coupled with lower revenues amid contracted economic activity, implies a deficit in the region of 8.5% of GDP. Consequently, public debt is seen reverting back to the upside trajectory by moving above the 80% of GDP mark.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusSlovenia
Currency in focusEuro
Sector in focus-


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