Economic growth broke record in Q2, yet still fell behind expectations

Low comparison base was behind record economic growth as well as growth of other indicators.

Car production remained the main driving force of the Slovak economy in Q2 2021.Car production remained the main driving force of the Slovak economy in Q2 2021. (Source: Sme)

Even though Slovak economic growth accelerated to an almost record 10 percent year on year in the second quarter of 2021, it was lower than expected. The main features of the April-June period were the re-opening of the economy in mid-April following the lifting of anti-pandemic measures; and the shortage of semiconductors, which especially impacted the automotive industry.

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“The performance of the Slovak economy during the second quarter fell behind expectations implied by the monthly indicators published throughout the quarter,” Matej Horňák, analyst with the Slovenská Sporiteľňa bank, wrote in his memo. “While the year-on-year growth was the highest since 2007, the reason behind this was the low comparison base. The GDP shrank by almost 11 percent in Q2 2020.”

Some figures

The gross domestic product (GDP) at constant prices grew by 9.6 percent y-o-y in the second quarter of 2021.After an adjustment for seasonal effects, GDP increased by 10.2 percent y-o-y and by 2 percent q-o-q. At current prices, Q2 GDP in Slovakia amounted to almost €24 billion, up 11.8 percent y-o-y. GDP thus achieved the nearly pre-pandemic level of 2019, the Statistics Office reported.

“The reason for the economic growth was not only foreign demand, but also domestic demand,” Eva Sadovská, analyst with Wood & Company, said in her memo. “Consumer as well as investment demand were apparent.”

Tatra Banka analyst Juraj Valachy sees the increase of investment activity as very encouraging.

“This is a very important sign that companies are willing to invest and believe in further recovery,” Valachy wrote in his memo.

Sadovská recalled that the Slovak economy is small, open and pro-export.

“This means that economic development in Slovakia depends not only what is happening in the country, but especially on what is happening with our trade partners abroad,” said Sadovská, adding that Slovakia’s export thrived during the second quarter of 2021, driven by the automotive sector. “The production of motor vehicles rose by tens of percent during Q2 2021 compared to the previous year.”

Analyst Ľubomír Koršňák from UniCredit Bank noted that the recovery of the industry especially slowed down in May, but also partially in June and April, due to the semiconductor shortage.

“The automotive industry especially had to battle the semiconductor crisis, which resulted in mass stoppages at car production plants, especially in May,” Koršňák stated in his memo.


The next development of the Slovak economy will depend on a potential third pandemic wave. Slovenská Sporiteľňa is keeping its estimate for GDP growth for all of 2021 at 4.2 percent, under the condition of less restrictions during the third wave and the fading of issues related to semiconductors. UniCredit Bank estimates economic growth in 2021 at 3.7 percent.

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