As exports grow, GDP drop rate abates

According to the data of the Central Statistics Agency, the real gross domestic product in the fourth quarter of 2009 shrank 16.9% year-on-year. That indicates that the annual drop has become more moderate albeit remaining significant. The main factor behind the GDP drop was the downslide of domestic demand, as all components - private and public consumption as well as investment (particularly private) - decreased significantly.

From the point of view of production, the sectors that are tightly tied to domestic demand, trade and construction, had the most pronounced negative effect on GDP development.

As the competitiveness of our products improved markedly and foreign demand growing steadily, the increase in goods exports in the fourth quarter of 2009 was significantly greater than in the previous quarters, having a positive effect on GDP dynamics. There was notable growth in the exporting branches of the processing industry. Moreover, the proportion of exports in the sales of production has increased in the majority of other branches, increasingly compensating the negative effect of domestic demand on the growth of this sector. The positive changes in exports, however, were not significant enough to provide a sufficient stimulus for the resumption of domestic demand.

Overall, the improvement in the trade balance was significant: although the increase in intermediate consumption goods necessary for manufacturing the growing export products had an effect on the overall import dynamics, the downslide in domestic demand and its structural changes impeded import growth.

The available operational data indicate that in the first quarter of this year the GDP decrease quarter-on-quarter may be very small. Even though in January the processing industry did not grow, the February confidence improvement in the sector was significant, pointing to probable positive development. In January the retail trade turnover posted a notable growth and the consumer assessment of the economic situation is likewise improving, which could point to stabilization in that sector as well.