Sovenian GDP fell by 9.3 percent in the second quarter of this year when compared to the second quarter of 2008. This was the third quarter in a row which has seen a fall in Slovene GDP, and the was the deepest annual drop so far in the current economic crisis. In the first half of 2009, GDP decreased by 8.8 percent compared to the same period of 2008. On the other hand, seasonally and working day adjusted GDP increased by 0.7 percent compared to the first quarter of 2009 technically making a break in the recession.

But before we get too excited about this fact, we need to consider that this escape from recession was simply a technical detail, and due to movement in the trade impact. Both exports and imports fell sharply – exports of goods and services by an annual 21.3 percent and imports of goods and services by 24.8 percent, so since exports decreased less than imports the external trade balance contributed +3.1 percentage points to GDP annual volume growth, or put another way, without the slump in imports the drop in GDP would have been even stronger. Of course, it sounds funny to say you come out of recession when living standards actually fall.

In addition, gross capital formation slumped, falling by 36.7 percent over the second quarter of 2008. In the January-June period, gross capital formation decreased by one third compared to the same period of 2008 and its share in GDP fell from 32.2 percent in 2008 to 22.1 percent.

So exports, imports and investment are all still falling. Continue reading →