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According to the Central Statistical Bureau data, the gross domestic product (GDP) at comparable prices in the 1st quarter of this year was 0.8% higher than the previous year. Although the GDP increase has been relatively moderate, it is positively assessed considering the high price level and the ongoing geopolitical uncertainty in the region.
The rate of price increase outpaces wage growth, affecting people's purchasing power. However, due to the base effect of Covid-19 restrictions and improvements in the labor market, household consumption dynamics remain positive – private consumption in the 1st quarter was 0.3% higher than the previous year.
A sharp increase in the 1st quarter was seen in investments. Gross fixed capital formation increased by 11.3% annually. Investments in housing, buildings, and construction increased by 17%, investments in machinery and equipment increased by 4.9%, and intellectual property products – by 4.3%.
Export volumes of goods and services in the 1st quarter were 0.7% lower than the previous year. Post-Covid-19, the export of services continues to recover, which was 4% higher this year in the 1st quarter compared to the previous year. As in the past year, growth was mainly driven by the increase in transport services, computer services, and other business services exports. Exports of goods at comparable prices decreased by 2.3% in the 1st quarter. The main export items were wood and wood products, mineral products, electrical appliances, and equipment. Unlike exports, imports of goods and services increased by 3.1% in the 1st quarter. This year in the 1st quarter, the export-import balance in actual prices was -5.5% of GDP.
In terms of sectors, the total added value in the 1st quarter increased by 0.7% compared to the 1st quarter of the previous year. The growth was largely driven by the service sectors. Industries most affected by Covid-19 restrictions continued to grow rapidly – the accommodation and food sector grew by 27.3% annually, arts, entertainment, and recreation by 19.5%, and commercial services by 4.5%. Steady growth continues in the ICT sector with an increase of 12.2%. After a three-year decline, the construction industry is recovering. This year in the 1st quarter, construction volumes increased by 17% compared to the 1st quarter of 2022. Growth in the 1st quarter occurred in all construction sub-sectors, with the highest growth in building construction.
A significant decline in the 1st quarter was in the trade sector (down 10.3%). This was influenced by a drop in wholesale trade by 27.3%, while the decline in retail trade (1.4%) was largely due to a decrease in retail food sales. Despite a significant increase in the air transport sector, the overall transport and storage sector declined by 4.7% in the 1st quarter, due to a reduction in service volumes in land transport and in storage and transport-related activities.
This year in the 1st quarter, compared to the corresponding period of the previous year, there was also a decline in the forestry, financial services, energy, mining, and health care sectors. For the third consecutive quarter, the volume of the manufacturing industry is decreasing – a decline of 4.3% in the 1st quarter. However, development trends in sub-sectors are very different. At the beginning of this year, production volumes decreased in wood processing, non-metallic mineral product manufacturing, the chemical industry, metal processing, as well as rubber and plastic product manufacturing. On the other hand, growth was observed in the food industry, electrical equipment manufacturing, computer, electronic, and optical equipment manufacturing, as well as in pharmaceuticals.
It is expected that geopolitical uncertainty and high inflation will continue to affect economic development. Very moderate economic growth rates are likely to be observed in the first half of the year. The Ministry of Economics forecasts that the overall GDP could grow by 0.8% in 2023.