Real GDP growth decelerated from +2.8% in 2014 to +1.4% in 2015 and edged up slightly to a still modest +1.6% in 2016. The latter was mainly driven by domestic consumption and inventories. Private consumption increased by +4% and government consumption by +1% in 2016. However, fixed investment decreased again, by -2.8% y/y, though this marked an improvement from -3.4% in 2015 and -8.1% in 2014. Meanwhile, inventories added +0.8pp to 2016 growth, a marked rebound from the drop in 2015 (-1.5pp). External trade activity recovered in 2016 as the adverse effects from the Russia crisis in 2015 faded. Exports grew by +3.6% but were outpaced by imports (+4.9%) so that net exports subtracted -0.8pp from growth in 2016.
Going forward, fixed investment should return to growth mode in 2017, in part because government invest¬ment is expected to surge as EU-funded projects will enter the implementation phase. Consumer spending is likely to ease somewhat due to the return of moderate inflation. Still, domestic demand is set to remain the key growth driver in the next two years. Euler Hermes forecasts full-year real GDP growth to accelerate to around +2% in 2017 and +2.2% in 2018.