Investment growth continues in Q1

The growth was once again driven by rising activity in general government and households, while business development continued to fall. Manufacturing and infrastructure developments, having a dominant weight, held back, while real estate and commercial investment boosted the economy's performance, KSH noted.

Compared to the previous quarter (Q4 2020), seasonally adjusted investment in construction fell by 0.9% and investment in machinery and equipment grew by 1.5%. The seasonally adjusted volume of investment in the national economy also exceeded the level of the fourth quarter of 2019, before the outbreak of the coronavirus pandemic.

Investment volume surpasses Q1 2020 levels

The volume of investment activity increased by 2.5% compared to the first quarter of 2020. Within this, construction, which represents 53% of total volume, fell by 1%, while investment in machinery and equipment, which accounts for 46%, rose by 7%. Around seven-tenths of investment in machinery and equipment in the period came from imports.

Among enterprises employing at least 50 people, which account for 53% of investment performance, the volume of development fell by 6.3%, broadly in line with the average pace of previous quarters, with a marked decline in the development of foreign-owned enterprises. At the same time, development in budgetary units, which accounted for 13% of investment, rose by 31%. While local governments saw their development fall, purchases of fixed assets by central government institutions nearly doubled, the statistical agency says.

Compared to the first quarter of 2020, investment expanded in most sections of the national economy. The performance of real estate activities, which is the second-largest investor and accounts for one-fifth of developments in the national economy, was the main contributor (2.2 percentage points) to the volume growth of investment in the national economy in the first quarter. The area's investment performance increased significantly by 12% year-on-year, mainly due to strong growth in the dominant residential construction sector.

The 16% increase in the volume of investment in wholesale and retail trade and repair of motor vehicles and motorcycles also contributed significantly (0.9 percentage points) to the change in the volume of investment in the national economy. Here, there was a significant increase in the development of retail stores in the current period.

The public administration and defense section significantly increased its investment volume (by 1.2 percentage points), as the area's development increased by nearly a third, with investment in flood protection playing a key role.

At the same time, several sections of the national economy significantly moderated investment volume growth. In manufacturing, which accounts for 27% of investment in the economy and is the largest contributor, investments were down by 10% in the first quarter compared to the high base, holding back investment growth by 3.2 percentage points. Performance declined in most sub-sections, including the heavily weighted manufacture of electrical equipment and the rubber industry.

Investment volumes in transport and storage fell by 16%, a larger decline than in the previous quarter, with the negative performance still mainly driven by a slowdown in public infrastructure development. This area reduced investment volume growth by 2 percentage points.

Investment performance in agriculture, forestry, and fishing was down significantly by 26% compared to a year earlier, partly because farmers bought fewer breeding animals. Agriculture thus held back the volume growth of investment in the national economy by 1.7 percentage points, according to KSH.