The Slovenia Times

Govt forecaster downgrades GDP outlook for 2016


The economy is projected to expand by 2.4% in 2017, according to the spring forecast released on Wednesday.

The projection is based on weak growth in exports and domestic consumption, which were the main engines of growth last year.

Exports are expected to rise by 3.7% compared to 5.2% last year, while the rate of growth of domestic consumption is to halve to 1%.

Investments, meanwhile, are expected to decline by 3% following a modest expansion last year.

The forecast is in line with the latest outlook by the European Commission, which expects the Slovenian economy to expand by 1.8% this year and 2.3% in 2017.

The deceleration has been expected, largely due to the uncertainty on international markets and a sharp dip in the phasing of EU funds under the bloc's new financial framework 2014-2020.

IMAD director Boštjan Vasle said the spring forecast had indeed been informed by the deceleration of investments due to the transition to the new EU financial framework.

The second major factor is the economic activity in the eurozone, where growth is projected to be on par with last year's, which is a "significant decline" compared to assumptions used in IMAD's autumn forecast.

In 2017 exports are projected to rise by 4.8% while the increase in domestic consumption is to be a more robust 2.3%. Similarly, investments are expected to surge by 6% next year.

The growth outlook for both years additionally faces downside risks such as a slowdown in key global economies.

On the domestic front the key factor will be how successfully Slovenia consolidates public finances and how well it absorbs EU funds, according to Vasle.

The sustainability of public finances, in turn, depends on how successfully structural issues such as demographic trends are addressed.

A pension reform taking effect in 2020 would be better than no pension reform at all, Vasle pointed out.

While the IMAD forecast represents the basis for the government's budget planning, Finance Minister Dušan Mramor said today it was still unclear what it means for the budget.

"We have to take a look at the actual budget revenue and expenditure," Mramor told reporters on the margins of a session of the Economic and Social Council.

The Chamber of Commerce and Industry (GZS) labelled the forecast for this year as "very realistic", with executive director for social dialogue Tatjana Čerin noted that the GZS had forecast 1.8% growth for this year.

"Our findings were informed by the trends on global markets and the uncertainty. For Slovenia, this means significantly lower exports and reduced consumption," she noted.

The ZSSS trade union association, on the other hand, thinks the forecast shows it is necessary to boost demand.

"We can increase purchasing power by raising workers' pay and protecting pensions," ZSSS president Dušan Semolič noted.


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