The Slovenia Times

Slovenia's economy projected to expand 4.4% this year


The growth is broad-based, underpinned by exports as well as consumption.

Exports are projected to expand by 8.8% this year on the back of strong external demand, before the pace of growth slows to just over 6% by 2019. Last year exports expanded by 6.4%.

Private spending is projected to decline to a still robust 3.3% from 4.2% last year, with additional deceleration planned in the subsequent two years.

The current brisk pace of growth is fuelled by a strong labour market, but the labour market growth is projected to tail off, which will reduce the contribution of private spending to growth.

Government spending, having surged by 2.5% last year, is expected to grow by 1.1% this year and under 1% in the next two years.

On the other hand, gross fixed capital formation is projected to surge by 9% having declined by 3.6% last year. The growth is to slow slightly in 2018 and 2019.

IMAD says high corporate profits are driving investments as deleveraging appears to have come to a halt, with housing investments also strong as the property market revival continues.

On the government side, investment growth is underpinned by the drawing of EU funds after a hiatus last year caused by the transition to the new EU budget framework.

IMAD director BoĊĦtjan Vasle said the favourable growth was also "reflected in the rapid improvement of the labour market," with employment projected to grow by a robust 2.7% this year.

However, IMAD also points out that employment growth will tail off in the coming years due to demographic constraints.

Wage growth is currently lagging behind productivity gains, but the demographic factors will slowly start exerting pressure on wages as the labour market tightens.

"We nevertheless expect that the desire for preservation of competitive position will continue to exert a significant impact on wages in the private sector, in particular the tradeable sector, meaning their growth will be in line with productivity," IMAD said.

Inflation is projected to hover just under 2% before exceeding the 2% mark in 2019, as strong foreign demand increases services prices. Absent external shocks, energy price growth is to remain subdued.

The forecast upgrade is expected given that GDP rose 4.4% in real terms in the second quarter and 5.1% in the first quarter.

Vasle noted that Slovenia's growth was once again exceeding eurozone growth, allowing the economy to catch up to eurozone GDP levels.

At present IMAD's forecast is the most optimistic among all major domestic and foreign forecasters, but most of them are yet to revise their spring projections.


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