C-bank pinpoints investment, lack of workers as challenges of growth
Even though GDP is one percent above the pre-crisis peak, its structure is quite different. The share of investment in GDP is substantially below the euro average, Banka Slovenije finds in the latest edition of its bulletin.
The central bank says that such a situation is unusual for an economy which is in a phase of trying to catch up with the more advanced rival economies. What is seen as particularly problematic from the development aspect is the lag in the growth of investment in research and development.
The country has been seeing growing demand for construction works this year, while private consumption growth has slowed down along with a moderation in wage growth. Coupled with the country's competitive exports, the moderation is reflected in the net trade contributing 1.1 percentage point to 4.4% growth in the second quarter.
The labour market saw a continuation of strong growth in employment in most activities, along with a rapid decline in unemployment and increasing structural imbalances. Faced with a shortage of staff, companies have been increasingly resorting to hiring agency and foreign workers.
Albeit slowly, structural unemployment has also been decreasing, with a gradual drop in the number of the long-term unemployed. The rates of registered and labour-survey unemployment have been falling since 2014; they are currently only two percentage points below the levels seen 2007 and 2008 when the economy was overheated.
Fuelled by the strong employment growth, the nominal wage bill increased by an average 5.6% year-on-year in the first seven months of the year, with the real growth at 3.9%. Trends in the labour market are not a threat to external competitiveness yet as the growth of labour costs per unit is still below the rate for the euro area.
However, a shortage of labour force will be one of the main challenges in preserving robust economic growth in the future. What is required is a breakthrough in labour productivity and value added through targeted investment in high-tech activities, the central bank says.
