The Slovenia Times

OECD revises GDP forecast to 4.4% this year, 3.6% in 2019


The OECD expects the country's economy to grow by 4.4% this year and 3.9% in 2019, down by 0.6 and 0.3 percentage points, respectively, from its forecast in May.

The figures bring the projections roughly in line with the majority consensus of domestic and international forecasters, which have estimated growth at roughly 4.5% this year and 0.5-1 percentage point lower in 2019.

In 2020, Slovenia's growth is projected to slow to 2.7%.

The OECD bases its figures on the assumption that capacity limits will exert increasing drag on growth while investment is expected to retreat to more sustainable levels.

One of the biggest limiting factors are labour shortages. The labour market is tightening and the unemployment rate has already fallen to 5.5%, while employment increased by nearly 2% this year alone.

The OECD projects the unemployment rate to decline to as low as 4.3% in 2020.

The labour market trends are also exerting pressure on wages, which in turn affects the competitiveness of exporters and is to lead to slower export growth.

Export growth, at over 10% last year, is projected to slow to about 8% this year and 6.4% in 2019.

On the other hand, wage growth is expected to bolster private consumption, a key component of GDP growth.

These trends will be coupled with a turnaround in fiscal policy, which is expected to remain expansionary in 2019 and turn neutral in 2020.

The budget surplus, after widening to 0.6% of GDP in 2018, will narrow in 2019 as a result of the discretionary easing and slower economic growth.

This could prove problematic for inflation, according to the organisation, as "a larger surplus is needed to contain inflationary pressures and to ensure continued debt reduction."

Overall, the OECD says that the recovery could be strengthened through structural reforms, while "stronger privatisation efforts would free up and improve the allocation of resources, particularly if combined with measures to strengthen competition."


More from Nekategorizirano