Although growth in real terms slowed down from the 4.1% recorded in the previous quarter, seasonally adjusted rate of growth ran slightly above the 3.6% recorded in the final quarter of 2018.

Seasonally adjusted quarter-on-quarter growth was 0.8%, data from the Statistics Office (SURS) show.

Contrary to expectations by analysts, the slowdown was not provoked by external demand as the growth of exports gathered pace compared to the previous two quarters, but rather by a slowdown in domestic expenditure.

Domestic expenditure grew by 1.8% year-on-year in the first quarter, the lowest rate of growth in at least three years, with the biggest impact coming from a 1.3% decline in gross capital formation, SURS official Romana Korenič told reporters in Ljubljana on Friday.

Changes in inventories had a markedly negative impact on GDP growth, as much as 2.1 percentage points. This is the biggest negative impact of inventories since 2013.

Gross fixed capital formation increased by 9.3%, which is on a par with the previous quarters. Construction investment expanded by as much as 18.1% but investment in machinery and equipment slowed down to 4%.

Businesses reduced inventories by 2.1%, the reason for which is not clear yet. Korenič said a potential reason could be a drop in orders, although business sentiment data or export growth do not suggest that.

Domestic expenditure was thus fuelled only by final consumption expenditure, which grew by 2.9%, a somewhat higher rate than in the previous three quarters.

Driven mainly by an increase in public sector pay at the beginning of the year, government final consumption rose by 3.6%, whereas household consumption increased by 2.6%, however Korenič said that the latter contributed more to the final consumption growth than government spending.

The statisticians noted a slowdown in household expenditure for durable goods, in particular cars. However, daily purchases of goods such as food, beverages, fuel and some types of services increased.

After a somewhat lower growth of exports in the third and fourth quarters of last year (5.4% and 6.8%), exports expanded by 7.6% year-on-year in the first quarter.

Imports increased at a slower pace (6.4%), which resulted in high external trade surplus. This time it contributed 1.6 percentage points to GDP growth.

Employment keeps increasing but with signs of a moderation. The number of people in work in the first quarter rose by 2.6% year-on-year to 1,026,547.

Half of the new jobs were created in manufacturing and construction, with livelier hiring also observed in transport, trade, and professional, scientific and technical activities.

Running at 3.2%, growth in real terms was the slowest since the final quarter of 2016 when it ran at 3%.

The Institute of Macroeconomic Development and Analysis, noted though that the growth remained strong, and even accelerated when adjusted for season and working days, which is the standard figure used by the Eurostat.

The central bank noted that the rate of growth remained considerably above the euro average. Like IMAD Banka Slovenije noted the strong growth in exports, despite the uncertainty in the international environment.

"The pace of growth in merchandise exports was much stronger than the growth in the value added in manufacturing ... Foreign orders were likely fulfilled largely through a decrease in inventories, which slowed down imports growth," Banka Slovenije said.

The Chamber of Commerce and Industry (GZS) assessed that the decrease in inventories was a one-off event, so it believes its annual growth projection of between 3% and 3.5% was attainable.

However, both IMAD acting director Maja Bednaš and Banka Slovenije noted challenges ahead, with the latter highlighting low productivity growth, and Bendaš projecting a gradual slow-down in exports.

Moreover, the GZS expects a slowdown in the second quarter, mainly due to a slowdown in exports and bad weather, which will have affected earnings in the catering industry and impede construction work.

Economy Minister Zdravko Počivalšek remains upbeat about the growth, saying the government should "create the conditions so our export economy can keep generating it".

As major risks to growth, the minister listed a potential trade war between the US and EU, and a shortage of labour force.

The latter challenge should be faced by tweaks to unemployment benefits, stimulating youth to enter the labour market sooner and the pensioners to stay in work, and, as a last resort, import of "culturally similar labour force".

Davorin Kračun, the head of the Fiscal Council, commented that the slowdown was in accordance with expectations.