Slovenia's economic growth slowed down to an annual rate of 0.7% in real terms in the second quarter of the year from 2.1% in the quarter before as a result of a negative balance of trade. GDP increased by 1.4% in the first half of the year, according to the national Statistical Office.

Seasonally-adjusted data, a measure used across the EU, show that Slovenia's economy expanded by 0.8% year-on-year and by 0.2% on the quarter before in the period between April and June.

Domestic consumption and in particular government spending have kept driving growth. General government spending surged by 12.3% year-on-year in the second quarter, pushing domestic consumption up by 5.5%, the highest growth rate in the past year.

Final consumption expenditure went up by 4.2% and gross capital formation by 10.2% for what is again the fastest rise in the past year, with inventories going up by 2.4%.

On a negative note, gross fixed capital formation fell by 1.6%, the first year-on-year decline in a while, which was mainly due to a 4% decrease in investment in construction.

Last year, fixed capital formation grew at or close to double-digit rates for most of the year, but its growth almost completely stopped at the beginning of 2024.

The trade gap had the biggest negative impact on GDP growth, reducing it by 4.1 percentage points. This is the second quarter in a row that the balance of trade had a negative impact on growth.

Imports of goods and services rose by 4.4% (+4.9% for goods and +2.1% for services), while exports declined by 0.8% (-0.5% for goods and -1.7% for services).

Growth rate still above eurozone's

Foreign and domestics macroeconomic forecasters have projected for Slovenia's economy to grow by 2.5% or slightly less in 2024.

Given the 1.4% growth in the first six months, considerable acceleration in the second half of the year will be required to achieve that figure.

This will largely depend on developments in the eurozone, where there is no sign of a recovery from the current weaknesses, but also on developments in construction, particularly on a more pronounced pick-up in public investment, including in post-flood reconstruction.

Although admitting that growth in the second quarter was more moderate than expected, the central bank said the rate remained comparable to the eurozone's, which recorded 0.6% growth year-on-year in the second quarter.

The central bank attributed the decline in exports to weak activity in Slovenia's key trade partners and and the government's macroeconomic forecaster IMAD to "low growth in foreign demand and to the competitive disadvantages of Slovenian exporters in terms of costs and prices".

The central bank said the strong domestic consumption was a result of high public spending on healthcare and post-flood reconstruction.

Healthcare was also noted by IMAD, which said that public spending rose considerably due to top-up health insurance being transformed into a mandatory contribution this year.

The central bank said lower construction activity was a result of completion of several state projects as the EU's previous budgetary period expired. Another reason is fewer housing projects. Nevertheless, the volume of construction remains high, 20% above pre-pandemic levels.