Brussels upgrades Slovenia’s GDP growth forecast to 6.4%

Brussels – The European Commissions projects in its autumn economic forecast, released on Thursday, that Slovenia’s GDP will expand by 6.4% in 2021, a 0.7-point upgrade from its July forecast. In 2022, the country’s GDP is to grow at 4.2%, a downgrade of 0.8 points.

The 6.4% figure for this year is considerably higher than the 5% average forecast for the EU and eurozone. The forecast for next year is meanwhile closer to the EU and eurozone average of 4.3%.

For 2023, the Commission forecasts that Slovenia’s GDP will expand at 3.5%, which is 1.1 points above the eurozone forecast.

On the other hand, the Commission warns about inflation, which was negative in 2020, but rising energy prices have pushed it to a ten-year high.

The country is to have 1.7% inflation this year, 2.1% next and again 1.7% in 2023. While the first two figures are below the forecasts for the eurozone, the figure for 2023 is slightly above the eurozone average.

The Commission notes Slovenia’s economy expanding rapidly in the first half of the year compared to the same period last year, saying it would reach the pre-pandemic 2019 level in the third quarter of the year only to continue growing robustly in the next two years, driven by consumption and investment.

However, an improvement in public finances is expected to be slow due to high current expenditure.

The general government deficit is to drop to 7.2% in 2021, mainly due to the rebound in economic activity and the expiration of some Covid measures. In 2022 and 2023, it is expected to decline further to 5.2% and 4.4%, respectively.

All three figures are higher than the annual averages for the eurozone, which are 7.1%, 3.9% and 2.4%, respectively, whereas 3% is set as the upper limit under EU rules.

Gross public debt, which should be under 60% of GDP, will be at around 90% in the eurozone and EU in the three year period covered by the forecast, while reaching 77.7% in Slovenia in 2021, to drop to 76.4% in 2022 and to 76% in 2023.

As for the Slovenian labour market, a 0.6% fall in employment in 2020 is expected, to be followed by 1.1% growth in 2021 and 1.3% growth in 2022, with unemployment projected to decline from 4.6% this year to 4.4% by 2023.

This is much lower than for instance this year’s unemployment projection of 7.9% for the eurozone, yet the Commission warns of labour shortages which could become a limiting factor to Slovenia’s economic growth.