Central bank says situation getting worse but not as markedly as in spring

Ljubljana – Banka Slovenije’s latest report on macroeconomic trends says that the economic situation in the eurozone as well as in Slovenia started to deteriorate again at the start of the fourth quarter. The lockdown will cause a substantial drop in economic activity, but it is not expected to be as strong as in the second quarter.

The central bank’s report, released on Wednesday, says that Slovenia had an encouraging end of the third quarter in construction, but slightly less so in industry and retail. Things started to deteriorate strongly again in November, but data so far suggests that not as markedly as in the spring.

There is strong pessimism among consumers, who expect a significant rise in unemployment and very reserved spending, Banka Slovenije wrote, assessing that in particular the service sector as the most affected segment is very likely to see a longer crisis.

The affected activities in the service sector provided roughly 22% of jobs and generated 20% of added value. There is however also hope for a faster normalisation of things given the quick progress in the development of vaccines against Covid-19.

Although the number of jobless people is still up by around 11,000 to 83,600 year-on-year, the unemployment situation has remained stable, including in November. The central bank attributes this also to the increase in the number of furloughed workers.

The report moreover highlights the continuation of deflation, which stood at 0.5% in October. Banka Slovenije expects deflationary pressures to grow stronger again as a result of the current circumstances.