Slovenia’s GDP down 5.5% in 2020 year-on-year

Ljubljana – Slovenia’s GDP dropped 5.5% in real terms in 2020 over the year before, the Statistics Office said on Friday. Domestic spending saw a considerable drop, while external demand also suffered a blow. Data for the final quarter of last year show a year-on-year drop of 4.5%.

Preliminary estimates show a drop of EUR 46.3 million at current prices, a nominal decline of 4.3% over 2019, while the drop reached 5.5% in real terms. Seasonally adjusted data, used in EU comparisons, show a 6.1% drop in GDP last year.

The year started off slowly, as epidemic was declared in March, with a 2.3% drop in real terms in the first quarter of the year.

A sharp drop of 12.9% was seen in the second quarter, followed by a significant upturn in the third quarter. Nevertheless, quarter-three GDP was still 2.4% lower year-on-year.

The fourth quarter saw a second lockdown, with GDP declining by 4.5% in real terms over the final quarter of 2019, the Statistics Office said.

Domestic spending dropped by 6.5%, dragged down most significantly by a 9.8% decline in household spending.

External demand also decreased, as exports dropped by 8.7%, while imports went down by 10.2%. Decrease was most notable in export and import of services, each by about 20%. Meanwhile, exports of goods were down 5.6% and imports of goods by 8.9%.

Foreign trade surplus amounted to EUR 4.6 million at the end of 2020 and was higher than in 2019.

Just over one million people in total were employed last year, a 1% decrease over 2019. Employment decreased the most in administrative and support services, manufacturing, and the accommodation and hospitality sector.

In the final quarter, domestic spending dropped 6.1% year-on-year, with consumer spending down 10.1% while gross investments increased by 8.2%.

Domestic spending of households was down 14.5% in the final quarter. The drop was still slightly less severe than in the second quarter, when spending went down by 17.3%.

Gross investments in fixed assets increased by 2% in the final quarter, mainly owing to construction projects.

Exports were down 0.4% compared to the final quarter of 2019, while imports dropped by 2%, both dragged down by a drop in services, mainly travel, while export of goods increased by 4.1% and import of goods went up 0.1%.

Responding to the data, Banka Slovenije said the anti-crisis measures adopted by the government had managed to preserve the majority of business potential, while the situation in the labour market had not deteriorated significantly.

However, the measures do have a considerable effect on the country’s public finance, the central bank said, noting that Slovenia saw the first budget deficit in 2020 after two years of surplus.

Banka Slovenije also noted that the seasonally adjusted drop of 6.1% was better than the EU average of 6.8%.

Compared to the first wave, the second wave of the epidemic dealt a significant blow only to sectors unable to reopen because they cannot sufficiently adapt to the restrictions in place, above all hospitality, whose revenue dropped by 62.4% in the final quarter of 2020.

While retail was also hit hard, manufacturing is recovering due to external demand, while construction in on the up due to investments, the central bank said.

IMAD, the government’s macroeconomic think-tank, said the drop in GDP in 2020 had been milder than its forecast because of favourable trends in exports and construction. IMAD projected a 6.6% drop last December.

In the final quarter, the exports and industry already reached pre-epidemic levels, IMAD said. Investments in fixed assets were also rising on the quarterly level after plunging in the spring. On the spending side, only state spending was up, mostly due to rising unemployment and the epidemic-related costs.

Transport also picked up in the second half of the year after dropping significantly in the second quarter, IMAD head Maja Bednaš said. In manufacturing, production of electric devices and metal products contributed the most to growth in the final quarter. In the entire year, only high-tech sectors such as the pharmaceutical industry and ICT equipment production recorded growth.

The Chamber of Commerce and Industry (GZS) meanwhile expressed positive surprise with the 5.5% drop, saying its analysts had expected the figure to be higher. The chamber believes that fewer work-free public holidays helped to cushion the decrease.

The GZS believes that an audit at a later point will nevertheless show the contraction to have been somewhat larger. It thus considers its 5% growth forecast for 2021 not realistic enough, so it downgraded it to 4.5%.