The Bank of Slovenia: Slovenia’s Economy Is on the Rise

The investment climate and the consumer confidence enhanced in Slovenia. In the first quarter of this year, a rapid growth in demand for the products of companies with a variety of activities is expected. Rate of unemployment declined. Such trends are indicated by the data given in the summary of macroeconomic trends prepared by the Bank of Slovenia. The Bank of Slovenia claims that the Slovenia’s economy is on the rise.

The Bank forecasts that the economy will continue its growth. This trend, which began at the end of the last year, has received its steady continuation. According to the monthly average indicator of activity, there is a further increase in private consumption. In addition, experts note an increase in investments into residential and commercial real estate. As evidenced by the data on the high growth of activity in some segments of the construction sector, according to the institution’s website.

Export growth reached a high level by the end of last year, and the sources of growth proposals were geographically much diversified. The growth of industrial production in Slovenia has one of the highest indicators among all the states of the Eurozone.

The Rate of Unemployment Continues Declining Gradually

Employment growth in the last year surpassed the wildest expectations of experts. In December, the number of employees (excluding self-employed farmers) increased by more than 3% at an average annual level. At the same time, the rate of unemployment continued to decline gradually. In January 2017, at an average annual level, it decreased by more than 12%. Despite this, the number of officially unemployed persons was still more than 100,000 people. The Bank of Slovenia emphasizes that such number of the unemployed today is still holding back the growth of wages in the private sector. 

Labour Productivity Is Still Considerably Lower Than in the Pre-crisis Year of 2008

Experts estimate that at the current stage of economic growth, an increase in labour productivity is far from the pre-crisis figures of 2008. Reducing the rate of unemployment by increasing wages and reducing employment will lead to that the low growth of labour productivity will continue. In turn, in the future, the low growth of labour productivity could slow economic growth.

The deficit of the consolidated balance of public financing in January–November last year decreased significantly. It has made 510 million euros, which in the average term was 300 million euros less than in 2015.

In the current year, according to the Bank’s forecasts, the public investments will have a positive impact on the GDP growth. Given the current favourable investment climate and the latest forecast of the European Commission, the growth of revenues from the payment of public taxes will exceed the planned figures incorporated in the state budget. The Bank of Slovenia is convinced that these revenues should be directed to the rapid improvement of the country’s financial position and will not lead to an additional increase in costs. 

Will There Be an Overheat in Economy This Year?

The European Commission considers that in the current year, there is a risk of overheating in the economy of Slovenia. This can lead to an increase in the structural deficit of the state budget. However, many macroeconomic indicators to date do not point to a likely overheating of the economy, as mentioned by the Bank of Slovenia. The core inflation and wage growth in the private sector remain low. The growth of bank loans to the private sector is weak. Besides, a low share of investment in GDP is recorded. At the same time, with the growth of private consumption and investment, a high surplus of the current account balance is retained.

The January decline in inflation by 1.5%, in the first place, was the consequence of the rise in oil prices to an average annual level, while the internal factors of price growth still remain relatively unstable. If in January, the oil prices had not risen at an annual average level, the decline of inflation rate in Slovenia would have amounted to less than 1%.

Core inflation is still relatively low, and even lower than in the middle of last year. The fixed core inflation, excluding energy prices, in January, as compared to December 2016, remained unchanged — 0.7%. The Bank of Slovenia emphasizes that this is 0.3% lower than the average indicator in the Eurozone.

Source: siol.net