• Velimir Bole
  • Jože Mencinger
  • Franjo Štiblar
  • Robert Volčjak

The passage to 2012 does not bring changes

Gospodarska gibanja 443

Total domestic demand in November lagged considerably behind October; the longer run dynamics nevertheless increased with the growth of impulse trend being the fastest in twelve months. Despite strengthened long run dynamics of consumers demand the demand for durable goods remains ten percent lower than it was before the crisis, and export demand calmed entirely. One can therefore not expect substantial changes in 2012, as the expected domestic demand for durable goods and foreign demand continue shrinking with similar dynamics in EU. Foreign trade in December was bad; with the amount smaller and the balance more negative than in previous months. High yearly growth was rapidly decreasing towards the end of the year; the exports in 2011 nevertheless for the first time exceeded 20 billions €. Trade deficit increased slightly compared to 2010, the deficit with Germany turned to a surplus of a quarter of billion €; the role of Germany in Slovenian export returned to what it was seven years ago. Pessimism strengthened, mostly due to considerable drop of confidence in retail trade, blaming low demand and strong competition.  The confidence in manufacturing remained practically unaltered; the results are hindered by insufficient domestic demand; the confidence in services decreased slightly. The confidence in construction was hampered with low demand and strong competition. In EU27, general economic climate warmed slightly.

Industrial production decreased slightly, the ups and downs are short lived and relatively small, a kind of lethargy thus continued in December. The situation in EU27 is similar; production increased in eleven and decreased in twelve of the reporting countries, the situation within the euro area is even worse. The shrinking in construction continued; its impulse trend does not foretell changes. Tourism was flourishing in 2011, though impulse trend indicates that more modest results can be expected. The shrinkage of economic activity in majority of transportation sectors continued; maritime transportation being an exception. The number of job seekers increased in January considerably, partly due to a normal seasonal rise. Unemployment rate is increasing in the EU as well, with the rate staying close to ten percent; it is even higher in the euro zone.

Slow decline in the speed of inflation will most likely continue; the drop in January was predominantly seasonal. The differences between the dynamics of prices of goods and prices of services were large; the former were brought down by sales in December and the end of sales contributed to price increases in January. Price expectations indicate slow continuation of price changes. Raw material prices continue to calm; by mid February they decreased for 0.3% and they were 17 percent lower than a year ago. Growth of wages continue to descend; though a large drop in December is seasonal, one can consider the descend rather permanent. Average wage in 2011 was only 2 percent higher than in 2010 which is the lowest yearly growth of wages. The differences among sectors diminish; in some sectors average wages in 2011 were absolutely lower than in 2010; but the decreases were small.

Available data do not provide for a respectable picture of public sector revenues. Following the  jump in December, public sector revenues in the last quarter of 2011 returned to the “normal” trajectory, approximately 10 percent higher than in the third quarter and two percent lower than in the fourth quarter of 2010. The data in January fit well into the trajectory; the revenues were slightly higher than in January 2011. The trend dynamics was positive and strong, but it is questionable due to large breaks in the data series. Direct taxes and other public revenues lagged considerably behind the average in the last quarter; the longer run dynamics nevertheless increased which was more caused by some administrative changes than by the development in the economy. The data on social contributions in January provide for the first relatively solid indicator of good dynamic development. Longer run dynamics of VAT is uncertain. Though VAT revenues increased considerably in January, enormous alterations in the timings of the tax payments preclude determination of the trends. Much more stable revenues of VAT on imports nevertheless indicate that the dynamics is relatively good. Revenues of excise taxes were practically equal to the corresponding revenues a year ago.

Credits to households and non financial business continued decreasing; the drop strengthened considerably in December; it was additionally pushed by the issue of government bonds. While the banks could finance it with supply of money by ECB, they did that by lowering the credits to households and business sector; the purchase of government bonds being much more attractive than crediting households and non-financial companies. The difference in the longer run dynamics of credits between Slovenia and euro zone will most likely disappear; the hardening of the requests by EBA will worsen credit activity in the euro zone and the lagging of Slovenia will therefore disappear. Due to purchases of government bonds and foreign transactions deposits increased slightly despite decreasing credits; but not enough to prevent worsening of the long run dynamics.

The current account deficit in December destroyed yearly results while large statistical error of over 500 millions € prevent firmer conclusions on successfulness on the balance of payment in 2011. Following the deficit in December, yearly balance became negative: larger surplus in services and successful drawing of transfers by the state did not outweigh rather modest trade deficit and much larger deficit on the income account. Capital enters through direct investments; foreign direct investments to Slovenia grew, while ours abroad disappeared; repayment of debts increases the outflow of capital. Net foreign debt of Slovenia decreases slowly due mainly to greater drop of gross domestic debt and smaller drop of financial assets abroad.

Full article is available in Slovenian language.

Only a part of the articles in the publication Gospodarska gibanja (Economic Trends) is written in the English language. Please visit the Slovenian web page.


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