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


Gospodarska gibanja 448

Domestic final demand decreased; longer run dynamics worsened as well. Private consumption squeezed most, following unusually high growth in the first quarter of 2012. In April, it lagged considerably behind growth in March. Investments dropped as well, though longer run dynamics did not worsen. Only government expenditures for goods and services improved; they are however extremely unstable due to erratic government policy measures. Export demand stopped, long run dynamics became negative.

The dynamics of value added in industry, retail trade, catering, transportation, financial and insurance activity remained similar to the dynamics in the euro zone. Slightly worse is the dynamics of value added in professional, scientific and technical services. The dynamics of value added in agriculture and construction lags considerably. Generation of value added in public sector remained faster than in the Euro area though labor costs in the public sector have been for two years lagging behind the most thrifty countries of the Euro area.

The decline of foreign trade in May is a consequence of weak economic activity and lesser working days compared to May 2011. Trade deficit was lower than average of the first five months and yearly dynamics of exports and imports is weaker than in EU27. With lower increases of export and import prices compared to EU27, terms of trade worsened in Slovenia more than in EU27. Rather high export/import ratio in May or in all five months is a result of a deficit with the EU member states and a surplus with non EU- member countries.

Business climate worsened in June due to deterioration of confidence in manufacturing and services. In July, confidence in manufacturing remained unaltered while confidence in services plunged further. Buoyancy in construction remained unaltered at extremely low level; in July it improved slightly. Improved confidence in the retail trade in June was in July trailed by strong shift in the opposite direction. Business climate in EU27 worsened compared to the same period of 2011.

In May, industrial production and production in manufacturing increased compared to April but remained lower than in May 2011. Impulse trend indicates stagnation. Average production dynamics in EU27 is similar; slight increment compared to April and negative yearly dynamics. Among EU members (with appropriate data) industrial production in May increased in thirteen and decreased in eight countries. The value of construction works continued to fall both measured by monthly or yearly dynamics; impulse trend however indicated feasible shift. Foreign tourists keep tourism in a relatively good shape. Air and airport activities performed worst among transportation branches; maritime transportation was in better shape.

Rapid shrinkage of registered jobseekers continued; however, only half of those leaving unemployment offices get jobs, the other half joins non-active population. Unemployment rate in EU27 and in the Euro area grows persistently; it exceeds 11 percent in the Euro area while the number of unemployed in EU27 came near to 25 millions.

The decline of economic activity shapes prices; costs of living index in June decreased and the longer run dynamics fell as well. Though, there were no substantial changes, the drops of prices concentrated in goods, the rises in services. Harmonized costs of living index decreased as well and its yearly dynamics in Slovenia became equal to the dynamics in the Euro area. Producers prices increased slightly in June, longer run dynamics decreased.

Prices of products for domestic markets stagnated while prices of products exported to non EU countries increased. Price expectations in July indicate that slowing down of producers prices will most likely continue. World raw material prices in Euros increased; the highest were rises of oil and food prices, the lowest were rises of prices of non- food agricultural raw materials and /gold. The wages in mining and in provision of electricity, gas, and water supply kept growing rapidly while wages in the public sector continued to lag behind.

Tax revenues increased in June, longer run dynamics remained negative; tax revenues in the second quarter were 10 percent lower than corresponding revenues in the second quarter of 2011. Direct taxes improved in June. The revenues of the profit tax normalized, the gap in April and in May might therefore turn to be permanent. Though revenues generated by income taxes jumped in June compared to May they did not reach the level in June 2010. Indirect taxes decreased. Such a decrease of value added taxes and excise taxes lasting for a long period, is unusual. But as value added tax on imports did not change considerably, this might be a sign of a long run and substantial descent of tax revenues generated by two major domestic taxes.

The decrease of credits speeded up; credits to companies and households decreased for 60 millions €. The dynamics of credits to households and business in the Euro area became negative, as well. Relatively stable balance of payments helps to keep deposits growing modestly though longer run dynamics has been decreasing since middle of 2010. The decrease of ECB interest rate will most likely launch further decreases of whole sale interest rates. Active retail trade interest rates continue to decrease only for the real estate credits; they stagnate or fluctuate for other credits to households and business sector. In the Euro area, active interest rates for business stagnate and for households decrease. Passive interest rates for deposits with maturity over a year decreased slightly while others stagnated; in the Euro area all passive interest rate are decreasing slowly.

Surplus in the balance of payments enhanced in May. Improved balance is a result of a much lower deficit in trade with goods and services and higher deficit in the income account due to increased burden of foreign indebtedness. Downward correction of our financial assets abroad increased net foreign debt to more than 14 billions € or more than 40 percent of GDP. In June, foreign debt decreased for only 200 millions €. The share of public and publicly guaranteed debt is approaching half of total gross foreign debt. This is a result of replacing private indebtedness with public; only a quarter of the increases of total foreign public debt was caused by primary budget deficit.

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