Velimir Bole bibliography

Economic policy presents expected poor results

Gospodarska gibanja 452-453

The drop of domestic demand accelerated; particularly households demand and, even more so, demand of broader government. The collapse of households spending on the crisis level, which was indicated by surveys following announcement of austerity measures, might realize. Among domestic demand components only short run investments dynamics increased while yearly dynamics decreased, as well. Contrary to “sad” performance of domestic demand, foreign demand strengthened in October which will most likely not last as indicated by expectations. Because of recession in EU, the level of foreign trade is kept up by trade with the rest of the world. Terms of trade worsened slightly.

In November, business climate improved a little; it was influenced by increased confidence in manufacturing and construction, decreased confidence in retail trade, and interruption of declining optimism in services. Adequacy of business orders in manufacturing lags behind corresponding adequacy in EU27, while in construction it comes closer to EU average. Business climate in EU27 worsened; retail trade being an exception. Optimism plummeted.

Yearly rate of change of industrial production increased considerably in October, impulse trend also indicates growth. In EU27, both current and yearly dynamics decreased. Industrial production increased in eight and decreased in fourteen countries for which appropriate data are available. The dynamics is unstable, declines and ascents in a country change constantly. Contraction in construction activity continues so does the value of construction works. Slow contraction of tourism continues, its activity depends on foreign tourists as there are less and less domestic tourists. Among transportation branches, the crisis helps public road transportation and badly harms air transportation. Growth of unemployment calmed slightly; jobseekers, loosing their non-permanent jobs, represent the majority of new job seekers. Among those leaving employment offices, slightly more than half get employed or self-employed, others leave active population. Unemployment rate in EU27 grows, and it grows even faster in the euro area; the countries with the lowest unemployment rates are Austria and Luxembourg, while unemployment rates remain the highest in Spain and Greece.

Retail sale prices in November and December decreased; fluctuations in prices of clothing and footwear contributed most to the fluctuations of retail sale prices. Industrial producers prices did not change much, the differences among various markets were negligible. Price expectations point to a rather restricted role of economic activity on prices, except for prices of services, where expected prices decreased and lagged behind price expectations in EU. Expected prices of goods stayed beyond long run average, expected producers prices stagnated on the long run average. Raw material prices (in euro) decreased in the last month (until the middle of December) but remained higher than they were a year ago. In October, wages increased, while wages in all public sectors, particularly in education and culture, lagged.

Quarterly data of unit labor costs for the third quarter of 2012 indicate that unit labor costs decreased considerably compared to other EU member states, both in the short and in the long run. Indeed, yearly dynamics of unit labor costs was negative only in Slovenia, while unit labor costs in public sector decreased far more than in any other EU member state. Unit labor costs in the economy lag approximately one tenth behind labor costs which would correspond to relative productivity. Unit labor costs in broader government are bellow the level at the end of 2008; growth of labor cost caused by payment reform was thus amortized. Labor costs are apparently not the obstacle for the beginning of economic recovery which is often believed and claimed by representatives of “employers” and government.

It is hard to estimate what is happening to the dynamics of public revenues and even harder to estimate what is happening to the dynamics of its components. Data remain incomplete and in September the distribution of revenues created additional problems. Therefore, yearly rates of change are questionable, seasonal adjustment meaningless, and the effects of recent data unclear. Indirectly estimated dynamics indicates that the decreasing public revenues are predominantly created by weak economic activity; while additional weakening in the second quarter was created by government intervention into taxes. The worsening of public revenues was stopped at the end of the year with positive dynamics of indirect taxes and negative dynamics of direct taxes. The decline of credits continued with a decline of credits to nonfinancial business sector while credits to households increased slightly; yearly dynamics decreased for both. Deposits decreased, but less than credits; deposits of non-financial corporations grew considerably, yearly dynamics increased as well, while deposits of households decreased.

Surpluses in the trade and services accounts contributed to the current account surplus; the deficits on the income and current transfer accounts worked in the opposite direction. The surplus on the current account in ten months exceeded half a billion euro, which is a result of the decline in trade deficit, increased services surplus, with transportation and travel contributing major shares. The deficit on the income account, particularly large on the investment account, and the deficit on the current transfers account led into opposite direction. Outflow of capital continued; it has been flowing in Slovenia through foreign direct investment, and flowing out through portfolio and other investments. Gross and net foreign debt increased slightly.

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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