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

Will imprudent economic policy again prevent recovery?

Gospodarska gibanja 461

Households spending in July decreased, long-term dynamics fell. However, sales in the retail trade and services suggest that the pace of consumer spending turned up. The structure of final demand altered; export dynamics remained similar to the dynamics in the euro area, growth of investment reached growth in the euro area, the dynamics of households spending reduced a lag behind households spending in the euro area. In spending of households spending on durable goods revived; dynamics of spending on non-durable goods, which had crashed after the introduction of ZUJF, still lags far behind the dynamics in the euro zone: improvements in investment are due to increased relative dynamics of investment in equipment and machinery.

In summer, the yearly growth dynamics of imports and exports worsened; the balance of trade changed from positive to negative; propelling the economy by foreign demand weakened. Confidence in the manufacturing sector in September was the same as in the previous month; the value of its indicator was higher than in September 2012 and equal to the long-term average. The state in the service sector is worse; after growth in the summer optimism slackened and remained far below its long-term average. Optimism in the construction and retail trade sectors decreased as well, the remaining construction companies complain over too much competition, retailers over lack of demand and competition. The economic climate in EU28, compared with September last year, recovered and overall business optimism increased.

Industrial production fell sharply in August compared to the previous month and to August last year. In EU28, industrial production rose compared to July, but declined compared to August last year. Among the member states for which data are available, industrial production rose in thirteen and fell in ten. The value of construction works in August was lower than in July and lower than last year, impulse trend is but upwards. Tourism strengthened, this time not only foreign but also domestic visitors exceeded the previous year numbers. The transportation branches improved in the summer due to strong increase of passenger traffic at Ljubljana airport, increased activity in Koper harbor and public road transportation. The labor market situation improved slightly; the number of job seekers declined. Outflow from unemployment status due to new employment and self-employment was higher than inflow of newly unemployed which were generated by loss of temporary employment. The unemployment rate in the euro area remained unaltered and higher than in the whole EU, Austria with less than 5 per cent unemployment rate remains the most successful, on the other hand, Greece with nearly 28 percent unemployment rate overtook Spain.

Prices in September rose little, long-term growth decreased again. The dynamics of prices of goods differed from the dynamics of prices of services; the former increased, the latter decreased. Producer prices of industrial products fell or stagnated in all markets; price expectations do not indicate significant changes in the near future. Raw material prices continue to slide downward. In August, average wages fell in most sectors and were decreasing also in the longer term. Since the beginning of the crisis total labor earnings in the Slovenian economy decreased more than in the euro area mainly due to the decrease in employment in private sector and decrease of salaries in the public sector. Relative “burden” (relative to the euro area) of the employees in the public sector lags approximately 3.5 percentage points behind the “burden” of the private sector.

Tax revenues are gradually improving. They increased in September, and they were already above the corresponding level of last year. The lion’s share of the increase can be contributed to excise tax. Tax revenues increase also by suppression of tax avoidance; current media-efficient activity of DURS points to additional tax revenue sources, This has so far been neglected; the control activity of Tax Administration was after joining the EU drastically reduced. By 2009, it increased again, but still lags behind the achievements before 2005.

Loans in August remained unaltered. There are some signs that the rate of decline of loans would begin declining. What will be the impact of an ad hoc liquidation of two banks on re-acceleration of credit contraction will be seen in the coming months, the consequences of the latest (retroactive) legislative changes of the status of hybrid capital instruments, will be seen in next few years.

Surplus in the balance of payment remained large in August; by the continuation it could exceed 7 percent of GDP (leaving aside large statistical error). The surplus was mainly due to a large current account surplus in services, especially tourism. Capital outflows rose sharply due to outflow of direct investment and repayments of loans; inflows were created by debt securities. According to Bulletin of Bank of Slovenia gross and net debt increased slightly in July, net debt in July was nevertheless a billion lower than at the end of last year.

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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