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

The dynamics of final demand and GDP has improved

Gospodarska gibanja 462

The dynamics of final consumption expenditure and GDP continues to recover, recovery being faster than in the euro area; in the second and third quarter of the year relative growth of final consumption markedly accelerated and after two years of relative lagging almost closed the gap with the euro area.

Export demand has remained the engine of growth. Trade balance, influenced by jump of exports to EU, was in September positive. The state in the trade balance is approaching the exceptional situation in 1992; the reasons differ.

Economic climate cooled slightly in October, which was a product of lowered confidence in manufacturing and construction. Manufacturing orders are similar to orders in the EU, while new orders in the remaining construction sector have been in Slovenia since midyear better than in the EU. Optimism in the service sector, however staying at extremely low level, strengthened somewhat, the confidence in the retail trade increased as well, despite problems with weak demand.

September’s industrial production was higher than in the same month year ago, but the trend (impulse trend) turned down. The value of construction works in September increased while it decreased in the year to year change. The number of tourist overnights increased slightly. Foreign tourists contributed the lion’s share.

Employment in a year declined, relatively more of those employed with small employers than of those employed by legal entities, while the number of self-employed increased slightly. The rise in the number of job seekers is mainly seasonal; the first-time jobseekers dominated among those entering job market, while most of those departing the unemployment offices re-employed or became self-employed. The unemployment rate in EU remained high, with the situation in the euro area being considerably worse than in EU states outside euro area. Austria and Germany remain the best, Spain and Greece the worst.

Prices continue to decline, expectations suggest that the decline will end. Cheaper oil products, seasonal fall in prices of fruits and lower prices of telephone and internet services contributed most to the decline in November. Price expectations have not changed for several months; expectations for prices of commodities remained slightly above while prices for services well below long-term average. Producer prices in October fell for products for the domestic and euro market, they increased for markets outside EU; producer prices continue to be pressed by weak demand. Expected producer prices are slightly below the long-term average. Raw material prices increased in the last month, particularly food prices, while prices of gold and oil decreased. Despite current increases, raw material prices remain well below the last year average.

Employee remunerations continued to fall with exceptions in financial and insurance activities, and in education. In a year, remunerations rose the most in manufacturing, they fell in all sectors of the general government, most in the health and social care sectors. Total labor costs do not shrink only due to falling wages but also because of the contraction in employment.  Expenditures for employees in Slovenia were since the beginning of the crisis reduced much more than in the euro area, the bulk of the gap was created after the start of a ZUJF. Despite common beliefs, remunerations to the employees in state administration, education and health in Slovenia as a proportion of remuneration of all employees is significantly lower than the euro area average and much lower than in the euro area countries, which received “assistance”. The relatively low expenditure in Slovenia for employees in these three sectors is even more surprising because these activities are in Slovenia almost entirely in public sector, while in the euro area almost a quarter of them is outside public sector. In the countries, which hosted troika, the share of personnel expenses in the administration, education and health remained higher than it was at the beginning of the crisis; by the decline of GDP, caused by austerity measures, private sector was affected more than public sector.

Taxable income continues to strengthen, government revenues increased in October, a more long-term dynamics recovered; annual rate fell due to last year high transfer of tax payments from September to October.

Sluggish slowdown in the fall of loans and deposits continues, current dynamics of loans is slowly improving. Worsening of the current dynamics of deposits has slowed as well. The dynamics of deposits remains fairly robust despite mistakes of economic policy and a multitude of bad news (truths, half-truths and lies) that are day bombing the population. Interbank interest rates remain unchanged; lending rates in September increased for consumer loans and loans to companies for large credits, others did not. In deposit rates, on the deposit side interest rates on deposits with shorter maturities rose, for deposits with longer maturities shrank.

Current account surplus continues to grow which is a classic belt-tightening policy outcome. The surplus was mainly due to a surplus in merchandise trade (which is traditionally in deficit), larger surplus in services, and smaller deficit on the income account. On the current transfers account, net outflow was higher than last year. Financial account adequately reflected current account, obligations decreased much more than last year, partly through the outflow of direct investment. Gross external debt by the end of August fell to 40 billion €, net external debt decreased as well.

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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