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

A very good start of summer

Gospodarska gibanja 468

On entering summer months Slovenian economy is dominated by positive trends andexpectations. Expected spending is increasing due to spending of households andinvestments, while ongoing government spending shrank; sustainable acceleration ofhouseholds spending is also questionable. Dynamics of exports in Slovenia remains vibrant,exceeding the dynamics in the EU. The current account surplus increases with increasedinvestments and not instead of them. Expected spending is still increasing, improved exportexpectations are higher than in the EU, the expected service spending began to decreasethe backlog.

Basic trends in foreign trade, exports outpacing imports and trade balance, therefore,remaining positive, have not altered. Slovenia ranks among successful European exportersand average European importers; relative position is improving. Economic sentiments inMay improved in all sectors; optimism prevailed in manufacturing, confidence strengthenedin services, particularly in the remains of the construction industry and in retail trade. Alsoin the EU, economic climate improved, while expectations and business optimism did not.

Industrial production increased, impulse trend reflects continued strengthening. In April,compared to March, industrial production grew in the EU28 and the euro area; monthlyfluctuations between countries remain large, the order of the success or failure changesfrom month to month. Foreign tourist demand weakened significantly, domestic demandstrengthened. Value of construction work is increasing, suggesting the improvement of thesituation; repair of damage caused by icy rain most likely contributed. Transport branches,for which we have data, continue to perform well, strong oscillation downward in the portof Koper might be a random swing. Some encouraging signs are observed in the labormarket. This includes a slight increase in the number of active population and employeesand continuation in the reduction of unemployment. Newcomers to employment servicescome mainly from the ranks of those who ceased to work for a certain time pwriod, most ofthose leaving institutions find new jobs or self-employment.Inflation continues to be just above zero, price expectations are but increasing. Dynamicsin Slovenia is similar to the dynamics in the euro area. Industrial producer prices continueto fall or stagnate, residential property prices are shrinking, which can be attributed tohalting credits for housing. Raw materials prices dropped last month, in a year only pricesof metals and oil increased.While in April wages grew, the pace did not alter. In April wage growth in the public sector outpaced wage growth in the business sector, in a year the former lagged behind the latter.Unit labor costs in the economy in the first quarter stagnated or declined and lagged behindthe growth of unit labor costs in the euro area.

General government revenues increased in May, more long-term dynamics increased aswell; current tax revenues in April and May exceed corresponding revenues in 2013 evenmore than in the first quarter; the revenues in five months were almost half a billion higherthan last year. This is the result of an increase of revenues by administrative bodies andthe notional reduction in revenues from profit tax in 2013 due to »positive accruals« infiscal year 2012. Particularly strong was acceleration of direct taxes and revenues of theadministrative bodies; both are exceptional, however direct taxes strengthen in the longerterm as well. Domestic taxes on goods and services in May decreased mainly due to theApril shift in timing, as confirmed by a cumulative annual growth and yield.

The total lending to companies and households continued to decline. Although, the currentdecline in lending is slowing, there are no improvements in longer-term dynamics: theloans to households are not exception. In April, deposits (by enterprises and households)decreased; the decrease of deposits by households, which dropped twice (at the crisis inCyprus and the introduction of »rehabilitation package of banking«) strongly, stoppedwhere they were last April. Deposits by corporations declined, but they have a solid thoughfluctuating year on year growth.Slovenia retains large surplus in current balance. The reasons are surpluses in goods andservices trade, which are similar to last year's, while the deficit in the income balance ishigher and net outflow of current transfers approximately the same as last year. The resultof the current account surplus is a net inflow in the capital and financial account, which isthe result of positive net FDI inflow of capital through investments in securities and outflowthrough other investment, reflecting the deleveraging mode. Gross and net external debt areslowly decreasing.

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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