ABSTRACT

Growth in the last eighteen months was driven mainly by export demand; economic performance is therefore highly sensitive to developments abroad. The domestic consolidation of growth can be achieved by households spending on durable goods, which was in 2012 severely affected by the "Greek therapy" which has not yet been noticeably corrected. Poor recovery is no surprise; the dynamics of household incomes lags behind relevant EU countries, and banks do not want to increase retail lending. Spending remains below average in 2010, when he it was first hit by the bank regulator, which squeezed credit for housing, and then by "Greek therapy". Since the beginning of 2014, spending on durable goods has recovered but very slowly. Also household spending on durable goods very clearly shows the effects of the key features of the post-crisis policies of both economic policy makers: government and central bank.

In May, merchandise exports accelerated and imports fell, which created a surplus in trade with EU member states and non-members. Slovenian trade has un-proportionally suffered by economic sanctions against Russia while in trade with China, Slovenia in coverage of imports lags three times more than EU.

In June, the business climate cooled somewhat; confidence in the manufacturing sector was the same as in May or in June last year, expectations weakened, climate in the service sector cooled down, but   was higher than last year and above the long-term average. Confidence in the construction sector, except orders, recovered. Economic sentiment across the EU28 in June compared with June last year, resumed, orders in the construction sector increased substantially, the expectations in the retail sector and in manufacturing worsened.

Industrial production in April worsened in the year to year comparison, the impulse trend turned downwards. Industrial production in the EU28 and the euro area rose slightly in April, compared to April last year was also higher, but only one percent. The annual increases or decreases of the countries have been modest, large shifts continue from month to month.

The value of construction works in April was unaltered compared to March and considerably lower than a year ago, the impulse trend of hours worked was improving. Total number of tourist overnight stays increased considerably, this time thanks more to domestic than to foreign guests. The expansion of air transport and on the Ljubljana airport resumed, in urban transport growth turned downwards. In the port of Koper, transport in April was as much as 85% higher than in April last year.

The labor market situation has improved somewhat. In June, the number of job seekers decreased again, also in comparison with June 2014. In May, the number of newly registered job seekers was much lower than in April or May of last year; most came to the employment agencies because of the termination of temporary employment. Among those leaving agencies,  most found new jobs for a specified time. The unemployment rate in the euro area has not changed, while the much lower rate of total EU28 declined. Germany continues to be the best, Greece the worst.

Retail prices in June declined mainly due to seasonal price cuts of food and non-alcoholic beverages. Service prices went up, most increases can be contributed to recreation and cultural activity. The harmonized index of consumer prices in Slovenia and in the euro area declined, in Slovenia it was lower than in June last year, in the euro zone it was higher. Real estate prices in the first quarter marked the second consecutive increase, but remained far below the level before the crisis.

Producer prices in May decreased on the year to year basis, growth turned down again. The weakest was the current dynamics of producer prices for non-durable consumer goods. Producer prices for the domestic market were a little livelier than producer prices for exports, but longer-term dynamics of prices of products for export remains stronger than the dynamics of prices of products for the domestic market. Price expectations are similar to the current actual price growth. Expected retail prices of goods continued to decline, while expectations for the prices of services remain unstable. World commodity prices in a month, until the last week of June, rose, the most commodity prices of food, the  least metals prices. Commodity prices of food were the strongest, oil prices the weakest.

Annual wage growth has fallen, but due to the events of last year; the impulse trend confirms very weak growth. In April, almost half of the activities had lower average wages. The opposite is true in the activities with stronger demand, particularly electricity generation and manufacturing, while in the public segment, average wages increased in health care and administration and decreased in education.

Relative unit labor costs both for the economy and for the government continue to lag behind the relative unit labor costs in the euro area. A unit labor costs for the government continue to face practical stand in the abyss, where they were pushed by "Greek Therapy" in 2012, which resulted in a drastic collapse of consumption. In the euro area, the whole post-crisis unit costs for the government steadily increased.

The growth of the economy pushed up government revenues. In the first half of the year they remained higher than last year. There has been a strong increase of both, indirect as well as direct taxes and other revenues, but indirect taxes remain the main generator of growth. The dynamics of indirect taxes is dictated by the value added tax, which in June was down compared to May, but a year on year amount exceeded the corresponding amount last year. Excise duties continue to fluctuate strongly. In June, compared to May, they more than doubled, surpassing last year's cumulative revenue is much lower. Also, direct taxes and other revenues are growing, their pace is slower. Cumulatively, direct taxes and contributions exceeded last year's by over 180 million euro. It seems that favorable trends in fiscal revenues prompted the government to reduce the tax burden, which is unnecessary, put in the wrong time, at the wrong end, and politically short-sighted.

Total loans in May again reduced because the drop in corporate loans was much larger than the increase in household loans. Although the economy is growing faster than in the euro area, the difference in the dynamics of loans between Slovenia and the euro area increases. That changes may be on the horizon, is indicated only by household loans, which after several years of falling, in May for the first time increased considerably. Total deposits continued to grow, deposits of enterprises faster than deposits of households.

With such dynamics of the credit "cleaning" it may even made sense to hurry by the sale of NKBM, because the bank is the most thorough holder of regulatory policies and always systematically and rapidly shrinks credits. If the government waited until the end of 2016, the question is whether there would be anything left for the buyer to buy.

Euribor, which is April became negative has not changed. Deposit interest rates in May did not change, while lending rates decreased slightly for the households and more for the companies. Interest rates for housing remained unaltered, and decreased for consumer credits, the reductions for companies were higher.

The surplus in the current account deficit in May is the result of surpluses in goods and services balance and the deficit in the balance of primary and secondary income. Cumulative surplus is increasing, but lags behind last year; also here surplus is the result of surpluses in goods and services balance and deficits in the balances of primary and secondary income. The outflow of profits by foreign companies in Slovenia is becoming an important determinant of the balance of payments. Liabilities increased due to additional borrowings, capital inflows increased due to the sales of businesses, investments in securities replace loans from abroad.

Gross external debt in April fell by one billion, net external debt by a fifth of a billion. The yield on Slovenian ten-year bonds fluctuates at the level of 2 per cent, similar to the Italian and Spanish bonds, and apparently quite independently of our sale or non-sale of assets.