Abstract

Domestic consumption increased sharply in December; the increase was not just seasonal. Household spending was the main engine. Fluctuating government spending on goods and services in December also increased substantially; the bulk of the increase is likely to be caused by rapid completion of projects financed from European funds. Investments were significantly reduced and remained compressed – unaltered level has persisted since the end of 2013. The export spending increased substantially after several months of decline; since the crisis began, export growth, practically identical to the growth of EU exports, was the only component which has driven growth through the entire period. Expected dynamics of spending in the next few months does not indicate significant changes; in virtually all segments of the spending, expectations are slightly above the long-term average. Household spending is expected to be strengthened the most.

Slovenia in 2015 reached the maximum trade level since independence and the excess of exports over imports amounting to 750 million €. In recent months, annual growth was slowing, surplus of exports over imports remained unaltered.

Information on the economic climate and confidence reveals a kind of windless situation; relatively small changes up or down. Economic sentiment in February compared with January improved slightly, but deteriorated compared to February last year. The decrease was most affected by reduced  consumer and retail trader confidence. Similar is the stagnation of confidence in the manufacturing and services sectors. Confidence in the construction sector in February was unchanged, but it fell compared with February last year and remained above the long-term average. Economic sentiment in the EU28 in February warmed; orders in the manufacturing sector declined, expectations in trade and construction contracts increased.

Industrial production, which is determined by production in manufacturing, was improving in December and also trended upward;  in the whole 2005 it was five percent higher than in a year earlier. Strong acceleration was at the end of the year due to mining activity, which varies greatly. Industrial production in the EU28 and in the euro area in December decreased compared with November and in a year. Large fluctuations between the member states continue from month to month.

The value of finished construction works was in December one tenth lower than in November or in December 2014, but the impulse trend indicates an improvement. The number of overnight stays in December increased compared with the previous year and the trend grew. Foreign tourists again contributed more to the very good results. Air traffic in December by a quarter exceeded the turnover in the previous year, the urban transport of passengers was the same, the transport of goods in the Port of Koper was almost a tenth bigger than in the previous year.

The situation on the labor market has improved somewhat, although in comparison with November and the year to year comparison, the number of active population decreased, the number of economically active compared with November decreased as well but interim comparisons increased together with the number of employees in companies. The number of those employed by individuals and self-employed decreased.

In February, the number of job seekers decreased compared to January and much more compared to February last year. Among less new applicants, more than half are due to the expiry of fixed-term employment, among the deregistered the majority had found new jobs or self-employment. The unemployment rate in the EU28 is decreasing, so is, but at a slower pace, also in the euro area. It remains the lowest in Germany and the Czech Republic, the highest in Spain, where a fifth of the active population is unemployed, and in Greece, where a quarter of the active population is unemployed.

Living costs in February did not change; in the longer term they are slightly declining. Prices of goods did not change, prices of services increased slightly, fuel prices declined considerably while prices of clothing and furniture and equipment increased slightly. The harmonized index of consumer prices in February was dormant while it decreased in a year. Only in four EU countries, prices decreased faster than in Slovenia, while the EU average prices after four months of growth or stagnation began to fall year on year again.

Industrial producer prices in January decreased, they were decreasing also in the longer run. Differences in the current dynamics of prices by end-use practically disappeared; energy prices  continue to be the most compressed. Also in export markets the differences in the growth of producer prices is insignificant. Real estate prices, which ceased to fall the first half of 2014, oscillate at the same level. Price expectations indicate that companies do not believe that the ECB is able to, at least, halt the decline in prices. Producer prices are expected to decrease, especially of goods, while the expectations of prices of services and construction works are not fallen below long term levels. 
Raw material prices in the last month increased significantly while in the long term they are  falling, with the speed of falling oil is on the forefront. In the year, prices of all commodities, except gold, decreased.

Average wages fell in January; the fall was not only seasonal. Wages decreased in most economic activities. Over the year, wages in market activity increased slightly, while in the public sector increased considerably more than in commercial activities, especially in the narrow government and in the health care. Although salaries in Slovenia increased year on year both in 2014 and in 2015, disposable incomes since the first quarter of 2014 practically stand while in the euro area they are rising. Among the potential factors for stagnation of disposable income are: decrease of the total remuneration of employees, increased taxation, change in the value-investment in pension funds, or the reduction of other incomes. Since revenues fell only slightly, their retardation cannot be a reason for the stagnation of disposable income and the effect of increased taxation in 2013 was proportional to GDP growth. Thus, the reasons are most likely the change in the value of investments and reductions in social transfers. Increasing rate of savings adds to the stagnation of disposable income and household spending. While at the beginning of the crisis, households in Slovenia behaved as in the euro area, the experience with ZUJF further stimulated savings; even a small increase in disposable income has been used to increase savings.

In February 2016, government revenues were significantly reduced, but longer-term dynamic strengthened. February is a seasonally weak month, but as the annual rate of change shows a decrease in revenues, which may be due to one-off events.

Direct taxes and other revenues in February fell markedly and deteriorated, long-term dynamics deteriorated  even more, the annual rate has fallen by nearly 10 percentage points. But it appears that this  is largely due to the fluctuations in the timing of payments. Domestic taxes on goods and services in February were considerably reduced, a more long-term dynamics remained strong. The revenues of the domestic added tax were in February markedly reduced, there was no downward shift in the revenues of value added tax on imports. At the same time the excise duty in February increased considerably, but this increase might only refund the January drop. Despite huge fluctuations in the tax return within a year, the tax yield has since the increase the tax rate for value added tax, practically not changed. Subsequent changes of the tax system did not have even cosmetic effects.

The contraction of credits, which lasts since bank rehabilitation is continuing. Total loans were also reduced in January; loans to enterprises increased, loans to households shrink; more long-term loans to companies decreased, and those to households stagnated. The difference in the decrease of corporate loans between euro area and Slovenia is growing. The claims that there are "no projects" persist but according to data from the ECB, the demand for loans in Slovenia in the past two years was growing on average more than twice as fast as in the euro area. In loans to households, there is no change; only last year, the loans to households increased by a 100 million less than they would if they grew as fast as in the euro area.

Total deposits in January decreased seasonally, their long-term dynamics remained very strong both for the deposits of households and companies; both are growing faster than in the euro area. In just one year, deposits of enterprises and households together increased by almost half a billion more than they would be if they grew as fast as in the euro area.

In the middle of March, ECB again cut interest rates, but one can expect that the impacts of recent moves will be similar to the effects of previous moves - loans will stagnate, prices will fall, and funding will be, like in the years after 2006 increasingly shifted from banks to non-bank instruments. If the central bank wants to move credits it will have to intervene with a completely different arsenal of measures. In January, deposit interest rates continue to fall. In Slovenia, almost all are lower than in the euro area. Lending rates for households remained unchanged, those for companies are growing. Changes in the lending rates are a piece of cake against obstacles to credit activity by restrictions of central bank supervision.

Record balance of payments surplus in 2015 at 7.5% of GDP was in January rising to tenth of this month produced GDP. The January surplus was created by the surpluses in goods and services trade, while decreased by the deficit in primary and secondary factors, which is typical for the economy, which sold or is selling productive assets. The financial account shows an increase in liabilities.
  
Also on the yearly level surplus was generated by the balances of goods and services, and it was decreased but by the deficits in primary and secondary factors. Balances in financial accounts were last year much lower than a year earlier, when this was due to the "rehabilitation" of banks. Gross external debt of Slovenia last year dropped by over one billion. The yield on government bonds is declining, the size is between yields on Italian and Spanish.