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

Only banks are decaying a stable economic situation

Gospodarska gibanja 489

In June, total domestic consumption increased, but the increase was less than seasonal, so its long-term dynamics was lowered; the annual growth rate became negative, trend growth declined. Consumption structure improved, households spending continued to grow steadily, especially spending on durable goods, which can relatively quickly reduce the dependence of economic activity on external markets only. Despite acceleration, investments in fixed assets do not reveal any noticeable upward trend. Government spending for goods and services fell. Exports continued to grow faster than exports in the euro area, its relative dynamics has increased particularly since the middle of last year. By the end of the year, one can expect relative strengthening in the construction sector and in services, a slight decline in demand for manufacturing products, and a sustainable growth of consumption of households.

In July, the results in trade were less favorable than before, there was a year to year decline in trade. The deterioration was largely due to trade with the EU Member States. The trend indicates that the dynamics of export growth began lagging behind the dynamics of import growth. The terms of trade were until June still improving, but less than for the EU28.

The economic climate improved at the end of the summer due to enhanced confidence in manufacturing, its reduction in services, slightly increased confidence in construction, and increased confidence in the retail trade. In the EU28, economic climate deteriorated.

In June, industrial production in the year to year comparison recovered mainly due to the manufacturing sector; impulsive trend was rapidly increasing. Mining contracted sharply again. In the EU28, industrial production rose, so did also in the in the euro zone. Among the member states for which data are available, industrial production increased the most in Ireland and in Bulgaria, and declined in Estonia and Hungary.

The value of construction works in June compared to May increased but fell by 16 percent  compared to June last year, the number of construction hours in June  compared to June last year decreased much less, impulse trend points to growth. Total number of tourist overnight stays in early summer compared with the previous year increased slightly. Again, there has been a decline of domestic and an increase of foreign tourists. In air transport there were more passengers and passenger kilometers. Urban transport increased as well. Less goods than a year ago were handled in the port of Koper.

The costs of living remained unaltered in August, more long-term dynamics decreased slightly; prices of service continued to rise, prices of goods shrank again. The dynamics of falling commodity prices continue to be dictated by the price of fuel. The annual growth of the harmonized consumer price index was negative in August and  continued to lag behind the growth in the Euro area. Prices of new and existing residential real estate continued stagnation. In July, producer prices stagnated, they were decreasing in the year to year comparison in all markets, with the fastest decrease for the  products for the EU market. Price expectations do not indicate changes in the dynamics in the next few months. Commodity prices decreased last month, with the exception of oil prices.

Average wages in June increased, while the long term dynamics stabilized and earnings per hour stagnated. High annual growth of wages in the public sector is due to the release of promotions. However, the increase did not even counteract the nominal drop after ZUJF-u in 2012.

General government revenues in July and in August were marked by the swings in year to year, but on average they increased. The average dynamics is strong both in direct taxes and other revenue as well as in domestic taxes on goods and services. In July, revenues were pushed down primarily by personal income taxes, in August the revenues of all important direct tax forms increased. Domestic taxes on goods and services rose in July and decreased in August. Despite that, the revenues in two months increased, the fastest growing tax forms were value added tax and excise duties. The value added tax on imports continued to decline. In eight months, fiscal revenue exceeded last year's by nearly a percentage of GDP.

Loans to the private non-financial units declined in July, the dynamics of the reduction of loans has lasted since October 2015 and the structure of the dynamics has not changed much. Loans to households fluctuate or  rise slowly, loans to non-financial corporations continue to decline rapidly. The credits since the last big transfer to the bad bank were reduced almost by a quarter, while in the euro area they increased, though Slovenian economy has been growing faster. Similar is the situation with households. Although spending on durable goods, which is normally financed by loans is growing faster than in the euro zone, household loans grow noticeably slower.

Deposits have increased again, particularly fast the deposits of corporations.  To what extent this is due to interventions of the central banks is indicated by the fact that in the period after the last transfer of loans to the bad bank, loans to corporations fell by 23% while their deposits grew by 18%.

In recent months, interbank interest rates have been decreasing; interbank interest rates for up to one year have been negative. Deposit interest rates with maturity over one year have decreased slightly or have remained unaltered. Lending rates have been changing  only slightly; among exception are increased interest rates to business sector for loans above EUR 1 million.

The surplus in the balance of payments has continued growing, the half-yearly balance exceeded the last year's record figures. In the first half of the year, surpluses in trade in goods and in services each  contributed more than one billion € to the current account surplus which was lowered by the deficits on the accounts of primary and secondary factors. The debt of Slovenia is decreasing; the yield on Slovenian ten-year bonds is near the lowest value, which should not be overlooked as the time for the key structural projects seems suitable.

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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