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

After eight years we are again paying price for the "abolition" of wage disparities

Gospodarska gibanja 491

Expectations point to boost in demand. For manufacturing companies, with the major portion of exports, demand is sufficient, as it is at the relative level of a decade ago, when it was rapidly growing, but had not yet faced a major overheating. Demand for service companies remains at too low level; since the crisis, there have been no noticeable improvements for them. The income situation of households is improving and in the second half of 2016, it has already exceeded the level in the euro area and the level of good, but not overheated years. There is a growing consumption of durable goods, which is confirmed by the intended investments in the restoration of apartments and houses. Expectations are for all components of spending over the long-term average, but the maximum reinforcement is promised in retail trade. Since the expected demand for services and export demand are slightly above the long-term average, we can expect at least as rapid growth as before.

In September, foreign trade results were again favorable, both in dynamics and with surplus which was on an annual level approaching 3% of GDP.

Economic sentiment in October remained favorable. This was the result of increased confidence in the manufacturing and services sectors; a positive effect was added by increased confidence of consumers.  The confidence in the construction sector decreased slightly, expectations for the next three months are lower. The confidence fell in retail trade as well, but the expectations improved. Economic sentiment across the EU28, compared with the same period last year, worsened slightly due to reduced orders in construction and manufacturing, and boosted expectations in the retail trade.

Industrial production in the year to year comparison recovered, including impulse trend upward in both the mining and manufacturing sector. In the EU, industrial production declined in September but remained above the level of last September. This time it grew most in Sweden and Ireland, and it fell in Denmark and in Germany.

The value of construction works in September was higher than in August, but a tenth lower than a year ago. Total number of tourist overnight stays increased in late summer; both the number of domestic and foreign tourists increased. In the air transport the number of passengers and passenger-kilometers increased; the reloading in the Port of Koper significantly exceeded reloading in September last year.

Though the unemployment rate in October rose seasonally, the labor market situation continued to improve, as the number of employed persons and employees is growing. Increased number of job seekers is in line with the season; this time between the newly declared job seekers there is a larger number of those seeking for their first job, than those seeking employment, because they lost their jobs for a certain period of time. Among those who left the employment offices, most got  new job or moved to the self-employed. The unemployment rate in the euro area and throughout the EU in comparison with last year fell, Germany and the Czech Republic continue to have the lowest, Greece and Spain the highest unemployment.

Prices are beginning to accelerate, as suggested for some time by core inflation. In October, the prices of goods increased while prices of services fell, but the latter were rising for a long while goods prices reversed up recently. Current price growth in October was determined by seasonal factors. At inflation, Slovenia ranks already in the first third of EU countries with the fastest growth rate. Also, producer prices in October rose, but more long-term growth remained negative. The weakest were prices for products for the domestic market, while prices for foreign markets increased. Price expectations show no major changes despite major swung in November downward. The level of expectations remains on the long-term average. Except for oil prices, which fell, the November prices of other commodities increased, the fastest prices of metals, the slowest prices of non-food agricultural products. A more long-term raw material prices, including oil prices, are rising; the fastest prices of non-food agricultural products, the slowest the prices of food and oil.

In September, average salaries decreased, also their more long-term dynamics fell. Among three activities in which wages increased were education, administration, and real estate. More long term wages increased the most in mining, health and education while they decreased in transportation, agriculture and information activities.

Problems with the salaries of doctors and their strikes are again revealing the absurdity of artificial positioned ratios and rigidity of the system, which was created by the 2008 Law on salaries in the public sector. No government has yet embarked on the re-regulation of this area, although they have faced major problems due to the economic nonsense arrangements.

The total income for a specialist from gainful employment in Slovenia is only slightly lower than in the countries with optimal management of resources for health care, while staffing of doctors strongly deviates from the optimum structure that enables optimal results. In Slovenia, there are almost 60% of the specialty doctors noticeably less than in countries with optimally regulated healthcare, in 40% of the specialty considerably more than in the optimal order. Therefore, any correction to the optimal reward is very difficult to achieve and practically leads to increases of salaries of all doctors, thus step away and not to an optimal position. In combination with the archaic management of public institutions, in which the director does not have key powers, but is responsible for the entire business, the wage law creates explosive mixture of large and long-term problems without the possibility of effective solutions. This leads not only to economically miserable life of public institutions, but above all to social decomposition, because long-term latent problems caused flat defamation of large segments of employees - full professional groups; once the bankers, second the doctors, third, ..., depending on (also political) needs.

General government revenue is slowing; in October it remained virtually the same as in September, in more long term, growth has been considerably reduced. Although the reduction in October is also the result of the modified base, one can claim that there has been a slowdown in growth. Cumulatively government revenue this year exceeded the last year by as much as 370 million, which is a good percentage of GDP. Direct taxes and other revenues fell in October, the more long-term dynamics declined, domestic taxes on goods and services increased in October, but the annual rate fell sharply.

Total loans to households and non-financial companies fell in September, a more long-term dynamics of the decline came to a halt. The dynamics of the decline continued to be driven by loans to companies, which fell less than in August and at the same time retained unchanged year to year dynamics. Loans to households, which had begun to turn up in April, intensified in September. The maturity of the loans in the last three years improved drastically. Total deposits of households and non-financial companies fell in September, a more long-term dynamics remained strong; Despite slowing, deposits of companies  continued to grow faster than deposits of households. ECB interest rates did not change, which is true also for the inter-bank interest rates. Lending rates rose slightly,  net changes were small, deposit interest rates stand.

In September, surplus in the current balance of payments exceeded one-tenth of the monthly GDP. The steady increase in the surplus of the balance of payments, which has only a small reflection on the reduction of external debt, is not optimal. In the first three quarters of the year, there was a surplus of more than 2.2 billion €, with large surpluses on the accounts of goods and services and deficits in primary and secondary income. Gross and net external debt is decreasing; very low yields on Slovenian government bonds are rising, but this is due to a general growth, so that the yields on Slovenian government bonds increased significantly less than comparable yields of Italy and Spain.

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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