Abstract

Slovenian economy entry into 2017 is solid; in the third quarter, the country was with a 2.7 percent annual growth by 1.1 percentage point faster than the EU28; the overtaking is growing, but more due to poorer results in the EU than better results in Slovenia. Growth  remains dependent on export demand; in the first three quarters balance of trade in goods and services contributed the lion's share to GDP growth. In October, despite the year on year fall of exports and imports, the balance remained positive while the trend dynamics and the terms of trade worsened. Due to the small size of the country and the differences in the structure of products Slovenia does not have adequate allowance to a large drop in foreign demand; the country would be left with modest buffers, such as an increase in government spending and the demand of the population. Both shares are in the GDP of Slovenia also much lower than the EU average; and have been since 2012 increasingly lagging behind.

The demand of the population depends not only on its disposable income but also on the confidence of households, that is, on their expectations about future developments in the economy and in their own household. Their confidence in 2016 improved compared to the pre-crisis (2004-2008) and post-crisis (2009-2015) periods. It appears that the most influential are expectations about employment opportunities and reduction of unemployment.

The expectations of the business sector are favorable; economic sentiment indicator in December reached the highest value since May 2008. In December, the confidence in the manufacturing remained unaltered, but it was higher than a year earlier and well above the long-term average. The confidence in the services sector dropped, the confidence in the construction recovered and expectations for the next three months remained broadly constant, the confidence in the retail trade was in December equal to November, but much better than a year before. In EU28, economic sentiment in November compared with the same period in 2015 improved; construction got more orders, expectations in retail trade and in manufacturing have been intensified.

Industrial production in October in the annual comparison improved, but its impulse trend is  shrinking; mining increased sharply and was accompanied with positive trend, the  increase of prevailing manufacturing was accompanied with negative impulse trend. In October compared to September, industrial production in the EU28 and in the euro area declined, but it was larger than last year.

The value of construction works in October was lower than in September and much lower than a year ago, but the impulse trend points to a slow recovery. Total number of tourist overnight stays increased strongly and continues to grow at approximately the same speed by both foreign and domestic tourists. In air transport, there were more passengers than last year, their distance flights increased even more. There were nearly a third more goods loaded and unloaded in the Port of Koper.

At the end of November, there were less job seekers than at the end of October and one tenth less than in the previous year. Majority of registered job seekers were those who lost their jobs for a certain period of time. More jobseekers left employment offices, most of them re-employed. The unemployment rate decreased in both the euro area and throughout the EU, where it is much lower than in the euro area. Czech Republic and Germany remained the most successful while Spain and Greece remained the least successful countries.

Price indices in November rose only slightly; prices of goods are more or less stagnating, while prices of services are rising. Falling of prices of fuels and energy, which have since 2014 contributed to deflation, comes to an end. In a year the most, but only one percent more expensive, were food, communications and miscellaneous goods, while clothing, footwear and housing became cheaper. The dynamics of prices in the euro area differs somewhat from the dynamics in Slovenia; there the annual growth rate of prices of goods turned positive in October, prices of energy decreased also in November, the dynamics of core inflation has been very stable. Industrial producer prices within a year had decreased, but the lagging in comparison to a year ago is getting smaller, so one can expect that the year on year decline in prices will soon turned into growth. Producer prices of goods for the foreign markets have raised.

Average gross and net salary per month or per hour was about 2 percent higher than a year ago;  in four activities, however, it decreased. The growth in the public sector exceeded the growth of wages in the private. "Non-systemic" movements in salaries between the public and private sectors have therefore already began before "systemic" agreement between public sector unions and the government was achieved. That the price for the "elimination of imbalances" will sooner or later have to be paid, was predictable and predicted. Because of the crisis, the duration of the "balance" of 2008 was extended, newly established "equilibrium" will not last long. The strongest unions will always be able to request new “equilibrium”, others will follow depending on their bargaining power.

The increase in labor costs both in business and in public administration still lags behind the increase in the EU28; in the business sector, the increase is steady and slow, in the public sector the increase in 2016 followed previous complete stagnation.

Larger inflows into the public purses approximately indicate nominal GDP growth; monthly fluctuations in receipts from each major taxes depend on the seasons and payments. The inflow of the revenue on profit tax in November was modest, the inflow of income taxes was abundant. Large inflows of VAT after the settlement and very small inflows from VAT on imports indicate to possible changes in the classification of transactions. The excise duty in November brought much more than last year, the cumulative increase is in line with GDP growth. The inflows into Pension Fund and Public Health Fund were normal.

Corporate loans in October increased but by less than they fell in September; in 2016 they fell by one billion €. Loans to households increased in October, which is probably the result of a large credit campaign by banks focused on the population. Deposits from businesses and households in October rose; total deposits were at the end of October of 4257 million € higher than the total credits.

Developments in banks are dictated by reduction of credits to business sector and often unnecessary destruction of companies. This continues despite favorable economic trends  under the control of SDH and DUTB who only do their work; the government is "convinced" that should not interfere in the functioning of the economy but only in changing the economic system, dealing with privatization of funerals and similar nonsense. Loans to households for the first time in the history of Slovenia exceeded corporate loans. To reduce the surplus of financial resources, with which they do not know what do, banks are now offering loans to households without precautions.

ECB interest rates remain unchanged. Deposit interest rates for households and non-financial corporations for new business remain close to zero, in Slovenia they are slightly lower than in the euro area, while lending rates for different new loans to both non-financial corporations and households are slightly higher than in the euro area. By changes of marginal interest rates the deposit and loan interest rates for existing transactions change as well.

By the October surplus, the cumulative balance of payment surplus exceeds 8% of GDP. External debt continues to decline, yields on Slovenian government bonds in December decreased and remained significantly lower than in Italy and Spain, but higher than in some countries in transition.

The current account surplus continues to be formed by the surplus in the goods and services account (large surpluses in travel and transport) and the deficit in the accounts of primary and secondary incomes. The deficit in the primary income account is shaped primarily by outflow through the capital account, the deficit in the secondary income account by relatively large net payments to the Brussels budget.

At the fluctuations in gross debt, net debt is gradually falling. The yield on ten-years Slovenian government bonds varies but in general remains lower than 1 per cent. It departed from the yields on Italian and Spanish government bonds, which has for some time accompanied; the confidence in the Slovenian economy by the capital markets obviously strengthened. Extremely low cost of borrowing, the surplus on the current account deficit and debt reduction are increasingly raising the question whether Slovenia should accelerate economic growth by borrowing or by guarantees for the construction of infrastructure, such as the "second track" and the "third axis".