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

Only accelerated demand for services is missing for the normalization of growth


January's domestic consumption decreased seasonally, while yearly dynamics is strongly affected by the previous year base.  However, households and government spending are strengthening, investments are lagging. Foreign demand remained strong. Spending of the households is increasingly generate by spending on durable goods; descent caused by ZUJF, has been, since the beginning of 2015, disappearing rapidly. Spending on non-durable goods and services is barely increasing. A deep drop in residential construction after the onset of the crisis and the gap with the euro area began to recover rapidly at the end of 2015, the construction of other buildings joined in 2016. Investment in machinery has been also increasing since 2016, while investment in transport equipment has been all the time increasing faster than in the euro area. Rapid growth in households and government spending and exports and falling investment once again brings to the fore the issue of long-term sustainability of the current dynamics. The sustainability of spending for three key components of domestic demand is strengthening, for full normalization of demand and economic growth only acceleration of the demand for services is needed. Expected demand continues increasing; but it could stagnate in the services sector. The high increase in demand is expected mainly in investment in buildings and public spending on goods.

Economic climate warmed in March; such a high sentiment indicator was last recorded in April 2008. In March, the increase was produced by increased confidence in services sector. Confidence also strengthened in manufacturing and retail trade, there was a slight drop in construction, but confidence remained well above last year and long-term average confidence. Economic sentiment in the EU28 improved due to larger orders in construction and improved expectations in retail trade and manufacturing.

Industrial production in January was, mainly due to manufacturing, a tenth larger than a year ago, the trend is growing. January activity in the mining also exceeded the last year activity. In EU28, industrial production in February fell behind it in January, but it was higher than in February last year. Among the countries with the largest annual increase was also Slovenia.

The value of construction works in February was for a quarter higher than in January, last year was exceeded for more than a fifth, the number of hours worked for a quarter. The number of overnight tourist stays increased; the increase was generated by foreign tourists, the number of domestic visitors decreased. The number of passengers in bus and air transportation increased, while the number of passengers by Adria Airways decreased. More products than last year were transported in Koper.

The situation on the labor market has stabilized. Seasonally, the number of active persons and employees in January decreased but increased in year to year comparison. In March, the number of job seekers decreased again, from March last year for 15 thousand. Among the new job-seekers two-thirds were those who lost their jobs for a certain period of time, among those leaving employment offices eighty percent re-employed. The unemployment rate is rapidly declining in the EU28 and in the euro area, where it remains higher.

The cost of living rose in March, while more long-term dynamics decreased slightly due to lower prices of services. Core inflation in February rose, more long-term dynamics increased considerably. The harmonized index of consumer prices rose more than in the euro zone. Prices of industrial producers, including their long-term growth, have picked up. Price expectations indicate a stabilization of inflation at the current level. Raw material prices in the global market declined; the most prices of agricultural raw materials, the least prices of metals. In a year, prices of raw materials rose strongly, the most prices of oil, the least prices of food.

Average salaries in January decreased seasonally in almost all sectors; the annual rates remained positive. Variations in a more long-term growth of average wages are lower than in short term changes. Wages in the public sector grew less than in the private sector. Unit labor costs continue to grow faster than in the euro area; the dynamics in the private sector is catching up with the dynamics in the euro area, in the public sector it is still lagging behind.

In March, government revenues from direct and indirect taxes were significantly smaller; especially big drop was in VAT. Among direct taxes, contributions for health care and personal income taxes decreased. Despite March's reduction, general government revenues in the first quarter were 180 million euro higher than in the first quarter last year. A more long-term dynamics of fiscal revenues in Slovenia is since the end of 2013 higher than in the euro area. Increased efficiency of tax collection also contributed to larger revenues.

Ongoing growth in total loans to private non-financial units, which began after September 2016, does not stop, the annual rate of total loans in February became positive for the first time after more than five years. Loans to households and businesses; the latter have turned up only in December, are now growing. Both continue to grow faster than in the euro area. Total deposits of the private non-financial units increased again in February. ECB interest rates remain unaltered. In the business sector lending interest rates for small loans increased, for large loans decreased. For households there were minor changes; slightly more expensive were consumer loans, cheaper were housing loans. Deposit interest rates have not changed.

The growth of the balance of payments surplus in 2017 continues, this time also due to small surplus in the balance of primary incomes. Gross and net debt is decreasing, the yield on Slovenian 10-year bonds is less than one per cent.

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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