Country Forecast Slovenia 2nd Quarter 2018 Updater

Country Forecast Slovenia 2nd Quarter 2018 Updater

  • May 2018 •
  • Report ID: 5168714 •
  • Format: PDF


  • On March 14th Miro Cerar, the prime minister and leader of the ruling Modern Centre Party (SMC), resigned following a Supreme Court ruling annulling a referendum to build a railway track to Luka Koper. This means that the parliamentary election will be brought forward a few weeks, to June 3rd.
  • The election is likely to result in another centre-left coalition, possibly including a new party set up by the runner-up in the presidential election in late 2017, Marjan Sarec. This is unlikely to lead to significant changes in policy.
  • Slovenia will gradually adopt a more open stance towards foreign investment. Although the government has postponed the partial privatisation of the country's largest bank, the privatisation process continues. However, given the likelihood of opposition from vested interests and the unpopularity of privatisation among the general public, progress will be slow, and The Economist Intelligence Unit does not expect an expansion of the programme beyond the currently announced list of companies.
  • The government budget reached balance in 2017 for the first time in the country's history. Since 2015 had been brought to within the EU limit of 3% of GDP. We expect the budget balance to move back to deficit in the forecast period (2018-22) owing to political pressures to increase spending.
  • Real GDP grew sharply in 2017 at 5.4%. In response, we have revised our growth estimate for 2018 to 4.5%. However, we expect this to be a temporary spike and forecast that growth will moderate gradually, to 2.8% on average in 2019-22. This will be driven in large part by private consumption, as the labour market will continue to improve, as will credit conditions. Exports will be driven by tourism and, increasingly, industrial exports as the expansion of Slovenia's main European export markets continues.
  • After two years of average deflation, average annual inflation returned in 2017, at 1.6%. The rapid economic expansion and recovery of the labour market will increasingly push up wage growth and hence inflation, which we expect to average 2.1% in 2018-22.
  • Strong tourism receipts will continue to support a significant surplus on the services balance, keeping the current account in comfortable surplus throughout 2018-22. However, a falling trade surplus will drive it down from 2018, to just below 4% of GDP in 2022.






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