Economic growth in the euro area continued in the third quarter; in the autumn international institutions significantly improved their forecasts for the euro area economy for this year and next. Economic growth continued in all of Slovenia’s main trading partners from the euro area, owing primarily to higher domestic demand in addition to exports. The higher forecasts for euro area GDP growth for this year and next are mainly a consequence of the stronger-than-expected growth and favourable economic prospects. Risks to growth are mostly balanced.
In the third quarter high economic growth in Slovenia continued and remained broad-based. This year’s GDP growth continues to be mainly driven by exports; the components of domestic consumption also remain higher year on year. The improvement in labour market conditions and consumer confidence is contributing to further growth in private consumption as well as to the growth of housing investment that started last year. Investment in machinery and equipment and investment in the construction of civil-engineering works, which has rebounded this year, remain higher year on year. Economic growth in Slovenia continues to exceed that in the euro area. Slovenia is thereby closing the gap relative to the pre-crisis level, which was wider than in the euro area owing to a steeper fall in GDP in the first years of the crisis.
The labour market situation continues to improve with favourable economic conditions and high labour demand, while the growth of wages remains moderate. The number of employed persons continues to rise across most sectors, reaching a level comparable to that in 2007. However, with enterprises increasingly facing a shortage of labour, the employment of foreigners continues to increase in certain sectors. Increased hiring and a reduced inflow into unemployment are reflected in the smaller number of unemployed. At the end of November 82,415 persons were registered as unemployed, 14.9% fewer than in the same month last year. Wage growth remains moderate, having risen around 2.5% in the public and private sectors in the first nine months.
Year-on-year growth in consumer prices remains relatively low. The main contributors to growth are prices of energy and services; in November the contribution of food prices also went up. The contributions of other price groups remain relatively low. The movement of core inflation does not indicate any major pressures on price growth.
The year-on-year growth in the volume of loans to domestic non-banking sectors continued in October. The volume of household loans (consumer loans in particular) continues to rise steadily. Since mid-year the volume of corporate loans has also been picking up, in our assessment owing mainly to the further slowdown in deleveraging, given that the volume of new loans has dwindled slightly in recent months.
With favourable economic developments and moderate growth in expenditure, the general government balance on a cash basis recorded a surplus of 0.1% of GDP in the first nine months. The strong revenue growth is underpinned primarily by favourable economic conditions, while in the third quarter revenue from EU funds was also up year on year after a relatively long period. Expenditure growth mainly reflects growth in employee compensation, some transfers (pensions and sickness benefits) and expenditure on goods and services. Towards the end of the year growth in expenditure is expected to strengthen.