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Slovenian Economic Mirror: The labour market situation continues to improve, while wage movements remain moderate

This year activity is increasing in most activities and the prospects remain favourable. The labour market situation continues to improve under the impact of favourable economic conditions, while wage movements remain moderate. Year-on-year growth in consumer prices has been down again in the last few months. Amid favourable economic developments and moderate expenditure growth, the general government deficit on a cash basis was low in the first four months.

This year activity is increasing in most activities and the prospects remain favourable. Higher foreign demand and competitiveness gains remain the main factors behind further growth in exports and manufacturing production. Private consumption, which is rising under the impact of favourable labour market conditions and high consumer confidence, is contributing to turnover growth in trade and services, particularly those related to leisure. This is also the result of a higher number of foreign tourist arrivals, which has been rising since 2010, with Slovenia becoming more recognisable abroad and the economies recovering from the crisis. The pick-up in domestic and foreign demand is also reflected in further turnover growth in most other market services. With the improvement in economic conditions and the recovery of the property market, construction activity also started to rebound.

The labour market situation continues to improve under the impact of favourable economic conditions, while wage movements remain moderate. The number of employed persons, which was up in most activities in the first four months, has reached the level from the beginning of 2007. Increased employment and a smaller inflow into unemployment are reflected in a decline in the number of unemployed. At the end of the June, 84,793 persons were registered as unemployed, 15.0% less than one year before. Companies also expect further growth in employment in the coming months.

Year-on-year growth in consumer prices has been down again in the last few months. This is mainly related to the smaller contribution of energy prices owing to a decline in global prices of oil. Food price growth has also slowed. Services prices remain higher year on year particularly on account of a further strengthening of private consumption, while the prices of durable and semi-durable goods remain lower.

The volume of loans to domestic non-banking sectors was higher year on year again in May. Household borrowing is rising.The year-on-year decline in the volume of corporate and NFI loans has almost come to a halt. Enterprises continue to borrow abroad where lending conditions are more favourable. Among sources of finance, banks continue to reduce liabilities to foreign banks, substituting them by deposits of domestic non-banking sectors, particularly households and non-financial corporations.

Amid favourable economic developments and moderate expenditure growth, the general government deficit on a cash basis was low in the first four months. At EUR 85 million, it reached one fifth of the figure from the same period of last year. Its decline is mainly due to the rapid year-on-year growth in revenue, which, in addition to some one-off factors, is attributable primarily to favourable economic conditions, including the labour market situation. Despite the relaxation of some austerity measures, total growth in expenditure remains moderate, being significantly affected by the currently low level of investment amid a very gradual implementation of the new financial perspective of the EU and lower payments into the EU budget year on year.