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Autumn forecast 2019: Economic growth will ease off this year and remain at a similar level in 2020

Economic growth will slow to 2.8% this year and remain at a similar level in the next two. This year’s moderation will mainly reflect the slowdown of economic growth in Slovenia’s trading partners and deteriorated expectations until the end of the year. These factors will be reflected particularly in lower growth in gross capital formation and a considerable negative contribution of external trade. Growth in private consumption will remain relatively high. Given the current forecasts for economic growth in trading partners, GDP growth will remain at a similar level next year. Amid further moderate growth in exports, domestic consumption will also continue to rise. Among the risks to the forecast, negative risks in the international environment predominate, some of them strengthening further in recent months. If they were to materialise, economic growth could be lower than projected in the central scenario. These are the key findings of the Autumn Forecast of Economic Trends, presented by the Institute of Macroeconomic Analysis and Development today.

 

“The growth forecast for this year, 2.8%, is 0.6 pps lower than in the spring primarily as a result of the slowdown in Slovenia’s main trading partners and deteriorated prospects until the end of the year, which will affect exports and investment, of the export sector in particular,” Maja Bednaš, Director of IMAD, said, commenting on economic growth figures.

Economic growth in the next two years will remain similar, at 3.0% and 2.7%, respectively. Next year’s growth will be favourably affected by six more working days. Considering the prevailing forecasts for economic growth in trading partners in 2020, export growth is projected to remain moderate, but it will slow with the expected gradual deterioration in cost competitiveness due to faster growth in unit labour costs than in trading partners.

A significant contribution to further solid growth over the forecasting period will come from domestic consumption, which will be supported by a continuation of relatively favourable labour market conditions and further growth in investment, construction investment in particular.

Growth in private and government consumption will otherwise ease off gradually, largely owing to lower growth in employment. Following this year’s acceleration, import growth will slow as well, but it will remain higher than export growth amid solid growth in domestic consumption. The contribution of external trade to GDP growth will thus remain negative, but less so than this year.

Among the risks that could lead to lower economic growth than assumed in the central scenario, downside risks in the international environment continue to predominate. "Given the significant negative risks, we also made a forecast for an alternative scenario. According to this scenario, which assumes 2 pps and 1 pp lower growth in foreign demand next year and in 2021, respectively, than the baseline scenario, GDP growth will be just below 2% in 2020 and 2% in 2021,” Maja Bednaš added.