In Slovenia, the value of some indicators of economic activity continued to decline in the last quarter of 2022; the economic climate improved in the last two months of 2022 but was still weaker than in the same period of 2021. Following a year-on-year fall in Slovenia’s export market share in the EU market in the third quarter, growth in the export-oriented sectors weakened further towards the end of the year. Growth in foreign trade in services was interrupted in October and real exports of goods to EU Member States continued to decline in current terms in November. The slow strengthening of manufacturing activity seen in the first three quarters of 2022 came to a halt towards the end of the year. Production in most sectors was also lower year-on-year. Turnover in trade and other market services decreased in October. The value of construction put in place increased significantly in the first 11 months of 2022, exceeding the previous year’s level by 44% in November. The slowdown in economic growth in most activities, elevated energy prices and warm weather led to lower consumption of natural gas and electricity. Natural gas consumption in November and December 2022 was 11% and 13% lower respectively than the comparable average consumption of the previous five years, and electricity consumption was 5% lower year-on-year. Household consumption remained similar on average in October and November to the previous quarter. In the last quarter of 2022, the financial situation of households deteriorated slightly both in current terms and year-on-year. The impact on the most vulnerable groups was cushioned by government measures to mitigate price increases. We estimate that measures to mitigate price increases for households and enterprises, support businesses and reduce uncertainty about energy supplies this winter also contributed to a slight increase in the value of the sentiment indicator in the last two months of last year.

Electricity consumption was 5% lower year-on-year in December. In our estimation, both industrial and household consumption were lower. Due to high electricity prices, in certain energy-intensive industrial companies in particular production volume has been reduced and manufacturing technologies have possibly been modernised to increase energy efficiency. The year-on-year lower household consumption may have resulted from energy saving and/or from fewer people working from home. Compared to December 2021, consumption was also lower in our main trading partners (by 4% in Italy and Croatia, 5% in Austria and Germany, and 11% in France).

In December 2022, industrial and household consumption in the distribution network were lower year-on-year, while small business consumption was higher. Industrial consumption was 6.8% lower than in December 2021. According to our estimate, this was due to the lower consumption by some energy-intensive companies, which reduced their production volume under the impact of high electricity prices or improved the energy efficiency of their production processes. Household consumption was also lower than in December 2021 (by 2.6%), mainly due to more rational energy consumption and possibly also because fewer people worked from home. Small business consumption was 2.2% higher year-on-year in December 2022 due to the absence of COVID-19 containment measures.

With the warm weather, natural gas consumption in October was more than a fifth below the comparable average consumption over the last five years. In the last two months of 2022, the gap narrowed again, amounting to 11% and 13% respectively. Part of industry reacted to the high gas prices by reducing production output and thus consumption. Government measures also contributed to a more rational use of gas. After a warm October, the gap with comparable gas consumption in previous years narrowed towards the end of the year. By mid-November, EU Member States were able to ensure that their gas storage capacities were almost full, but since then the storage level has been gradually declining. According to preliminary data, gas consumption in Slovenia from 1 August 2022 to 5 January 2023 was 14% lower than the comparable average consumption over the last five years, which is slightly below the EU recommendations for gas consumption reduction in the August 2022 to March 2023 period.

Amid high price growth, the value of fiscally verified invoices in December was higher year-on-year in nominal terms and compared to the same period of 2019 (by 12% and by 16% respectively). With two fewer working days in the month, the slightly lower growth than in the previous month (15%) was mainly due to somewhat lower growth in retail trade (10%), where growth slowed in all three main sectors (wholesale trade, retail trade and sales of motor vehicles). Partly due to the low base in December 2021, when strict COVID-19 containment measures were in place, turnover growth continued to strengthen in accommodation and food service activities (to 30% – 35% for food and beverages and 17% for accommodation establishments) and gambling and betting (to 40%). Nominal growth also remained high in creative, arts and entertainment activities (54%) and sports activities and amusement and recreation activities (28%).

Goods trade with EU countries continued to decrease in November. Real trade in goods with EU countries decreased by around 4% (seasonally adjusted). It was also lower year-on-year. The decline in trade with EU countries was due to uncertainty and low sentiment indicator values in industry and among consumers in some of Slovenia’s main trading partners, notably Germany and Italy. According to initial estimates, trade in intermediate products (excluding petroleum products) in particular has declined in recent months. In the first 11 months, exports to EU countries rose by 5.5% year-on-year and imports by 2.6%. Sentiment in export-oriented industries improved slightly in December, but export orders remained very low with the great uncertainty in the international environment. 

Slovenia’s export market share in the EU market continued to decline in the third quarter of 2022. Amid strong year-on-year nominal growth in the euro value of Slovenian merchandise exports and even stronger growth in EU merchandise imports, initial estimates suggest that Slovenia’s market share in the EU market fell by 4.3% year-on-year in the third quarter and by 5.1% in the first three quarters combined. Although the decline was largely due to lower foreign demand for products that account for a relatively large share of Slovenian exports (a structural effect), the export performance of individual products also deteriorated. Market shares decreased for most major manufacturing product groups (road vehicles, electrical machinery, apparatus and equipment, and pharmaceuticals) but increased for industrial machinery. Among energy-intensive products, market shares declined for chemical and non-metallic mineral products, while they increased for metals (iron, steel and aluminium) and paper. Among Slovenia’s main trading partners, France and Germany recorded the strongest drops compared to both the previous year and the pre-epidemic level.

The growth in foreign trade in services was interrupted in October (seasonally adjusted). Compared to previous months, both imports and exports of services decreased. Trade fell in travel and other business services and a more pronounced decline was also recorded in transport services. This was mainly linked to lower trade in goods and cooling of economic activity in Slovenia’s main trading partners. Among main services, only ICT services saw an increase in trade (seasonally adjusted). Due to the low base from 2021, year-on-year growth in trade in services remained very high in the first ten months (29.4%), exceeding pre-epidemic levels (January–October 2019) by a quarter. However, due to low levels at the beginning of 2022, the services most affected by the containment measures (tourism-related services and personal, cultural and recreation services) continued to lag behind their pre-crisis levels in the same period. 

The slow strengthening of manufacturing activity seen in the first three quarters of 2022 came to a halt towards the end of the year. Production in most sectors was also lower year-on-year. After year-on-year growth in the first half of the year, production in low-technology industries (in addition to the more energy-intensive paper industry and, in recent months, also in the wood-processing and furniture industries and the manufacture of food products) was lower year-on-year from the middle of last year. Especially in October and November, medium-low-technology industries (with the exception of the manufacture of fabricated metal products, which is less energy intensive) and some medium-high-technology industries also lagged behind the previous year’s level. In the latter industries, we assess that this is more related to supply chain disruptions and lower demand (in the manufacture of motor vehicles and the manufacture of machinery and equipment n.e.c.) than to energy intensity (which is greater in the chemical industry). In high-technology industries, production in the manufacture of ICT equipment and, in our estimation, the pharmaceutical industry remained higher than a year ago, with output in the first 11 months of 2022 up by one-fifth compared to the same period of 2021. Growth in all other sectors was below 2% on average over the same period.

According to figures on the value of construction put in place, construction activity in November was considerably higher than in 2021. The value of construction put in place increased significantly in 2022 and was 44% higher year-on-year in November. Compared to previous years, construction of buildings stands out in terms of the level of activity. Activity was also high in civil engineering, while it was lower in specialised construction work (installation works and building completion). The implicit deflator of the value of construction work put in place (used to measure prices in the construction sector) was 17% in November, which was slightly less than in previous months. However, some other data suggest significantly lower construction activity. The value of industrial production in two activities traditionally strongly linked to construction does not point to such high growth. Production in other mining and quarrying was 10% higher in November than in the same month of 2021, while it was 9% lower in the manufacture of other non-metallic mineral products.

Average turnover in October and November was close to that recorded in the third quarter in real terms. Turnover in retail trade excluding fuel fell in October, partly due to the timing of the holidays, but rose in November, according to preliminary SURS data. The average for both months was similar to Q3. In October and November, turnover was higher year-on-year in retail sales of non-food products, while sales of food, beverages and tobacco products were lower. Turnover in the sale of motor vehicles, where, after a significant increase in the third quarter, turnover declined in October and, according to preliminary data, also in November, also remained lower than a year ago. In October, turnover further declined in wholesale trade, where year-on-year growth also continued to weaken.

Real income from market services fell in October. It fell in current terms for the second month in a row, this time by 1%, while it was 3.3% higher year-on-year. After two months of sustained growth, turnover in transportation and storage again fell significantly, most markedly in storage. A slightly lower turnover was also recorded in professional and technical activities, with a more pronounced decline in architectural and engineering services. After declining, turnover increased again in accommodation and food service activities. Turnover in information and communication activities increased again, mainly due to higher turnover in computer services on both the domestic and international markets. Turnover growth in administrative and support service activities slowed, with a renewed decline in travel and employment agencies. In the first ten months of last year, turnover was higher year-on-year in all activities, though that of travel and employment agencies still lagged behind the pre-epidemic levels (October 2019), by 24% and 14% respectively.

The volume of road freight transport continued to decrease significantly in the third quarter of 2022, while the volume of rail transport remained stable. The volume of road transport performed by Slovenian vehicles decreased significantly quarter-on-quarter for the second quarter in a row and was almost 5% lower than in the same quarter of 2019 (cross-trade by 8% and other road transport by 1%). The sharp quarter-on-quarter decline was related to the decline in the volume of transport performed at least partially on Slovenian territory (exports, imports and national transport combined). The share of cross-trade transport performed by Slovenian vehicles in total transport thus increased markedly (to 47%) and was no longer significantly lower than in the same period before the epidemic (when it was 49%). Rail freight transport, already declining before the epidemic, was about 7% lower than in the same quarter of 2019.

At the beginning of the last quarter of last year, household expenditure remained similar to the third quarter. In October and November, expenditure on non-food products was similar to previous months, with a further slowdown in year-on-year growth due to a higher base. Sales of new passenger cars continued to decline, with October and November well below 2021 sales (by one-fifth) and pre-COVID-19 sales (by 37%). Sales of food, beverages and tobacco products, which account for about 20% of total household expenditure, were also slightly lower. After the deadline for the redemption of vouchers expired in June, the number of overnight stays by domestic tourists declined in the following months, and consequently also expenditure on tourist services in the domestic market, while expenditure on tourist services abroad increased compared to the previous year.

The value of the Economic Sentiment Indicator rose for the second month in a row in December but remained down year-on-year. However, the gap with the previous year was the smallest in seven months. Confidence rose for the second month in a row in all activities except for remaining unchanged in services in December, while it was significantly higher among consumers. We assume that this was mainly related to measures to mitigate rising prices for households and companies, support for businesses, and lower uncertainty related to energy supply this winter. Year-on-year, confidence remained higher in retail trade and services, while it was lower in manufacturing, among consumers and, slightly, in construction. In manufacturing, this was related to the situation in the international environment (high prices of intermediate goods and energy and uncertainty about economic growth in Slovenia’s main trading partners), while lower confidence among consumers was related to lower purchasing power due to high prices. 

Amid a further decline in the number of transactions, the growth in prices of dwellings continued in Q3 2022. Prices increased by 2.4% compared to the second quarter and, following an increase of 11.5% in 2021 as a whole, were 15.4% higher year-on-year. The high growth was mainly due to higher prices of existing dwellings (by 15.6%), where the number of transactions was the lowest in 18 months (10% lower year-on-year). Prices of newly built dwellings were also higher (by 13.7%), but these dwellings accounted for only 1% of all transactions (39 transactions) due to insufficient supply. The total value of housing transactions for all types of dwellings sold in the third quarter was EUR 385 million, about 5% less than in the same quarter of 2021. 

The financial situation of households deteriorated slightly over the last quarter of 2022 compared to the previous quarter and year-on-year. At the same time, the proportion of households in the lowest income quartile facing financial distress did not increase significantly. In our view, government measures such as the energy allowance for the poorest households (recipients of social assistance or income support and disabled persons), the dearness allowance for families with children, the allowance for pensioners and the capping of energy prices have also made an important contribution. Households facing financial distress continued to cover their financial needs to a greater extent by drawing on savings, and the proportion of households running into debt increased slightly.

With the number of people in employment reaching a record high, year-on-year growth was 2.1% in October, slightly lower than in previous months. It remained high in construction, which faces major labour shortages. The employment of foreign workers has recently been increasingly contributing to overall growth in the number of people in employment – in October, foreign workers contributed 77% to year-on-year employment growth. Consequently, the share of foreign nationals among all persons in employment is also increasing, up 1.3 p.p. to 13.8% in the last year. Activities with the largest share of foreign workers are construction (47%), transportation and storage (32%), and administrative and support service activities (26%). In the first ten months, the number of people in employment rose by an average of 2.6% year-on-year.

According to the seasonally adjusted data, the monthly decline in the number of registered unemployed was larger in December (2.2%) than in previous months. According to the original data, 53,181 people were unemployed at the end of December, 1.2% more than at the end of November. This largely reflects seasonal trends related to a higher inflow into unemployment due to expiry of fixed-term employment contracts. Unemployment was down 19.4% year-on-year. Under conditions of high demand for labour, which is also reflected in the high vacancy rate, the number of long-term unemployed has also been declining since May 2021 – their number was almost one-third lower year-on-year in December. The number of unemployed people over 50, who are often long-term unemployed, is also declining – in December, their number was a little less than one-fifth lower than a year ago.

In November, the number of financial social assistance (FSA) beneficiaries and unemployment benefit (UB) recipients fell year-on-year by more than 10%. According to seasonally adjusted data, the number of FSA beneficiaries remained at October’s level, while the number of UB recipients increased slightly. According to original data, the number of FSA beneficiaries has been declining since mid-2021 and reached its lowest level in October 2022. This was mainly due to the improved labour market situation and – in a context of labour shortages – to the increased employment of long-term unemployed, who are often FSA beneficiaries. In November, 77.852 people received FSA, which is 10.9% less than in November 2021. The number of UB recipients was also lower year-on-year in November, by 11.4% (14,059 people according to original data). 

Amid high inflation, the average gross wage fell by 2.4% year-on-year in real terms in October; the decline was more pronounced in the public sector than in the private sector. In the private sector, the year-on-year real decline (1.9%) was lower than in the previous months, while in transportation and storage, an activity with above-average labour shortage, wages increased year-on-year. In the public sector, the year-on-year real decline (3.1%) was also lower than in previous months, mainly due to the agreement on wage increases from October this year. The average wage in health and social work activities, where wages also increased in December 2021 (though not for all employees), was higher year-on-year in real terms. Compared to October last year, the average gross wage increased by 7.3% in nominal terms – by 6.5% in the public sector and by 7.9% in the private sector.

Year-on-year consumer price inflation edged up slightly to 10.3% in December. It was thus higher than in November, mainly due to the stronger increase in services prices, which were 7.2% higher year-on-year. We estimate that this was, in addition to the low base resulting partly from containment measures in force at the end of 2021, also due to higher prices of services in December in communications, restaurants and hotels, recreational and cultural activities, and health. Last year, the largest upward impact on inflation came from higher prices of food and non-alcoholic beverages (3.1 p.p.). While their year-on-year increase at the end of the year was somewhat lower (18.6%) than in November, due to the high base, prices in this group continued to rise significantly month-on-month (by 1.7%, slightly above the monthly average of the previous year). The year-on-year increase in energy prices continued to slow slightly towards the end of the year, to around 16% according to our estimate, and the contribution to inflation was slightly below 2 p.p. The slowdown in economic activity and the reduction of bottlenecks and cost pressures in commodity markets are also contributing to a gradual slowdown in the rise in durable goods prices, which were 8.2% higher year-on-year in December, while the increase in semi-durable goods prices (3.8%) remained relatively modest.

The year-on-year growth of Slovenian industrial producer prices continues to gradually weaken and was 19.7% in November, while it was about 2 p.p. higher in the euro area as a whole. In November, price growth on the domestic market was lower year-on-year than in October (22.7%), while it strengthened slightly on foreign markets (16.2%). Amid a monthly price decline of about 7%, the year-on-year increase in energy prices has slowed, but still amounts to almost 80%. However, price increases of intermediate goods continued to slow gradually in the face of subdued economic activity, with prices 21.3% higher year-on-year. After slowing in recent months, growth in prices for capital goods accelerated slightly in November (10.5%). The increase in consumer goods prices continued to strengthen (14%), especially of non-durable goods (14.4%), while price growth in durable goods remained at slightly above 12%. 

After slowing in the previous two months, the year-on-year growth in the volume of bank loans to domestic non-banking sectors increased slightly in November, to 11.1%. The increase was due to stronger growth in corporate and NFI loans, mainly due to the low base. The volume of these loans increased by around EUR 50 million, which is less than one-third of the average monthly increase over the 11-month period. Year-on-year growth in household loans remained around 8% in November. Growth in domestic non-banking sector deposits was slightly below 8% in recent months, while deposits of non-financial corporations are still growing at a faster rate. After having largely declined since August last year, the volume of household deposits rose slightly in November. In our view, this was partly due to government measures such as the energy allowance for the poorest households, the dearness allowance for families with children and the allowance for pensioners. The normalisation of monetary policy in recent months has led to an increase in both active and passive interest rates. The increase in the latter was much less pronounced in Slovenia, both in terms of lending rates and in comparison with the euro area as a whole. The quality of banks’ assets remains solid and the share of non-performing loans is slightly above 1%.

Yields to maturity of euro area government bonds increased again in the last quarter of 2022. This was still mainly due to the high inflation in the euro area and the associated acceleration of monetary policy normalisation. The yield to maturity of the Slovenian government bond was 3.38% in the fourth quarter of last year, the highest level since 2014 and more than 300 basis points higher than in the same period of 2021. The spread to the German bond was 125 basis points, which is 75 basis points higher than a year ago. 

The current account of the balance of payments in the first 11 months of 2022 recorded a deficit of EUR 217.9 million, compared to a surplus of EUR 2.2 billion in the same period of 2021. With imports growing faster than exports, the significant reduction in the current account balance was mainly due to goods trade balance, which turned from a surplus to a deficit at the end of 2021. The services surplus increased, especially in trade in travel, as receipts from foreign tourists who visited Slovenia were significantly higher year-on-year (by EUR 1.2 billion) than expenditure of Slovenian tourists abroad (by EUR 0.5 billion). Trade in transport services also contributed to the growth of the surplus in services trade. Net outflows of primary and secondary income were higher year-on-year. The primary income deficit was higher mainly because more customs duties were paid into the EU budget, while subsidies received from the EU budget were also lower. The higher secondary income deficit arose from higher private sector transfers abroad.

As expected, the deficit of the consolidated balance of public finances widened at the end of 2022, but in the first 11 months it was significantly lower than in the same period of 2021. In the first 11 months of 2022, the deficit was EUR 0.7 billion (EUR 0.4 billion in November), compared to EUR 2.2 billion in the same period of 2021. The lower deficit was strongly influenced by lower expenditure on measures to mitigate the consequences of the epidemic, the amount of which was EUR 1.9 billion lower year-on-year. At the same time, the scope of measures to cushion the impact of the surge in energy prices increased. According to the Fiscal Council’s estimate, the two sets of measures accounted for EUR 0.9 billion in the first 11 months of 2022. Revenue of the consolidated general government budgetary accounts was 9.9% higher year-on-year in the first 11 months of 2022. Compared to the same period of 2021 (14.2%), revenue growth moderated, reflecting lower growth in economic activity, the reduction of some tax burdens (VAT and excise duty on energy and personal income tax) and the absence of the one-off inflows from the sale of concessions that took place in 2021. In the first 11 months of 2022, expenditure was 2.1% higher year-on-year. This is a much smaller increase than in the same period of 2021 (10.3%), reflecting lower expenditure on civil servants’ wages and subsidies for businesses and a slowdown in the growth of transfers to individuals and households related to measures to mitigate the consequences of the COVID-19 epidemic. The driver of expenditure growth was investment, which saw a 31.5% increase.

Slovenia’s net budgetary position against the EU budget was positive in the first 11 months of 2022 (at EUR 158.0 million). In this period, Slovenia received EUR 812.4 million from the EU budget (68.3% of receipts envisaged in the state budget for 2022) and paid EUR 654.4 million into it (91.6% of planned payments). The bulk of receipts were resources from structural funds (45.3% of all reimbursements to the state budget) and resources for the implementation of the Common Agricultural and Fisheries Policy (29.1%). The share of resources from the EU Cohesion Fund was significantly smaller (9.3%). The second instalment of the advance payment for the implementation of RRP was paid into the state budget from the Recovery and Resilience Facility. According to SVRK data, by the end of November 2022, Slovenia had absorbed (payments to beneficiaries) 73% of the funds available under the 2014–2020 financial perspective (including React-EU).