In the first quarter of this year, real gross domestic product (GDP) increased by 0.6% quarter-on-quarter and by 0.7% year-on-year. Household consumption contributed more than one percentage point to year-on-year GDP growth in the first quarter. Compared to the same period last year, households spent more on tourist services abroad and vehicle purchases and less on food, non-food products and overnight stays in Slovenia. As the number of arrivals and overnight stays of foreign tourists increased, growth in tourism-related services was strong. Investment activity remained relatively strong in the first quarter, with a particular acceleration of activity in construction. However, the surprisingly high negative contribution of inventories (-6.5 p.p.) contributed to the sharp year-on-year decline in gross capital formation. Activity in the export-oriented part of the economy was weak in the first quarter, with goods exports and manufacturing activity remaining at similar levels to the same period last year. Trade in services, especially travel, increased, supported by a rapid post-COVID-19 recovery in tourism. Total exports increased while total imports declined, contributing to the high positive contribution of the external balance (5.1 p.p.). After a period of strong growth, government consumption declined year-on-year for the third consecutive quarter, especially related to lower spending on containment measures.

Electricity consumption fell by 12% year-on-year in April, more than in the previous month, when it fell by 7%. We estimate that the main reason for the year-on-year decline in consumption was lower consumption in the energy-intensive part of industry. We estimate that the shutdown of primary aluminium production in Talum, which is an energy-intensive company, made a significant contribution to the year-on-year decline in consumption in April. The lower consumption compared to last year may also have been influenced by lower household consumption due to more rational energy consumption and the impact of COVID-19 measures on the higher base of last year. Slovenia’s main trading partners also recorded a year-on-year decline in consumption in April (France by 10%, Austria by 8%, Italy and Germany by 5%, and Croatia by 4%).

In April, electricity consumption in the distribution network was lower year-on-year in all consumption groups, with one fewer working day this April. The sharpest decline was in industrial consumption (by 8.8%), which we estimate to be due to the one fewer working day this year and lower consumption in the energy-intensive part of the economy as a result of high energy prices. Household consumption was also lower in April than a year earlier (by 3.5%), according to our estimates due to more rational energy consumption and the impact of the COVID-19 epidemic on last year’s high base. Small business consumption was 3.8% lower year-on-year in April.

Amid cooler weather, gas consumption in April was only one percent lower than the comparable average consumption over the last five years. The lower gas consumption can be attributed to lower production in some industries as a result of high gas prices and government measures to encourage more rational consumption, while the relatively high consumption in April, which almost reached the average consumption for this month in recent years, was due to lower temperatures that delayed the end of the heating season. EU Member States exceeded the target of reducing gas consumption by at least 15% between August last year and March this year – their gas consumption was almost 18% below the comparable average consumption of the five previous years, while Slovenia reduced its gas consumption by almost 14%, which was only one percentage point below the recommendation. At the end of March, the Council of the EU prolonged the regulation on voluntary gas demand reduction until the end of March 2024, while stipulating that any increase in gas consumption due to the switching from coal to gas in district heating can be deducted from the calculation.

Amid high price growth and one less working day, the nominal value of fiscally verified invoices in April was 5% higher year-on-year. Year-on-year growth in total turnover was even lower than in the previous months (it almost halved in March, to 7%), mainly due to lower growth in trade, which accounted for almost 80% of the total value of fiscally verified invoices issued. Turnover in retail trade rose 2% in nominal terms (5% in March), turnover in wholesale trade rose 3% (similar to March) and turnover in the sale of motor vehicles rose 19% (similar to year-on-year growth in March). Turnover growth in accommodation and food services (14%) and certain creative, arts, entertainment and sports services and betting and gambling remained similar to that in March (total growth in other service activities was 17%).

Trade in goods slowed further in current terms in the first quarter of this year. Amid strong monthly fluctuations, real goods exports fell by 2.6% and imports by 4.6% compared to the previous quarter. Exports to EU Member States, especially to Italy and Austria, were also noticeably lower. The decline in recent months was mainly due to lower exports and imports of intermediate goods, while imports of consumer goods were also lower. Year-on-year, exports and imports in the first quarter of this year were lower (by 1.9% and 4.4% respectively). At the beginning of the second quarter, sentiment in export-oriented activities deteriorated somewhat. Also in the second quarter, companies indicate that the main limiting factors to business operations are related to the uncertain economic situation, low foreign demand and the lack of skilled labour.

Trade in services increased in current terms in the first quarter and was still significantly higher than in the same period last year. Among the main service groups, exports of construction and ICT services and other business services, all of which had fluctuated sharply in recent months, rose compared to the previous quarter (seasonally adjusted). Exports of tourism-related services remained at the level of the previous quarter, while exports of transport services declined. Imports of services saw an increase in most of the main groups of services, with the exception of imports of transport services. Year-on-year growth in trade in services remained strong in the first quarter of the year, mainly due to a significant recovery in trade in tourism-related services. 

Manufacturing output rose in the first quarter, while it fell slightly year-on-year. After contracting in the second half of last year, output increased again in the first quarter of this year, mainly due to higher output in high-technology industries. In these industries, output was about 14% higher than in the same period last year, while in the other industry groups it was on average largely unchanged (in medium-technology industries) or lower (in most low-technology industries, with the exception of the leather industry and printing). It remained lower in all energy-intensive industries (especially in the manufacture of paper and chemical products and, to a lesser extent, in medium-low-technology manufacture of basic metals, non-metallic minerals, and rubber and plastic products), where the year-on-year decline was similar to that in the previous quarter (only in the manufacture of basic metals was it significantly lower). The decline in the manufacture of motor vehicles came to a halt and was largely unchanged year-on-year (after a 10% decline last year).

According to data on the value of construction work put in place, construction activity further increased in March. The value of construction work put in place increased sharply at the beginning of this year and was 28% higher year-on-year in March. In the first quarter, activity was 24% higher than in the first quarter of last year, with a similar growth in all three segments covered by the statistics: construction of buildings, civil engineering and specialised construction activities. The implicit deflator of the value of construction work put in place, used to measure prices in the construction sector, was 9% in March, the lowest level since the beginning of 2022.
However, some other data suggest significantly lower growth in construction activity. According to VAT data, the activity of construction companies in March was 6% higher than last year. Based on data on the value of construction put in place, the difference in the activity growth was 22 p.p. Data on the value of industrial production in two activities traditionally strongly linked to construction also do not point to such high growth.

Real turnover in most trade sectors fell further in February and, according to preliminary data, also in March. With the February decline, turnover was also down year-on-year – by about 5% in wholesale trade and in retail sale of food, beverages and tobacco and by 3% in retail sale of non-food products. After a significant monthly increase in the previous two months, turnover in the sale of motor vehicles also fell slightly but was one-tenth higher year-on-year due to the low base related to vehicle supply disruptions last year. According to preliminary SURS data, turnover in retail sale of food, beverages and tobacco and non-food products further declined in March, while turnover in the sale of motor vehicles increased again.

Real turnover growth in market services continued in February. After a recovery at the beginning of the year, total turnover in market services increased by a further 0.9% in current terms. High growth continued in professional and technical activities, with strong turnover growth in architectural and engineering services. Turnover growth in information and communication activities slowed after recording a significant increase in January. Turnover in administrative and support service activities maintained its high end-2022 level. After high growth in previous months, turnover in accommodation and food service activities decreased. It also continued to decline in transportation and storage (especially in warehousing and storage). In February, total turnover in market services was 5.7% higher in real terms year-on-year. It was higher in most market service activities, except in transportation and storage and real estate activities. Only turnover in administrative and support service activities and employment agencies was still below pre-epidemic levels (compared to February 2019), in the latter by 31%.

Private consumption rose 2.1% year-on-year in the first quarter, with households spending more year-on-year on cars and tourist services abroad and less on food, non-food products and accommodation at home. The sale of passenger cars, which declined sharply last year due to supply chain disruptions, was also higher year-on-year. Expenditure on tourist services abroad also increased, while the number of overnight stays by domestic tourists in Slovenia was lower than a year ago. Turnover in the sale of food, beverages and tobacco, which has been declining since last spring, was also lower year-on-year (by 6%), as was turnover in the sale of non-food products (by 5%).

The value of the economic sentiment indicator deteriorated in April. It was 1 p.p. lower than in the previous month (seasonally adjusted). It was lower in manufacturing and services, while it was slightly higher in retail trade, among consumers and in construction. According to original data, the indicator deteriorated by 7.2 p.p. year-on-year, mainly due to lower confidence in manufacturing. All other confidence indicators also declined slightly year-on-year. This was mainly due to the uncertain economic situation and weak external demand, as export expectations declined significantly, while the indicators of overall order books and expected and assured production in manufacturing were also lower. Labour shortage also remains an important limiting factor in industry, services and construction.

In March, year-on-year growth in the number of persons in employment was similar to the previous two months (1.8%). The strongest growth was still seen in construction, which is facing a major labour shortage and saw the largest increase in the number of persons in employment also compared to the same period in 2019. Employment of foreign workers has been the largest contributor to the overall growth in the number of persons in employment for some time – their contribution was 83% year-on-year in March, slightly higher than in previous months. Foreigners accounted for 14.2% of total employment, up 1.3 p.p. from the previous year. The sectors with the highest share of foreigners were construction (48%), transportation and storage (32%), and administrative and support service activities (26%).

According to the seasonally adjusted data, the monthly decline in the number of registered unemployed was similar in April (by 1.5%) as in the previous months. According to original data, 48,904 people were unemployed at the end of April, 3.4% less than at the end of March. Unemployment was down 16.3% year-on-year. Against the backdrop of severe labour shortages, the number of long-term unemployed fell by almost a third and the number of unemployed over 50 fell by 16.4%.

The average gross wage increased by 1.2% year-on-year in real terms in February. This was mainly due to the sharp increase in the minimum wage at the beginning of the year and the relatively low base from February 2022. In the private sector, the average gross wage increased by 1.8% year-on-year in real terms. It was highest in administrative and support service activities and in accommodation and food service activities, i.e. sectors with the greatest labour shortages and a high share of minimum wage recipients. Gross wages in the public sector also increased slightly year-on-year in real terms (by 0.2%). Compared to February last year, the average gross wage increased by 10.7% in nominal terms – by 9.5% in the public sector and by 11.3% in the private sector.

The year-on-year increase in consumer prices slowed slightly in April but was still quite high, at 9.4%. Food and non-alcoholic beverage prices remain the largest contributor to overall growth (2.7 p.p.), although their year-on-year increase slowed to 15.8% (from 19% in March). This is due to a monthly decline in prices (for the first time since November 2021), which we estimate to have been driven by the stabilisation of the situation in the energy and input markets (e.g. for fertilisers). The higher base from last April, when food and non-alcoholic beverage prices rose by a full 2.7% on a monthly basis, also contributed significantly to the lower year-on-year growth. The high base also contributed to lower price growth in the group housing, water, electricity, gas and other fuels (13.7%). Growth of durable goods prices has continued to gradually moderate (5.5%), while growth of semi-durable goods prices strengthened in the last two months (6%). The year-on-year price increase in services fluctuated considerably in the last two months, partly due to the rather strong seasonal changes in package holiday prices, and reached almost 8% again in April. Core inflation is also hovering around 8%.

After about two and a half years of uninterrupted growth, Slovenian industrial producer prices fell month-on-month in April (by 0.4%); the year-on-year growth thus continues to slow rapidly. Prices of products fell month-on-month in almost all industrial groups, with the exception of non-durable consumer goods, where prices rose by 0.5%. Prices on foreign markets fell for the second month in a row (this time by 0.9%), while prices on the domestic market were only marginally higher (by 0.1%) due to the increase in consumer goods prices. Against the backdrop of the monthly decline in prices and the high base from last year, the year-on-year price increase for Slovenian producer prices slowed significantly (from 13.4% in March) but still reached 9.9%. Growth was lower on both the domestic (by 13.3%) and foreign markets (by 6.4%). Year-on-year product price growth is slowing in all product groups and remains highest in the energy group (36.1%). In the intermediate goods group, year-on-year price growth fell to 6.5%.

The year-on-year growth in the volume of bank loans to domestic non-banking sectors slowed further to 2.5% in March, and, month-on-month, the volume of loans declined for the second month in a row. As credit conditions tighten and economic activity cools, growth in corporate and NFI loans, which increased by only 0.7% year-on-year, is weakening rapidly. Growth in loans to households is also gradually slowing, especially in housing loans, which are still growing faster than consumer loans. The growth of the latter has accelerated slightly this year (to 2.6%). The volume of new loans to non-financial corporations was almost a quarter lower than the year before. This is a similar decline to that of new loans to households, which was mainly due to an almost halved borrowing in the form of housing loans. Year-on-year growth in domestic non-banking sector deposits (6.1%) remained largely unchanged. Deposit rates continue to rise much more slowly than lending rates, so most of the growth comes from an increase in overnight deposits. The quality of banks’ assets remains solid and the share of non-performing loans is still slightly above 1%.

The current account of the balance of payments recorded a surplus in the first quarter of this year. The largest contribution came from the trade balance, which turned from a deficit to a surplus. In the first quarter, goods exports rose slightly year-on-year, while imports fell significantly, and the terms of trade improved. We estimate that the quantity fluctuations contributed EUR 619 million to the year-on-year change in the balance of goods trade (EUR 789 million) and the terms of trade contributed EUR 170 million. The growth in the services surplus continued, especially in trade in transportation services, as their exports increased year-on-year, while imports declined. In the first quarter, net outflows of primary and secondary income were slightly lower year-on-year than a year ago. The primary income deficit was lower due to higher net interest receipts by the government and the Bank of Slovenia from deposits in foreign accounts, while the secondary income deficit was lower due to higher transfers from abroad to the domestic private sector. The 12-month balance of the current account of the balance of payments showed a surplus of EUR 784.1 million in March (1.2% of estimated GDP).

In the first quarter of 2023, the consolidated general government budgetary accounts recorded a deficit. It totalled EUR 273.7 million, compared with EUR 315.5 billion in the same period last year. Revenues increased by 2.6%, compared to a 16.9% increase in the same period last year. On the high base of last year, receipts from the EU budget (a sharp rise last year related to the disbursement of part of the advance payment from the Recovery and Resilience Facility) were considerably lower, as was some non-tax revenue. Tax revenue growth weakened amid lower activity and also reductions in the tax burden (VAT and environmental tax on CO₂ emissions) and legislative changes in income tax. The growth in social security contributions was even higher than in the same period last year, as employment continued to increase and wage growth picked up. Revenues increased by 1.7% year-on-year, while they decreased by 2.8% in the same period last year (lifting of certain measures to mitigate the consequences of the epidemic). The main reason for the increase was the rise in wages and other labour costs affected by the agreement on wage increases in the public sector. Various transfers (subsidies and transfers to individuals and households) have also increased, due to last year’s base and also measures to mitigate the impact of rising energy prices. Expenditure on measures to mitigate the consequences of COVID-19 fell to only EUR 64 million in the first quarter of this year (compared to EUR 332 million in the same period last year), while measures to mitigate price increases amounted to EUR 130 million. The latter includes mainly subsidies to the economy under Article 14 of the ZPGOPEK (EUR 79 million). The strong growth of investment activity was similar to that recorded last year.

Slovenia’s net budgetary position against the EU budget was positive in the first three months of 2023 (at EUR 90.5 million). In this period, Slovenia received EUR 257.1 million from the EU budget (14.6% of receipts envisaged in the state budget for 2023) and paid EUR 166.6 million into it (25.5% of planned payments). The bulk of receipts were resources from structural funds (44.2% of all reimbursements to the state budget) and resources from the Cohesion Fund (21.6%). The highest payments into the EU budget came from GNI-based payments (50% of all payments).