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A pronounced decline of economic activity in the second quarter
In the second quarter Slovenia recorded the steepest decline of economic activity since 2009, and one of the largest in the euro area. The key reason cited by the Institute of Macroeconomic Analysis and Development is a strong decline in domestic demand amid a further contraction of investment, and after the stagnation in the first quarter, lower private and government consumption. Particularly worrisome is that exports shrank as well, for the first time in two years.
The provisional data by the Statistical Office show that in the second quarter of this year gross domestic product was down 3.2% from the same period last year. According to the Institute of Macroeconomic Analysis and Development, one of the key reasons is lower domestic demand. The shrinkage of household consumption (-3.0%) was largely a result of the tightened labour market situation, a substantial deterioration of consumer confidence and a decline in the consumption of durable goods. Government consumption dropped as well (-2.0%), chiefly due to government measures to curb expenditure. The contraction of fixed capital formation (-8.9%) was, in addition to a further shrinkage of construction investment, also attributable to lower investment in machinery and equipment. With this notable decline in domestic consumption, the year-on-year drop in imports deepened considerably (-5.4%).
"It is the drop of exports (-0.5%) that we also find worrisome, as exports have been the main factor of the otherwise weak economic recovery thus far. Namely, with a slowdown of economic activity in Slovenia’s main trading partners, exports declined for the first time in two years," said Boštjan Vasle, Director of IMAD.
After last year’s accumulation of inventories, in the second quarter changes of inventories made a much smaller contribution to the total growth (-2.9 p.p.).
In the second quarter economic activity also declined across the euro area as a whole (-0.2%, seasonally adjusted), but the contraction in Slovenia (-1.0%) was among the most pronounced, according to the available data for 22 Member States. Slovenia thus remains in the group of EU Member States with the largest drops in economic activity during the crisis.