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Economic growth in the euro area slowed in the first quarter, while economic sentiment indicators deteriorated sharply in March and April due to the war in the Middle East and, at the beginning of the second quarter, pointed to a decline in activity. Following growth of 0.2% in the fourth quarter of last year, GDP increased by 0.1% in the first quarter of this year, according to Eurostat’s flash estimate (0.8% year on year; seasonally adjusted). In April, the euro area composite Purchasing Managers’ Index (PMI) fell below the 50-point threshold separating expansion from contraction for the first time in a year and a half. The manufacturing PMI increased slightly further, partly due to a build-up of inventories amid expectations of further price increases and tighter supply constraints, while the services PMI fell to its lowest level since February 2021. The economic sentiment indicator (ESI) also declined, reaching its lowest level since November 2020. Sentiment deteriorated across all sectors, particularly in services and retail trade, and even more markedly among consumers. In Germany, Slovenia’s largest trading partner, all major economic sentiment indicators (PMI, ESI, ZEW, Ifo) also deteriorated significantly in April.

In Slovenia, the war in the Middle East had not yet had a significant impact on economic activity in the first quarter of this year, as economic growth strengthened; however, it significantly affected the April confidence indicators and inflation. In the first quarter of 2026, GDP increased by 0.7% quarter-on-quarter (seasonally adjusted) and was 3.0% higher year-on-year, also due to the effect of the low base from the previous year. Growth exceeded expectations mainly owing to stronger export activity (0.7% year-on-year): goods exports increased by 1.8%, particularly due to higher exports of pharmaceutical products and, following last year’s decline, also road vehicles and metals, while services exports decreased by 2.9%. Import growth (1.5% year-on-year) remained higher than export growth, although lower than last year. Moderate growth in private consumption continued (2.7% year-on-year). Households increased spending primarily on motor vehicles, non-food products, and tourism-related services both at home and abroad. Investment growth also continued (12.6% year-on-year), particularly in construction investment, while investment in equipment and machinery also increased. Growth in government consumption strengthened somewhat (3.9% year-on-year), mainly due to higher expenditure on long-term care, increased employment in the general government sector, particularly in health and social work activities, and higher spending on goods and services. While sentiment indicators in the euro area had already begun to deteriorate in March, confidence in Slovenia declined in April, most notably among consumers. Compared with April last year, all confidence indicators were lower, while the composite economic sentiment indicator and the confidence indicators in retail trade, manufacturing and among consumers were below their long-term averages. Firms reported uncertain economic conditions, weak foreign demand and a lack of skilled labour as the main limiting factors in the second quarter. The risk of raw material shortages also increased, although it remained relatively low.

The number of persons in employment remained almost unchanged in March (seasonally adjusted), while the number of unemployed persons declined month-on-month in April. The sharp increase in the minimum wage accelerated year-on-year nominal growth in the average gross wage in January and February, while growth in the public sector remained relatively high, mainly due to the implementation of the wage reform. The number of employees declined slightly year-on-year in March (–0.2%), while the number of self-employed increased (0.9%). The year-on-year decline in the number of persons in employment was most pronounced in manufacturing and trade, while employment in public services, particularly in health and social work, increased. At the end of April, 44,175 persons were unemployed (original data), which is 0.4% less than a year ago. The year-on-year decline in the number of long-term unemployed and unemployed persons aged over 50 continued. Since October 2024, however, the number of unemployed young people (aged 15–29) has been increasing, which, in our assessment, reflects the entry of larger cohorts into the labour market. Year-on-year nominal growth in the average gross wage remained high (7.2% in February) – 7.8% in the private sector, with the highest increases recorded in activities with a high share of minimum-wage earners (construction, accommodation and food service activities, and administrative and support service activities), and 5.9% in the public sector, reflecting the implementation of the wage reform. 
Inflation accelerated year-on-year in April, rising from 2.5% in March to 3.1%, driven by higher fuel prices related to the war in the Middle East; petroleum product prices contributed around 1 p.p. to year-on-year inflation. Prices of liquid fuels rose by almost one third month-on-month in April due to the war in the Middle East, while prices of motor fuels and lubricants increased by almost one fifth. Prices in the housing, water, electricity, gas and other fuels group rose by around 10% year-on-year, and transport prices by nearly 5%, with the two groups jointly contributing almost two thirds of annual inflation. Within the two groups, prices of petroleum products (liquid fuels and motor fuels combined) increased by 17.5%. Year-on-year growth in prices in the food and non-alcoholic beverages group continued to slow, reaching 1%, the lowest level since July 2024. In March, Slovenian industrial producer prices increased slightly (by 0.2%), while their year-on-year growth slowed (by 0.9%), mainly due to falling prices on foreign markets.

The deficit of the consolidated general government balance amounted to EUR 698 million in the first quarter of this year, which was EUR 133 million more than in the first quarter of 2025. Revenues increased by approximately 10% year-on-year, exceeding the growth recorded in the same period of 2025. Growth strengthened particularly in social contributions, reflecting the introduction of the long-term care contribution in July last year. Growth also accelerated in revenues from value added tax, personal income tax and EU funds (related to the implementation of the Recovery and Resilience Plan). By contrast, growth in excise duty revenues slowed year-on-year. Expenditure increased by 11.2% year-on-year, representing slightly higher growth than in the first quarter of last year. The increase in expenditure was driven mainly by higher compensation of employees due to the implementation of the wage reform and by higher transfers. Investment expenditure also increased year-on-year, particularly for the purchase of military equipment and investment in new construction, reconstruction and renovation.