News

Economic growth in the euro area slowed significantly in the last quarter of 2021 compared to the previous quarter, and according to the available indicators, growth remains weak at the beginning of this year. According to Eurostat’s flash estimates, GDP growth slowed compared to the third quarter of last year, to 0.3%. Available indicators suggest that similar economic activity is continuing in the first quarter of this year. The value of the composite Purchasing Managers’ Index (PMI) for the euro area was the lowest in 11 months in January. The services PMI declined amid the rise in Omicron infections and the tightening of containment measures, while the worsening of the epidemiological situation had no impact on the manufacturing PMI, which reached its highest level in five months. Energy prices continue to make a strong contribution to high year-on-year inflation in the euro area, which stood at 5.1% in January. In January and February, the IMF and EC downgraded their autumn forecasts for economic growth in 2022. Forecasts for the US and China were lowered in light of the ongoing pandemic and higher energy prices and supply chain disruptions and resulting higher inflation, and forecasts for the euro area were revised down by 0.4 and 0.3 p.p. to 3.9% and 4% respectively. GDP growth in the euro area is expected to slow further in 2023, but the autumn forecast was revised slightly upwards. 

In Slovenia, most indicators suggest that the relatively favourable trends in economic activity which were observed at the end of last year continue, while uncertainties due to the epidemiological situation are still present in service activities. Manufacturing output rose significantly in the last quarter of last year, as did trade in goods, with export expectations remaining high at the beginning of this year. In the last quarter of last year, household spending on non-food products increased, and the sale of automotive fuels also rose sharply, due not only to higher freight traffic but also to sales to transit customers. At the end of last year, turnover increased again in market services, with only that of travel and employment agencies falling significantly below pre-epidemic levels. Activity in construction remained lower year-on-year at the end of last year. High price growth in construction services continued due to rising commodity prices and labour shortages. According to data on fiscal verification of invoices, turnover in January was up 30% year-on-year, partly due to last year’s low base as a result of containment measures, and was 7% lower than in January 2020; accommodation and food service activities, creative, arts and entertainment activities, and gambling and betting activities also remained below pre-crisis levels, as did turnover in trade. Economic sentiment improved slightly again in January in most activities, while confidence in manufacturing and among consumers remained at the same level as in December last year.  

Labour market conditions remain good. In November 2021, the number of employed persons increased sharply again. Year-on-year employment growth was the highest in accommodation and food service activities and construction. The latter employed the highest share of foreign workers in the first 11 months of 2021. Given the shortage of domestic labour, the contribution of foreign labour to overall employment growth was almost 50% last November. At the beginning of the year, 67,834 people were registered as unemployed, a significant decrease compared to the same periods of 2021 and 2020 (by 25.9% and 15% respectively). The number of long-term unemployed continued to decline in January and was lower than before the epidemic. Year-on-year growth in average gross wages in the private sector remains high, which we assess could already be affected by labour shortages in some activities (manufacturing, construction, and accommodation and food service activities). Due to the cessation of epidemic-related bonus payments, year-on-year public sector wage growth slowed significantly in the second half of the last year and was already negative in November.

Consumer price inflation increased markedly year-on-year in January, with sharp rises in energy, food and services prices. Inflation stood at 5.8%, mainly due to higher energy prices. Prices for natural gas and town gas rose by more than a quarter month-on-month, and prices for petroleum products and electricity were also higher. Prices in the food and non-alcoholic beverages group continue to rise, increasing by 4.6% year-on-year, while growth in service prices was above 3% year-on-year for the first time since the outbreak of the epidemic. Year-on-year growth of Slovenian industrial producer prices continues to rise, the year-on-year increase being mainly due to higher commodity prices (16%). 

The general government deficit in 2021 was EUR 2.9 billion, EUR 0.6 billion lower than in 2020. The decrease was due to high revenue growth and slower expenditure growth. Revenue growth was the result of a recovery in economic activity, especially domestic demand and more favourable labour market conditions. Growth arose mainly from higher revenues from value added tax, social contributions, personal income tax and corporate income tax. Growth in non-tax revenues and revenues from the EU budget also accelerated. In addition to lower expenditure growth, the structure of growth was different last year, with a higher contribution in particular for public servants’ wages (payments of allowances) and for investment, while expenditure on subsidies, which had increased in 2020, fell sharply. Growth in current transfers to individuals and households was similar to that in 2020. In 2021, total expenditure on measures to mitigate the consequences of COVID-19 amounted to EUR 2.8 billion, most of it on allowances for public sector workers and reimbursement of fixed costs to companies.