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Growth in euro area economic activity continued to slow down in the first quarter. GDP growth forecasts for Slovenia’s main trading partners are significantly lower than at the beginning of the year, accompanied by high uncertainty. According to Eurostat’s flash estimate, GDP growth moderated compared to the last quarter of 2021, to 0.2% (it was 5% year-on-year). Available confidence indicators (PMI, ESI, Ifo) suggest that growth in activity in manufacturing is expected to remain modest at the beginning of the second quarter, while it is expected to increase slightly in the services sector. In view of the increasing uncertainty in the international environment, mainly due to the war in Ukraine, the IMF revised its forecasts for Slovenia’s two main economic partners downwards by more than one percentage point in April (to 2.1% for Germany and 2.3% for Italy). The forecasts are subject to risks associated with the unfolding of the war in Ukraine, high energy prices (and high inflation), persistence of supply chain disruptions and measures related to the epidemiological situation in China.

Amid heightened uncertainty in the international environment, growth of activity in the export-oriented part of the economy slowed in the first quarter. According to the available data, trade in goods increased in the first quarter, albeit at a slower pace than in previous quarters, while activity in manufacturing remained at the previous quarter’s level. This trend was mainly due to the relatively high current growth in March, as activity in the export-oriented part of the economy declined in current terms in the first two months. Growth of activity in sectors more dependent on domestic demand continued in the first two months of the year. In construction, the value of completed works further increased in current terms in February amid a sharp increase in cost pressures. Turnover in trade continued to rise and the lifting of the recovered/vaccinated/tested rule in February contributed to the positive development in the retail trade in non-food products. After two months of decline, turnover in market services also increased in February. Compared to the same period before the epidemic, only travel agencies recorded a significantly lower turnover. In trade in services, only those activities that were strongly affected by the containment measures (trade in travel and trade in personal, cultural and recreational services) are still lagging behind the pre-epidemic period. After falling sharply in March, the value of the economic sentiment indicator rose slightly in April and was also higher year-on-year. Confidence was higher in most sectors, with the exception of manufacturing and among consumers, the main factors here being rising prices and uncertainty about further price increases. Amid ongoing supply chain disruptions and the escalation of the war in Ukraine, the less favourable export expectations have not yet had a noticeable impact on the export-oriented part of the economy. 

In the labour market, unemployment continues to fall and the year-on-year increase in the number of persons in employment remains high. The number of unemployed persons in April was more than a quarter lower than in the same period last year and the lowest on record. Amid high demand for labour, the number of long-term unemployed is also declining. Year-on-year growth in the number of people in employment remained high in February; it was highest in accommodation and food service activities and in construction. Given the shortage of domestic labour, the number of foreign citizens in employment is increasing, with their share particularly high in construction, transportation and storage, and administrative and support service activities. 

Year-on-year consumer price growth increased to 6.9% in April. The high growth was mainly driven by high energy prices, especially prices of petroleum products. With rising input prices and geopolitical uncertainties, prices of food and durable goods continued to grow at a robust pace, and service prices are also gradually rising. In recent months, high prices of energy and other commodities, along with increasing supply chain problems, are affecting Slovenian industrial producer prices, which rose by 17.9% year-on-year in March.

In the first quarter of this year, the general government deficit was lower than in the same period last year; projections of the Stability Programme indicate that the deficit will narrow compared to last year. In the first quarter, the deficit of the consolidated general government budgetary accounts was EUR 317.6 million, almost EUR 1 billion lower than in the same period last year, reflecting high revenue growth amid lower expenditure. The increase in revenue was the result of continued growth in economic activity and favourable labour market conditions, while receipts from the EU budget also increased significantly. The decrease in expenditure in the first quarter was mainly due to the fact that payments related to measures to mitigate the consequences of the epidemic decreased significantly year-on-year (by more than EUR 600 million). According to the projections of the Stability Programme 2022, the general government deficit is expected to fall to 4.1% of GDP this year (5.2% of GDP last year), assuming a no-policy-change scenario. It should be noted that, not taking into account the COVID-19 measures, the deficit is projected to be higher in 2022 and 2023 than in 2020 and 2021, mainly due to some structural measures (tax cuts and statutory increases in expenditure for various purposes) and a high planned level of investment.