News

The economic sentiment indicators for the euro area improved slightly in November but do not yet point to a significant improvement in activity. In their November forecasts, the OECD and the EC expect growth in the euro area to gradually strengthen. The composite Purchasing Managers’ Index (PMI) for the euro area increased in November but remained below the 50 mark, which represents the threshold between economic expansion and contraction. The Economic Sentiment Indicator (ESI) was also slightly higher in November than in October. Sentiment improved in most activities and among consumers but remained below the long-term average, except in services. In their November forecasts, the OECD and EC expect economic activity in the euro area to gradually pick up as consumption recovers on the back of a robust labour market, sustained wage growth and continued easing of inflation. Economic growth is projected to be 0.6% this year and between 0.9% and 1.2% in 2024. In 2025, growth is expected to strengthen to around 1.6%. 

Most available short-term economic indicators for Slovenia improved as we moved into the fourth quarter. Real exports and imports of goods in October were similar to the previous month, while the year-on-year decline has slowed slightly. The trend of monthly decline in trade in goods has come to an end in the last two months. This was mainly due to the slowdown in the decline in trade in intermediate goods. In the first ten months, total goods exports were 7.4% lower year-on-year and imports 7.6% lower. After manufacturing production had increased in September, it continued to rise slightly in October and was roughly at the same level as a year ago. In the first ten months, output in most activities was on average lower than last year, with the largest year-on-year declines in the chemical, paper and metal industries. Only in the manufacture of food products, the manufacture of machinery and equipment n.e.c. and the repair and installation of machinery and equipment, high-technology industries, and the manufacture of leather did production increase. Sentiment in export-oriented activities improved slightly in November for the second month in a row, while export orders remained significantly lower than at the beginning of the year. In the third quarter, trade in services remained close to its peak, albeit with considerable differences in the development of individual service activities. Tourism-related services recorded the fastest growth. Real turnover in services rose in the third quarter compared to the second in most market services, with overall activity similar to last year. The available data point to a recovery in household consumption in the fourth quarter. Year-on-year growth in the nominal value of fiscally verified invoices was on average higher in October and November than in the previous quarter. After two months of year-on-year decline, sales of new passenger cars to private customers and the number of overnight stays by domestic tourists in Slovenia increased year-on-year in September and October. In October, purchases of non-food products were also higher year-on-year for the first time since January, while spending on food, beverages and tobacco remained slightly below the previous year’s level. According to data on the value of construction work put in place, construction activity increased in September with the recovery from the floods and was significantly higher than last year. Sentiment in the Slovenian economy improved in November and was the highest in six months, although it was still lower year-on-year. 

The year-on-year decline in the number of registered unemployed is slowing and so is the year-on-year growth in the number of persons in employment. According to the seasonally adjusted data, the monthly decline in the number of registered unemployed in November (0.8%) was similar to previous months but lower than at the beginning of the year. 47,175 people were unemployed at the end of November, 0.1% less than at the end of October. Year-on-year, unemployment was down 10.2% (18.4% at the beginning of the year). Year-on-year growth in the number of persons in employment (0.9%) continued to slow in September. According to seasonally adjusted data, the number of persons in employment in manufacturing and construction is slowly declining month-on-month, while it is rising slightly or remaining unchanged in other activities. With the number of Slovenians in employment declining slightly year-on-year, an increase in the number of foreign citizens in employment contributed to the overall year-on-year growth in the number of persons in employment in September. The share of foreigners among all persons in employment was 14.6% in September, 0.9 p.p. higher than a year earlier. The year-on-year real growth in average gross wage slowed significantly in September amid higher inflation (1.8%). In the first nine months, the average gross wage was 1.8% higher year-on-year in real terms. The increase in the public sector was more pronounced than in the private sector due to the last year’s agreement with the public sector trade unions.

In November, year-on-year consumer price growth was the lowest in two years (4.9%). The main reason for the fall of 2 p.p. compared to October was the lower contribution from energy prices, mainly due to the reintroduction of the exemption from the levy on renewable energy sources and combined heat and power. The year-on-year growth of food and non-alcoholic beverage prices continued to slow and was more than two-thirds lower in November than at the beginning of this year. However, the growth of services prices remains relatively high, even if it weakened slightly in November. In our view, this is partly due to a significant slowdown in price growth in the health sector. 

At EUR 848.2 million, the consolidated general government deficit in the first ten months of the year was EUR 462 million higher than in the same period last year. Revenues in the first ten months were 5.6% higher year-on-year. This year, growth is mainly driven by social contributions, boosted by higher wage growth, while tax revenues are slowing due to moderation of economic activity and the reduction in the tax burden, with the exception of excise duties, which mostly increased until October in energy products, after having been reduced in previous years. In terms of revenue, only receipts from the EU budget were down year-on-year, but these are expected to increase by the end of the year due to the expected inflow of funds based on the second payment request under the Recovery and Resilience Facility. The growth in expenditure (7.9% year-on-year in the first ten months) this year is higher than last. This is partly due to the dynamics of measures to mitigate the consequences of COVID-19 and rising energy prices in recent years. This is mainly due to wages and other remunerations, which were influenced by last year’s agreement on wage increases in the public sector, higher subsidies for companies to mitigate the consequences of rising energy prices and post-flood reconstruction. The disbursements based on measures to mitigate energy poverty and flood recovery measures have also had an impact on this year’s growth in transfers to individuals and households. In the last two months of this year, we expect the consolidated general government deficit to be larger than in September and October, when it totalled EUR 49.3 million. This will be due to higher expenditure by municipalities based on the advances for the flood recovery, the upcoming end of EU funds absorption under the 2014–2020 financial perspective and certain payments at the end of the year to ease the cost of living crisis.