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Sentiment indicators for the euro area suggest that dynamics of the economic activity remained weak in the fourth quarter of 2023. In the baseline scenario, the ECB projects slightly higher growth for 2024 and 2025 than forecast for 2023. After falling to its lowest level in three years in October, the composite Purchasing Managers’ Index (PMI) for the euro area improved slightly in November and remained unchanged in December. The index remained below the 50 mark, which is the threshold between economic expansion and contraction. The Economic Sentiment Indicator (ESI) for the euro area improved in December but remained below the long-term average. Confidence was up in all activities and among consumers. In their November and December forecasts, some international institutions estimate that economic activity picked up in the final quarter of last year and that the gradual strengthening of growth will continue in the coming quarters. GDP growth is expected to strengthen this year and next, mainly driven by rising private consumption supported by increased confidence, low unemployment and wage growth, and a further decline in inflation. The ECB estimates that euro area GDP rose by 0.6% in 2023 and forecasts slightly higher growth of 0.8% and 1.5% in 2024 and 2025 respectively according to the baseline scenario, which is subject to significant uncertainties related to the development of the conflict in the Middle East.

Most available short-term economic indicators for Slovenia improved at the end of 2023. However, with the exception of construction and some segments of household consumption, they have largely not reached the level of a year ago. After two months of growth, trade in goods fell again in November. In the first 11 months, real exports fell by 7.1% year-on-year and real imports by 7.5%. The values of the competitiveness indicators improved slightly in the fourth quarter of 2023 after a long period of negative developments, but still point to unfavourable price competitiveness of Slovenian exporters. Slovenia’s export market share in the EU market increased again year-on-year in the third quarter but still did not exceed the levels recorded before the energy crisis. Since September, manufacturing output has increased in all industry groups according to technology intensity. The effect of high energy prices, which had the greatest impact on energy-intensive industries, started to ease gradually. In the first 11 months of 2023, manufacturing output was still 3.2% lower year-on-year. According to data on the value of construction work put in place, construction activity remained unchanged in November, although it was one-fifth higher between January and November than in the same period of 2022. Real turnover in most trade sectors rose in October after several months of decline, while real turnover in market services decreased again and remained similar to the same period a year earlier. Trade in services decreased slightly in October but remained close to its peak. In the first ten months of 2023, exports of services rose by an average of 6.4% year-on-year in nominal terms and imports by 4.7%. The year-on-year growth was mainly due to a significant recovery in trade in tourism-related services. Household consumption picked up in the fourth quarter. Household expenditure on tourism services abroad was higher year-on-year in October, as were sales of passenger cars to private customers in October and November. However, the year-on-year decline in household expenditure on non-food and food products, beverages, and tobacco has decreased significantly. The recovery in consumption is also evident from the stronger year-on-year growth in the nominal value of fiscally verified invoices, which was positive again in real terms after two quarters of decline. In December, the value of the economic sentiment indicator rose compared to November, while it remained lower year-on-year.

Year-on-year growth in the number of persons in employment and decline in the number of unemployed slowed at the end of last year. The year-on-year increase in October was driven by the employment of foreign workers, while the number of employed Slovenian citizens fell year-on-year. Since September, the number of persons employed in the manufacturing sector has fallen, which contributes to the deceleration of year-on-year growth. The average gross wage increased by 2.2% year-on-year in real terms in October. It increased by 2.3% in real terms in the private sector and by 1.9% in the public sector; growth in the latter was lower than in previous months due to the higher base of last year related to the implementation of the wage increase agreement. In the first ten months, year-on-year gross wage growth was 1.8% in real terms (1.4% in the private sector and 2.5% in the public sector) and 10% in nominal terms (9.6% in the private sector and 10.8% in the public sector). Growth in the private sector was highest in administrative and support service activities and accommodation and food service activities, which along with construction are among the activities facing the greatest labour shortages. The number of unemployed in December 2023 was almost one-tenth lower than a year earlier and, amid labour shortages, the number of long-term unemployed fell by almost one-fifth. In 2023, 48,709 persons were registered as unemployed on average, 14% fewer than a year earlier. As a result, with high employment and low unemployment, the number of social assistance beneficiaries and unemployment benefit recipients declined year-on-year.

Year-on-year inflation fell to 4.2% at the end of last year and more than halved compared to December 2022. The rise in prices for all major consumer groups is slowing down. Compared to the start of 2023, lower growth of food prices and lower energy prices in particular contributed to the slowdown in inflation. At 4.2%, year-on-year rise in food prices was still only around one-fifth of what it was at the start of 2023. Energy prices, which had risen by almost 10% year-on-year at the beginning of last year, fell by 2.3% year-on-year in December due to falling global prices and government measures. The year-on-year increase in services prices has also slowed, particularly in December, but remains high (6.1%). Slovenian industrial producer prices continued to fall in November and were only slightly above the level of a year ago. The year-on-year growth rate, which had been close to 20% at the beginning of 2023, moderated further to 0.3%, the lowest since December 2020. The slowdown in year-on-year growth was still mainly due to developments in the intermediate goods group; in most other groups, with the exception of energy, the year-on-year price increase is also gradually weakening.

At EUR 1,081.3 million, the consolidated general government deficit in the first 11 months of 2023 was EUR 332.5 million higher than in the same period of 2022. Revenue was up 6.1% year-on-year and expenditure 7.4%. The strongest growth in revenue was seen in excise duties, social contributions (higher wage growth) and personal income tax. Against the backdrop of weakening economic activity, overall tax revenue growth was partly dampened by a slowdown in VAT revenue growth, which was also affected by the reduction in the VAT rate on energy products until September last year. Revenue from corporate income tax declined markedly due to the lower last balancing payment of tax. The main reason for the expenditure growth this year was the rise in wages and other remunerations affected by the agreement on wage increases in the public sector and certain transfers. Growth in capital expenditure remained high.