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In the Spring Forecast, prepared by the Institute of Macroeconomic Analysis and Development (IMAD) in the second half of February, GDP growth in 2024 is projected at 2.4%, which is slightly less than expected in autumn. Economic activity will benefit from continued investment growth, easing of inflationary pressures and a recovery in foreign demand, although this will be somewhat weaker than expected in the autumn. “We expect a recovery in goods exports after last year’s decline and slightly higher growth in value added in manufacturing, while growth in services exports will be driven mainly by growth in tourism-related services. Growth in the export sector will be curbed by deterioration in competitiveness as a result of increased domestic cost pressure, particularly in terms of labour costs,” said Maja Bednaš, Director of IMAD, on the expected economic activity in the current forecast. “We expect investment to continue to grow, driven by continued strong government investment activity, which is also linked to the recovery from floods and the implementation of the Recovery and Resilience Plan, renewed growth in investment in equipment and machinery as exports recover, and strong growth in housing investment,” she added. Private consumption is expected to rise as real income and employment increase. Growth will be supported by high employment levels, sustained wage growth, lower price pressures and increased consumer optimism. The relatively modest acceleration in growth compared to last year is largely methodological and related to the abolition of supplementary health insurance and its transformation into a compulsory healthcare contribution. However, this change will boost the growth of government consumption, which will rise this year.

In the next two years, GDP growth is expected to be slightly higher (2.5% in 2025 and 2.6% in 2026). Higher growth in exports and related activities will follow higher growth in foreign demand. Exports of high-technology industries (pharmaceuticals, ICT equipment) in particular are expected to increase and their contribution to value-added growth in manufacturing will strengthen. Structural changes in the European industry will lead to more modest growth in the Slovenian automotive industry, i.e. in the manufacture of motor vehicles and some related activities. With higher exports, private investments in equipment and machinery will recover. The investment activity of the general government sector will continue to be high, but we expect somewhat lower growth in housing investments. Growth in private consumption will accelerate in the wake of further real income growth and expected slightly lower saving rate, which will nevertheless remain higher than before the epidemic. Higher spending on non-essential goods and services (furniture, electronics, tourism, etc.) will contribute to turnover growth in trade and accommodation and food service activities, and in creative, arts, entertainment, personal and sports activities. After growth in government consumption will be temporarily high in 2024, it will be moderate again in 2025, mainly due to further growth in employment and healthcare expenditure, and the gradual implementation of a long-term care system. In 2026, the full implementation of the Long-Term Care Act will lead to a slight rebound in government consumption growth. 

Inflation is expected to gradually decline for most of this year before rising again towards the end of the year and the beginning of next year due to the base effect and the expiry of measures to curb high energy prices. We expect a further slowdown in the growth of service prices, which will remain relatively high amid continued consumption growth. The growth of food prices will also continue to slow. The rise in non-energy industrial goods prices will be moderate. Assuming that energy prices on the global market will be relatively stable, the year-on-year growth in energy prices in the consumer price index will fluctuate considerably due to the expiry of the temporary measures to mitigate the consequences of rising energy prices. Taking into account the expiry of the measures, average inflation is therefore expected to fall to 2.7% this year and rise to 3.4% in 2025, although price increases for most groups of goods and services will slow down. Inflation is expected to fall to 2.2% in 2026. 

This year, increase in employment and the decline in unemployment will continue to weaken. However, severe labour shortages related to demographic trends will not allow for stronger employment growth in the next two years. Despite the higher projected economic growth, employment growth will be slightly lower on average this year than last and the average number of registered unemployed will be similar to last year. “Employment will not increase significantly in the next two years, and the labour shortage will be somewhat alleviated by certain measures to facilitate the attraction and recruitment of foreign workers, which should be further strengthened. As in recent years, the employment of foreign workers will be the key to employment growth," commented Maja Bednaš on labour market trends and labour shortages.
 
Nominal growth in average gross wage will moderate slightly this year, while real growth will be slightly higher amid the expected lower price growth. Wage growth in the private sector will remain relatively high this year. This will be due to the continued labour market pressures in the face of labour shortages and increased pressures to maintain the purchasing power, and the January increase in the minimum wage. In the public sector, wage growth, which will be significantly lower than last year, will be affected by the partial adjustment of wages for inflation in the middle of the year. Overall, wage growth will weaken over the next two years. This reflects the easing of price pressures and companies' efforts to improve their cost competitiveness, which has weakened considerably in recent years. The forecast of gross wage growth is subject to considerable risks, particularly in connection with the possible persistence of inflation, increased labour market pressure due to supply bottlenecks and the implementation of the wage system reform in the public sector. 

The realisation of the Spring Forecast is subject to a number of uncertainties due to the geopolitical and economic situation in the international economic environment, which may affect the pace of the expected recovery and the moderation of inflation in Slovenia’s trading partners. In particular, an escalation of the situation in the Middle East and in Ukraine could lead to renewed supply shocks, which would also have a negative impact on the export-oriented part of the Slovenian economy. In addition, the latter could also be affected by possible increased cost pressures, including in domestic economic environment, which would worsen its already weakened competitiveness. The broader economic consequences of last year’s floods also remain uncertain, particularly with regard to the pace of reconstruction after the floods due to limited administrative and personnel capacities, including in the construction sector. There are, however, also some upside risks to economic growth. These arise in particular from a possible faster decline in inflation, more successful attraction of workforce and more efficient absorption of EU funds in conjunction with reform measures.