Ljubljana, 14 November (STA) - Responding to the 1.4% GDP growth reported for Slovenia for third quarter, the Bank of Slovenia said growth continues to be constrained by cyclical cooling in construction and weak investment. The think tank IMAD sees the figures as broadly in line with projections, with export data slightly above expectations.
While both Q3 and annual January-September growth reached 1.4% after Q1 and Q2 expansions of 2.1% and 0.7% respectively, according to the Statistics Office data released on Thursday, the central bank announced it will downgrade its current 2.5% projection for 2024 in December. It said that institutions that have already revised their forecasts have adjusted them to 1.5%.
The Bank of Slovenia said growth in Slovenia remained comparable to the euro area average, where persistent challenges, including competitiveness issues and unfavourable external trade conditions, continue to weigh on performance.
On the positive side, it pointed to government and private consumption supporting growth and also highlighted recent export activity as a positive factor, with exports up by 3.2% quarter-on-quarter and 8.4% year-on-year in Q3. With low investment levels and reduced inventories, imports growth lagged behind exports, resulting in a positive net foreign trade contribution to GDP growth for the first time in three quarters, adding 1.9 percentage points to growth.
Private consumption increased in the third quarter due to a further decline in inflation, higher real incomes, and favourable labour market conditions. Year-on-year government spending also remained significantly higher. Economic activity was additionally dampened by a decline in fixed capital investment, particularly in construction, with quarterly declines of 3.9% and year-on-year declines of 8.2%, the central bank said.
Sector-wise, reduced investment was most evident in construction, where the year-on-year decline in value-added deepened to 10.3%. Conversely, the ongoing strength in private consumption continues to support the services sector, including retail trade. Particularly encouraging to the Bank of Slovenia is the fact that the value-added growth in manufacturing exceeded expectations in Q3, rising by 5.0% year-on-year.
Meanwhile, the government's economic think tank IMAD spoke of figures being broadly in line with its projections. Acting director Maja Bednaš also noted that recent export data are slightly better than expected, though investment remains weak.
According to IMAD, growth risks in international terms are primarily linked to potential escalations in geopolitical tensions, global trade conflicts, and slower recovery among key trading partners. Domestic risks, meanwhile, relate to ensuring sufficient capacity to support the country's high levels of public investment over the coming years and attracting foreign labour.
Elaborating on the export figures, it noted that exports rose across most sectors, particularly chemicals and pharmaceuticals, though vehicle exports - after peaking at their highest levels since late 2019 earlier in the year - declined for a second consecutive quarter but remained above the previous year's average.
While also pointing to the drop in construction investment, IMAD said private household consumption in Q3 matched the growth rates of the first half of the year, with increased spending on cars, non-food goods, and travel services abroad. Tourism-related services continued to grow, supported by a rise in foreign tourist arrivals and overnight stays.
While government spending growth eased slightly, it remained elevated. Methodological changes, including the shift of supplementary health insurance to a mandatory health contribution, have affected public spending, particularly on pharmaceuticals, goods, and services in healthcare.
Additional government expenditure on flood recovery and increased employment in the public sector also contributed to high growth levels.
"Next year, international institutions project growth acceleration among Slovenia's trading partners, meaning that external assumptions have not significantly diverged from those in IMAD's autumn forecast," concluded IMAD, whose autumn projection anticipates GDP growth of 1.5% in 2024 and 2.4% in 2025.
