STA, 28 April 2022 - The Institute of Macroeconomic Analysis and Development (IMAD) has downgraded its growth forecast for Slovenia for this year from 4.7% to 4.2%. The new figures were disclosed by Finance Minister Andrej Šircelj on Thursday after the government eventually got acquainted with the IMAD's spring forecast.
The government's economic forecaster had drawn up its latest outlook a month ago but the outgoing government had decided not to get formally acquainted with the document ahead of the 24 April general election.
IMAD expects growth to slow down to around 3% over the next two years. Presenting the forecast, IMAD director Maja Bednaš said they had expected a slow-down due to rising energy prices and disruption in supply chains before the war in Ukraine, which, however, only further increased those pressures.
The forecast had thus been drawn up against the backdrop of substantial uncertainty due to the war in Ukraine, with another factor being a reduced scope of measures in support of post-pandemic recovery.
This year's growth is expected to rely substantially on domestic spending, where the growth in private consumption is expected to slow down, partly as a result of higher inflation. Consumption of services is to grow in particular in the wake of Covid-19 restrictions.
IMAD expects investment growth to remain at high rates as well as growth in exports, which is to slow down due to the impact of the war in Ukraine and its fallout on merchandise exports.
The country's GDP growth is expected to slow down to 3% next year and down further to 2.8% in 2024.
According to Bendaš, the biggest risks to the forecast are linked to the developments in the war in Ukraine and energy prices with a further negative risk still posed by Covid-19 and increasingly by supply chains.
Russia and Ukraine represent about 3% of Slovenian exports, which Bendaš said was not a substantial exposure, but she noted greater exposure of the pharmaceutical, chemical and electricity equipment industries.
Inflation is expected to remain high; this year it is expected to run at 6.4% before falling to 3.2% in 2023 and 2.3% in 2024.
Employment is expected to increase by 1.7% this year as the number of registered unemployed is to drop to roughly 61,000 at the end of the year.
A further improvement in the labour market is expected over the next two years, "but less intensely than this year given the slightly lower growth in economic activity and demographic trends that are reducing the size of the working-age population," said the IMAD director.
At a government press conference earlier today, Minister Šircelj talked about why the government had delayed signing off the IMAD forecast. "Looking back at a few reports, they all put the economic growth rate lower than the actual rate," he said. IMAD forecast 6.1% growth for 2021 in the autumn, but the actual rate according to initial estimates by the Statistics Office was 8.1%.
"For me as finance minister it's important that such a forecast is as accurate as possible [...] Firstly, it expresses either optimism or pessimism, in this case pessimism, and secondly, such data can actually lead to the government or the ministry making wrong decisions," said Šircelj.
In late March IMAD commented on the delay by saying that given all the available data, information and assumptions, its forecast was realistic and there were "no substantive or technical reasons for a correction".
The International Monetary Fund has forecast for the Slovenian economy in light of the war in Ukraine and its fallout on the global markets to expand by 3.7% this year, down 0.9 points from its previous forecast, and by 3% next year, down 0.6 points.
The Slovenian Chamber of Commerce and Industry also expects the country's GDP to grow by 3.7% this year and by 3.2% in 2023.