By: A. G./ Nova24tv
The Office for Macroeconomic Analysis and Development (Umar), in its autumn economic outlook for 2024, lowered its growth forecast, now expecting only 1.5% growth, which is significantly lower than the spring prediction of 2.4%. The decrease in expected growth for 2024 is primarily due to weaker foreign demand and lower service exports.
Umar also warns that economic conditions will remain uncertain, and higher inflation is expected at the beginning of next year due to the low base effect and the expiration of Robert Golob’s government’s measures to curb high energy prices.
Umar forecasted that export growth will be lower than expected in the spring, due to decreased demand in foreign markets and a reduced volume of service activities. Additionally, investment is expected to stagnate, contrary to spring expectations of growth.
“The situation will collapse because the equation simply will not add up. It is just a matter of time. Someone else will have to address the consequences with measures to reduce public spending. And there will be cycling protests on the streets again. You know how that story goes,” commented Tone Kajzer.
Golob avoids criticism
“The most important thing is that Umar has not changed its wage growth forecast. It remains significantly higher than inflation, which we have managed to bring well below the European average,” emphasised the Prime Minister. Meanwhile, Economy Minister Matjaž Han stated that it is quite clear what the situation in Europe is, citing problems in Germany, our largest trading partner. He noted that it is normal for conditions in Germany and the rest of Europe to affect Slovenia as well.
Stagnating investments, higher government spending
While investments are stagnating, private consumption will be an important growth factor this year, according to Umar. After last year’s stagnation, private consumption will strengthen, driven by high employment, real wage growth, lower inflation, and greater consumer optimism. Public consumption will also be somewhat higher than expected, mainly due to post-flood reconstruction, which increased government spending on goods and services in the first half of the year. However, it remains a question whether the money will actually go toward reconstruction, as not a single house has been built for flood victims yet.
Changes in the healthcare system, particularly the abolition of supplemental health insurance and the introduction of mandatory contributions, have a methodological impact on the ratio between private and public consumption, as the abolition contributes to lower private and higher public consumption growth.
Decline in competitiveness due to harmful measures
Umar warns of numerous uncertainties related to geopolitical and economic conditions in the international environment. There are also risks on the domestic market, primarily due to the declining competitiveness in the export sector and the state’s capacity to maintain a high level of investment activity in the coming years.