By: C. R.
At the Chamber of Commerce and Industry of Slovenia (GZS), based on the developments in the first half of the year, they are much less optimistic about full-year GDP growth. While the previous forecast projected 1.8% growth, according to GZS’s head of analytics Bojan Ivanc, GDP will now struggle to exceed 1.0%. The GZS is calling on the government to take action and correct the mistakes of its economic policy.
After a decline at the beginning of the year, Slovenia’s gross domestic product (GDP) expanded in the second quarter. Year-on-year growth was 0.7%. With a 0.6% drop in the first quarter, according to revised data, and 0.7% growth in the second, GDP volume grew by just 0.1% year-on-year in the January–June period.
According to seasonally adjusted data, which are used for EU comparisons, growth in the second quarter was 0.8% year-on-year and 0.7% quarter-on-quarter.
In a statement to the media today, Bojan Ivanc, head of analytics at the GZS, noted that although Slovenia’s quarterly growth was among the highest in the euro area, it was lower than expected. GZS had forecast 1.0%, while analysts from Focus Economics projected 1.3%. Data for the half-year overall point to stagnation, while GDP in the EU grew by 1.6% year-on-year in the first half of 2024.
“Therefore, we cannot be satisfied with the rebound in the second quarter,” Ivanc said. Based on half-year growth dynamics, Slovenia ranked 17th out of 19 EU countries for which data were available.
Given the weak figures for the first half of the year, even with an expected turnaround in the second half, GZS sees little chance that annual economic growth will exceed 1.0%. With EU-level estimates at 1.3% or 1.4%, Slovenia’s growth will, after a long period, likely fall below the EU average this year.
Ivanc admitted that he had been much more optimistic about Slovenia’s economy last year than the actual results justified, and this year his initial optimism also failed to materialise. He recalled that Slovenia’s average annual growth in the past ten years was 2.9%, so anything below 1.5% or even 2.0% is very weak growth for the country.
He also pointed to the decline in industrial production in manufacturing. In the summer, year-on-year output fell by 1.8%, placing Slovenia in the lower third among EU member states.
Ivanc highlighted a surprisingly sharp drop in the production of metal and electronic products as well as motor vehicles, trailers, and aircraft. Negative trends are also visible in other industries. He warned that, given current global developments, Slovenia is losing market share in goods within Europe, which future statistics will likely reflect even more clearly.
Ivanc also discussed the labour market, which already began cooling somewhat last year. In May, there were about 0.5% fewer jobs than in May 2023. In the first five months of this year, there were on average 5,800 fewer jobs in the private sector, mainly in manufacturing and construction, while employment in the public sector increased by 2,300.
In the second quarter, there were fewer than 17,000 job vacancies, the lowest since Q1 2021 and 18% below the five-year average. According to Ivanc, this means a rapid recovery in the labour market is unlikely.
GZS CEO Mitja Gorenšček expressed surprise that, following stagnation in the first half of the year, the government has shown no real response. “All the alarm bells should be ringing,” he argued, adding that the government should already be preparing measures to remedy the situation.
He reminded that GZS has consistently highlighted the problems of Slovenia’s business competitiveness and proposed various measures to ease the burden on the economy. “But unfortunately, things have not gone in this direction, but quite the opposite,” he observed. With additional burdens from income tax and social contributions, as well as other measures, the government has in fact increased the pressure on labour and businesses.
GZS is calling on the government not to raise health contribution rates and to withdraw the hospitality bill, vetoed by the National Council, which, by restricting short-term property rentals, would, in the chamber’s view, negatively impact tourism. At the same time, the government should acknowledge and correct past mistakes in income tax policy and carefully assess the real need for a long-term care contribution rate. After fixing past errors, the government should then take proper steps in line with expert proposals, including those of GZS.
Gorenšček recalled government representatives’ statements that people are their priority. But since the private sector provides about 700,000 jobs, on which employees and their families depend, the government, in order to help people, must first ensure a strong economy. This, he stressed, is the foundation of social standards in the country.