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The economic climate is deteriorating under Golob’s government, the situation is more than worrying!

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Slovenia continues to experience a negative trend in the economic climate. (Photo: STA, Shutterstock)

By: Vida Kocjan

The economy’s trust in the government under the leadership of Robert Golob and his alleged measures is almost zero. Economy worried about declining production and orders. In Germany, the situation is completely different.

The negative trend in the economic climate continues in Slovenia. On an annual basis, this is already lower by 6.9 percent, according to data from the Statistical Office of the Republic of Slovenia. It is worrying that the mood in the economy has been deteriorating for several months. The economy is worried about falling production and orders, and the tax burden is increasing again with Golob’s government.

Up in Germany

The economic climate is completely different in Germany. Data from the Munich Institute for Economic Research Ifo show that the mood in the German economy is improving from month to month. This has been the case all this year, and the institute attributes the April growth of the index mainly to the expectations of companies. In contrast to Slovenian companies, German companies are therefore optimistic about expectations.

Down in Slovenia

The Slovenian Statistical Office states that the situation has been deteriorating since the beginning of the year. In April, the value of the economic climate indicator reached -2.5 percentage points and was one percentage point lower than the previous month. Confidence indicators in manufacturing and service activities had a negative impact. The monthly value change was positively influenced by confidence indicators in retail trade, among consumers and in the construction industry. This was the case on a monthly basis.

On an annual basis, the decline in value was influenced by all five confidence indicators. In manufacturing, the indicator decreased by 5.2 percentage points, among consumers by 0.6 percentage points, in retail trade by 0.5 percentage points, and in service activities and construction by 0.3 percentage points each.

The economic climate indicator also shows that confidence started to decline already in the last quarter of last year. This means that Slovenian companies rate expectations worse than in previous periods. The trust in the government under the leadership of Robert Golob and his alleged measures is almost zero.

Falling production and orders

At the same time, the volume of industry and orders in some industries are also decreasing in Slovenia. The Chamber of Commerce and Industry of Slovenia (GZS) warns that production has already decreased in the fourth quarter of 2022. The latter is now also confirmed in the lowering of the economic climate or mood indicator. The chamber states that everything is connected with the decline in orders in some industries, which worries them. Industrial production also decreased due to a sharp rise in the prices of natural gas and electricity. The biggest decrease in production was in the paper and chemical industry, namely by almost a fifth and by 18 percent. Furthermore, production decreased by more than a tenth (11 percent) in the metal industry, processing and processing of wood, and the production of motor vehicles.

Production is lower this year as well

According to the data of the Statistical Office of the Republic of Slovenia (SURS), the year-on-year decline in industrial production continued in the first two months of 2023. An even greater decrease than in the last quarter of last year was in the paper industry, where production decreased by 19 percent this year (last year by 18). In the chemical industry, furniture production, and processing, production in the first two months of this year was lower by an eighth (12 percent).

At the October level

Business tendencies (expectations) in manufacturing activities are at a similarly low level as in October 2022, according to SURS data. The latter does not inspire confidence, the industry is declining, the current decline is for six months, which will be difficult to correct. GZS states that mainly joint orders decreased. The drop in one year was from 5 to -20 points (by 25 points). At the same time, realised production decreased from 5.3 to 4.2 months. It is a period of one year, which corresponds to the time after last year’s parliamentary elections, when the current coalition led by Robert Golob took over the leadership of the government.

The GZS also adds that the drop in the total orders indicator usually indicated a deterioration in the dynamics of industrial production in later months. They state that the indicator of the volume of new orders, which is calculated on a quarterly basis, fell to -9 at the beginning of the 2nd quarter of this year (it was +14 a year ago), and the assessment of the competitive position of Slovenian companies on the markets of EU countries also decreased, from 3 to -7.

Due to the high growth of production costs, which is mainly the result of rising energy prices, the share of companies that describe domestic demand as insufficient (from 8 to 17 percent) increased in one year, and even more the share of those that describe foreign demand as insufficient (from 15 to 28 percent). The situation is therefore more than worrying and does not bode well.

Better only in retail

At the end of April, the Slovenian Statistical Office also published the results of the Business Tendencies survey, which more precisely measures trust by individual sectors. They found that the value of the confidence indicator decreased in manufacturing activities. On a monthly basis, it was lower by three percentage points, year-on-year by 13 percentage points and compared to the long-term average by nine percentage points.

As many as 38 percent of all companies cited a lack of qualified workers as the main limiting factor, followed by uncertain economic conditions (36 percent or six percentage points less than last year) and insufficient foreign demand (28 percent or 16 percentage points more than last year). This time, 41 percent of companies in manufacturing activities reported that their investments were higher last year than the year before, while 16 percent answered that they were lower. Investments were higher in land, construction and infrastructure and intangible assets, but lower in machinery and equipment.

For this year, 34 percent of companies anticipate that investments will be higher, and 18 percent of companies that they will be lower. This year, compared to 2022, companies are expected to invest less.

After three months of decline, the confidence indicator improved only in retail trade. In the monthly comparison, its value was higher by 12 percentage points, and compared to the previous April, it was lower by 10 percentage points.

High energy prices

Slovenian companies warn of high energy prices. The European Statistical Office (Eurostat) wrote before the holidays that the prices of electricity and natural gas have recently stabilised. They added that it is partly the result of measures taken by member states and measures at the EU level.

EU members decided on different measures. The measures could be tax reductions, temporary tax exemptions for consumers, price restrictions or vouchers for final consumers, and some countries regulated the prices of energy products. It is hard to say what Golob’s government did, but it certainly did not lower taxes. If you ask Golob, they regulated the prices of energy products.

Tax clamp: The favourable impact of Janša’s tax reform, which the Golob’s overthrew

In April, some were happy with the information that the tax burden in Slovenia has decreased. The Organisation for Economic Cooperation and Development (OECD) has published a comparison between member states. They found that last year in OECD countries the tax rate was 34.6%, and in Slovenia it was 42.8%, which meant the seventh place among OECD countries. The tax burden is still high, but the OECD found that it has decreased in Slovenia. They also wrote that the tax grip in Slovenia loosened by 0.75 percentage points, we gained one place in the ranking. Some in the government were happy about this, including Luka Mesec, Deputy Prime Minister and Minister of Labour and coordinator of the Levica party. But soon he experienced a cold shower. The data relied on by the OECD was for the tax reform of the previous government of Janez Janša. Let’s remember. In March of last year, changes to the Income Tax Act came into effect, when the income tax scale was linked to inflation, which further increased net wages. The revised Income Tax Act already last year increased the annual general allowance by one thousand euros, to 4,500 euros, special allowances were also higher – for example for dependent children and additional allowance for the lowest wages – and the highest 50% bracket was replaced by 45%.

At the end of last year, Robert Golob’s government then repealed Janša’s income tax reform and introduced a lower general relief for salaries this year than planned for 2023, so that instead of 5,500 euros this year it amounts to 5,000 euros, it again introduced the 50% income tax bracket, and increased the limit for the additional relief for those with the lowest incomes, introduced a higher relief for young people up to the age of 29 (1,300 euros) and slightly increased the reliefs for dependent family members (which would otherwise have grown due to adjustment to inflation even under the previous rules).

Comparison of electricity prices

Electricity prices for an average household in some comparable countries, per kilowatt hour (kwh):

  • Slovenia: 19.6 euros
  • Croatia: 14.8 euros
  • The Netherlands: 13.5 euros
  • Hungary: 10.8 euros

In Slovenia, electricity prices were almost 41 percent higher year-on-year. The price of gas was 36 percent higher year-on-year (14 percent in Croatia).

Source: Eurostat

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