Ljubljana, 27 September (STA) - The Institute of Macroeconomic Analysis and Development (IMAD) has downgraded its GDP growth forecast for Slovenia from 5.1% to 4.4% for this year and from 3.8% to 3.7% for the next. It has meanwhile upgraded its 2020 forecast from 3.2% to 3.4%.
According to the government's macroeconomic forecaster, Slovenia's economy will slow down somewhat from last year, when GDP expanded by 4.9%, but growth remains fairly robust and stable.
"Fairly good economic results will continue both in terms of economic growth and the labour market, but growth rates will slow down somewhat. It is noteworthy that we're speaking about cooling down and not about a drop in economic growth," Boštjan Vasle, the acting head of IMAD, told the press on Thursday.
According to him, the downgrade stems from lower expectations about the growth of Slovenian and global economies as well as a decrease in business and consumers' sentiments. "In comparison to past years, these indicators are still very high, but they have started to turn down in past quarters."
Despite the downgrade, Slovenia will continue to outperform the eurozone, which means "that we will continue catching up to the more developed countries".
There are some risk factors to the latest forecast, with IMAD highlighting unforeseen developments in the international environment as the main risk factor.
Noting that these risks had greater potential to hurt the Slovenian economy that past risks, Vasle singled out the threat of new tariffs, the possibility of a disorganised Brexit, and unfinished processes of strengthening eurozone institutions.
Meanwhile, domestic risks remain balanced for the first two years, but Vasle noted that "following several years of constant increases in economic growth, it appears that we're past the peak".
Exports, the main generator of growth, will also cool down somewhat in this and the coming year before gaining momentum again in 2020.
Following last year's expansion by 10.7%, IMAD projects the exports to grow by 8.2% this year and by 6.6% in 2019 before picking up in 2020 to 7.1%.
According to the forecaster, exports will still exceed imports this year, when they are expected to grow by 8%, before the trend turns in the next two years. In 2019, imports are to increase by 7.1% and in 2020 by 7.3%.
Investment in capital assets will increase by 9% this year, which is 1.7 points lower than in 2017. The trend will continue in 2019 and 2020, when the figure is to stand at 8.5% and 7.5%, respectively.
While the figures remain strong, Vasle pointed out that in terms of GDP, the share of investment, at 20%, is still below the pre-crisis levels at 30%.
"This is somewhat worrying when considering that our economic growth or our catching up to the more developed countries depends in large part on our investment and productivity," he said.
Moreover, companies invest less, but report of their production facilities are nearly at full capacity, a record at the national level.
On the other hand, an upturn is forecast for domestic consumption this year before it starts to slow down again next year. Following last year's increase of 1.9%, domestic consumption will speed up by 2.7% this year, but then slow down to 2.6% in 2019 and to 2.2% in 2020.
General government spending, which was up 0.5% last year, will hit 2.7% this year, followed by 2% in 2019 and 1.5% in 2020.
Despite the slowdown, IMAD believes positive trends will also continue on the labour market, which is however already showing signs of pressure from the strong economic growth.
After rising by 2.9% last year, Slovenia's employment rate is to reach 2.8% this year, 1.5% in 2019 and 0.8% in 2020.
Furthermore IMAD's forecast shows a moderate growth in inflation, rising from 1.4% last year to 1.8% this year, to 2.1% next year and to 2.3% in 2020.