February 7 (SeeNews) - The European Commission said on Wednesday it has increased its forecast for Slovenia's economic growth this year to 4.2% from 4.0% projected in November, as domestic demand remains strong but the contribution from net exports declines.
As employment and wages grow and bank lending becomes more readily available, private consumption is expected to expand strongly, the European Commission said in its Winter 2018 Economic Forecast.
Strong demand, high capacity utilisation, as well as improving corporate balance sheets and credit conditions underpin the expected high growth of investment in productive capacity, the Commission said.
"Growth in construction investment is also expected to accelerate, as demand for new housing, as well as the need for commercial and industrial spaces, grow."
The improved take-up of EU funds is set to boost investment further.
HICP inflation was 1.6% in 2017. Due to the increases in energy and services prices, inflation is set to accelerate to 1.8% in 2018. In 2019, when the labour market tightens further, headline inflation is projected to reach 2.0%, the Commission noted.
The strong confidence indicates that solid growth in all components continued in the final quarter of 2017, leading to an estimated real GDP increase of 4.9% in last year.
Growth in 2017 was mainly driven by domestic demand but also net exports. In particular, there was strong growth in public as well as private investment. Private and public consumption also increased, boosted by growing disposable income and upbeat consumer confidence, the Commission said.