June 12 (SeeNews) - Erste Group said on Tuesday it has affirmed its forecast for Slovenia’s economic growth in 2018 at 4.5% on the back of domestic demand, to be followed by a slowdown to 3.7% in 2019.
The ongoing improvement on the labour market and on the consumer sentiment side will boost the private consumption footprint, while the pickup in EU funds should provide a further nudge in investment activity, the group's analysts said in their latest macroeconomic outlook on Slovenia.
The lender projects that CPI will move around the 2% mark this year and next, as more intensified pressures on both domestic demand and the cost side gradually drive the headline figure towards slightly higher ground.
In terms of the country's fiscal position, Erste said it should also remain positive in 2018, as the government plans another budget surplus amid stronger tax revenues due to ongoing strong economic momentum, accompanied by decreasing interest expenditures.
"We expect the budget figure to be around 0.2% of GDP in 2018, with the main downside risk to current fiscal outlook remaining related to more pronounced pressures on rising public wages and pensions," the banking group explained.
Looking at Slovenia's politics, Erste commented that the 2018 elections failed to bring any major surprises, as center-right Slovenian Democratic Party (SDS) emerged as relative winners, taking 25 seats out of 90, while newcomer Marjan 'arec (LMS) was runner-up with 13 seats.
The lender, however, evaluated the likelihood of SDS forming a government as quite thin at the moment, as the majority of other parties have dismissed SDS as an acceptable coalition partner.
"This leaves the possibility of a wide center-left government as a baseline scenario, although the risks of new snap elections are also not negligible", Erste cautioned.
It also said that despite political risks remaining elevated in the coming period, it does not see adverse short-term implications for the current economic profile.