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Slovenia's 2017-2019 growth rates to among euro area's highest - c-bank

Author Maja Garaca
Slovenia's 2017-2019 growth rates to among euro area's highest - c-bank GDP, Creative Commons.

LJUBLJANA (Slovenia), June 16 (SeeNews) - Slovenia's central bank said it expects the country's economic growth rate to be among the highest in the euro area, at 3.5% this year, 3.1% in 2018 and 3.0% in 2019.

"With such a rate of growth, convergence processes can continue once again, approximately 10 years after being interrupted by the start of the crisis", the central bank said in a statement earlier this week.

It noted that while private and government investments are both growing, the strengthening of domestic demand is becoming a pillar of economic growth.

"Numerous investment projects by both domestic and foreign investors are about to be launched, encouraged by the diminishing uncertainty in the business environment, favourable financing conditions, increased optimism in the export sector and the strengthening of private consumption", bank of Slovenia said.

Favourable conditions in the labour market and diminishing uncertainty among consumers will also be key factors for boosting growth, the bank said, adding that the need for external financing of investments and consumption will be lower than it was in the pre-crisis period.

Unemployment rate is expected to reach the pre-crisis level of around 6% by the end of 2019, which will lead to wage growth.

Inflation will start to gradually rise and will exceed 2% at the end of the forecast horizon, the central bank noted.

"If the base effects in energy and food prices are set to have a significant impact on inflation this year, the growth in prices over the next two years will mainly be influenced by domestic factors", it explained.

The majority of uncertainty factors accompanying the present forecast could have a positive impact on both economic growth and inflation, the bank said. It added that the domestic environment, primarily on account of potential faster-than-expected growth in both private-sector and government investment, could pose the biggest risk to projected economic growth.

In terms of banks, the central bank noted that a revival of lending activity can be expected this year since banks are operating in a favourable macroeconomic environment which increases the confidence of companies and households.

Earlier this week, Erste Group said it has raised its outlook for Slovenia's economic growth to 3.7% in 2017, from an earlier predicted 3.1% expansion.