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Slovenia's c-bank lowers 2019, 2020 GDP growth fcasts on slowdown in foreign demand

Slovenia's c-bank lowers 2019, 2020 GDP growth fcasts on slowdown in foreign demand GDP, Creative Commons.

LJUBLJANA (Slovenia), June 27 (SeeNews) – Slovenia's central bank said on Thursday that it has lowered its forecast for the country's gross domestic product (GDP) growth in 2019 and 2020, but added that projections will remain higher than the euro area average.

The economic growth will slow down to 3.2% in 2019 and 2.9% next year, from 4.5% in 2018, Bank of Slovenia said in the June issue of its macroeconomic projections.

In its previous forecast in December the central bank said Slovenia's GDP will expand by 3.4% in 2019 and by 3.0% in 2020.

“The more moderate GDP growth is attributable to a slight slowdown in foreign demand growth and a gradual shift into a more mature phase of the business cycle," the central bank explained.

It noted that the downside risks to economic growth are more pronounced and originate from the external environment.

"Over the medium term, economic growth will remain broadly based and will be driven primarily by private consumption and investment. Both will be strongly dependent on labour market developments which will be characterized by slower employment growth and faster wage growth."

Bank of Slovenia also noted that economic growth will also continue to be supported by government investment, as the disbursement of EU funds and the execution of major investment projects are expected to pick up their pace.

Inflation is projected to be slightly lower this year than last year, reaching 1.7%, and will fluctuate at around 2% over the next two years.

The central bank also said that the main risks accompanying the current projections originate from the external environment, and are on the downside for economic growth in Slovenia.

According to Bank of Slovenia, the realisation of risks related to the escalation of geopolitical tensions and additional protectionist measures could slow growth in foreign demand, which would be reflected in lower export growth and in a general deterioration of economic sentiment, which in turn would mainly be a drag on business investment activities.

“By contrast, the risks from the domestic environment remain on the upside, and relate primarily to the possibility of faster wage growth, which would facilitate a sharper increase in private consumption,” the central bank said.

Also, additional uncertainty surrounds government investment dynamics, which, in the wake of faster disbursement of EU funds and the intensified execution of major infrastructure projects, could slightly outperform its current growth projections.