March 15 (SeeNews) - Slovenia's economic growth is expected to accelerate to 5.1% in 2018, from 5.0% last year, before dropping slightly to 3.8% next year, a government-run macroeconomic institute said on Thursday.
Growth in 2018 will be backed by very favourable economic developments at home and internationally, and a continuation of high business and consumer expectations, the Institute of Macroeconomic Analysis and Development (IMAD) said in a statement on its website.
It noted, however, that next year economic growth will slow mainly owing to a gradual slowdown in foreign demand and demographic factors, which will be reflected primarily in lower growth in employment and household consumption.
In terms of exports, growth is expected to remain high in 2018 and subsequent years, underpinned by gains in competitiveness from previous years and a favourable export structure, IMAD noted.
It explained that domestic consumption will remain a significant factor of growth in 2018–2020.
"Growth in private consumption will strengthen this year under the impact of favourable labour market conditions and consumer optimism, then fall slightly in 2019 and 2020, for the most part owing to slower growth in employment", it added.
Last year’s rebound in investment, which has contracted significantly since the onset of the crisis, will continue, IMAD said, with all segments of investment activity expected to strengthen.
The growth of employment will remain fairly high this year, before easing gradually in the next two years, mainly under the impact of demographic change, while wage growth is expected to remain in line with the expected growth of productivity.
Inflation will remain relatively low this year (1.5%), before rising moderately in the next two years (to just above 2%). However, under the impact of high economic growth and, in particular, private consumption, core inflation will already exceed 2% this year.
IMAD noted that the surplus of the current account of the balance of payments is seen to remain very high in 2018-2020, at around 7% of GDP, on the back of extensive deleveraging, a gradual improvement of business performance, as well as stronger saving.
In terms of risks to the outlook, upside ones mostly come from the domestic environment, IMAD said, while the international environment poses downside risks.
Downside risks are mainly associated with the consequences of the tightening of monetary policy in the US and in the euro area; protectionist measures and the unpredictability of economic measures in the US; high valuation of assets on financial markets; the outcome of Brexit negotiations; political changes in EU Member States and global geopolitical tensions.
The Institute of Macroeconomic Analysis and Development of the Republic of Slovenia is an independent government office. Its director answers directly to the president of the government.