March 13 (SeeNews) - Slovenia's economic growth will expand by 3.3% in the first quarter of the year, up from 2.6% in the previous quarter, backed by strong domestic demand and private consumption, Erste Group analysts said on Monday.
Slovenia's economic growth will steady at 3.1% in the second quarter where it will stay for the remainder of the year, Erste Bank analysts said in their latest macroeconomic outlook report on Slovenia.
Erste sees Slovenia's full year 2017 GDP growth at 3.1%, up from 2.5% in 2016. In 2018, the country's economy is expected to shrink slightly to 3.0%.
"We see limited changes in the growth shaping factors, as domestic demand should continue to play a pivotal role. Support on the private consumption side is also seen remaining in place, with stabilized labor market conditions and improving consumer sentiment backing up a steady consumption footprint," Erste commented.
It explained that, after the negative performance in 2016, investment activity should also pick up the pace in both the private and public sectors, with the latter benefiting from the higher usage of EU funding.
"Though we still see exports maintaining their overall positive developments, domestic demand-driven import dynamics should continue to drive pressure on the net export side, thus resulting in a less supportive role," Erste said.
It also pointed out that Slovenia will turn to an inflation of 1.6% in 2017, from a deflation of 0.1% in 2016, which will continue to grow to 2.0% next year.
"We see such a change in the pattern as mostly due to the reversed cost-side developments, mainly in the higher food and recovering oil prices, which, coupled with the low base effect and intensified pressures on the domestic demand side of the equation, resulted in a positive inflation footprint," Erste explained.
In February, Slovenia saw an inflation of 2.2%, its highest rate since August 2013.
In addition, the lender noted that political risks in Slovenia remain low, but expressed doubt that the country will sell a 75% stake in Nova Ljubljanska Banka (NLB) by the end of the year, as planned.
"We do not rule out the possibility of further delays in the privatization process, taking into account previous experiences," it concluded.
NLB was one of two Slovenian banks alongside NKBM to show a minor capital shortfall under the adverse scenario of the stress test conducted by the European Central Bank in October 2014. Its privatisation, according to the European Commission requirements, should be complete in 2017.