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Feb 02, 2024 14:47 EEST
February 2 (SeeNews) - Slovenia's economic growth is expected to recover and inflation to fall in 2024, with downside risks including intensification of regional conflicts, renewed commodity price volatility, and lower external demand, the International Monetary Fund (IMF) said.
"Despite tighter fiscal policy, growth is expected to increase to about 2% in 2024, led by domestic demand, including higher flood-related investment, and by higher consumption as real wages recover," the IMF said in a statement earlier this week, following the conclusion of Article IV consultations with Slovenia.
Under the assumption of broadly stable commodity prices and interest rates on hold in the first half of the year, inflation is projected to decline to below 3% by end-year and to 2% in 2025, whereas the current account is expected to remain in surplus over the medium term, the IMF said.
"Supply chain disruptions pose additional risks but also may create opportunities for Slovenia in the event of nearshoring. Labour shortages and broader capacity constraints could affect post-flood reconstruction or undermine disinflation. Finally, new severe weather events could cause significant economic disruptions," the IMF noted.
Slovenia needs a stricter fiscal stance to reduce debt, rebuild fiscal space, and support disinflation, while sustained fiscal consolidation and structural reforms are crucial for long-term public debt sustainability, with transparency in handling flood-related spending are essential, the fund said.
IMF also advised for accelerating key structural fiscal reforms, such as pension system reform, public wage reforms, and tax base broadening, while deeper structural reforms are deemed essential for boosting growth and income convergence.
An IMF mission, led by Donal McGettigan, visited Slovenia during January 18 - 30 for a review of the economy, the financial sector and the banking system under the 2024 Article IV of the IMF's Articles of Agreement.
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