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Slovenia's GDP growth to slow down in 2019 - OECD

Slovenia's GDP growth to slow down in 2019 - OECD Source: Slovenian government

LJUBLJANA (Slovenia), May 22 (SeeNews) – Slovenia’s economic growth is expected to decelerate to around 3.4% this year and 3.1% in 2020, from an estimated 4.5% in 2018, the Organisation for Economic Co-operation and Development (OECD) said.

“Due to domestic capacity constraints, robust private consumption and investment growth will increasingly be satisfied through higher imports. Export growth will ease in the face of weaker global demand growth and rising unit labour costs,” OECD said on Tuesday in its latest economic outlook on Slovenia.

Private consumption will be backed by continued income gains from real wage and employment growth, while private investments will be underpinned by the business sector’s need to expand capacity and favourable financing conditions, the statement added.

The maturing of the recovery is reflected in increasing labour shortages and tightening capacity constraints, leading demand to be increasingly satisfied through higher imports, the organisation also said.

The fiscal stance is expansionary in 2019 and neutral the following year, the statement noted, adding that as monetary conditions remain extremely accommodative, a tighter of the fiscal stance is needed to contain inflationary pressures and secure fiscal sustainability.

“Measures, such as restricting pathways to early retirement and accelerating the privatisation process, would contribute to mobilising under-utilised labour resources and free up workers to faster growing industries,” OECD noted.

The main upside risk is a lower-than-expected household saving rate, which would lead to stronger private consumption growth, the organisation said, adding that downside risks stem primarily from lower-than-expected productivity gains from the expansion of the capital stock, leading to a deterioration in external competitiveness and export performance. As house prices have increased substantially in the last year, an abrupt correction in the real estate market could also have negative repercussions on demand and growth.