LJUBLJANA (Slovenia), January 24 (SeeNews) – Slovenia's GDP growth is expected to slow to 3.1% in 2018 from 4.1% in 2017 due to market size limits, French credit insurance agency Coface said .
Slovenia's economic growth rate reached its highest level in ten years in 2017 thanks to the rise in employment and real wages, which stimulated domestic demand, Coface said in its Country and Sector Risks 2018 report published on Tuesday.
Slower momentum in investment and private consumption could reduce growth in 2018, Coface warned.
"Growth is still broadly dependent on exports and integration in European value chains. The over-indebtedness preceding the 2013 banking crisis will continue to put pressure on this sector, despite gradual restructuring and low interest rates."
Coface added that robust foreign investment is limited by an ambivalent attitude on the part of Slovenia's authorities towards the privatisation of state-owned enterprises and cumbersome regulations.
"Despite everything, investments are expected to increase, thanks to vigorous internal and external demand, especially in the consumer goods and construction industries," Coface added.
The credit insurance agency predicts that Slovenia's inflation rate will accelerate slightly to 1.9% in 2018, from 1.5% last year, on the back of modest underlying pressure on prices and the gradual closing of the output gap.
Coface also said that Slovenia's fiscal restructuring will continue in 2018 via new cuts in current spending and welfare spending, taking into account the ageing of the population.
Slovenia's budget deficit is expected to narrow to 0.2% in 2018 from 0.8% last year, on the back of higher tax receipts and social security contributions, as well as lower interest rates, according to Coface.
Public debt is expected to drop slightly to 74.0% of GDP from 75.5%.
Coface also said that Slovenia is led by a fragile coalition government headed by prime minister Miro Cerar but that government is expected to survive until the parliamentary elections scheduled in April or May 2018.
"The fiscal consolidation the government is committed to seems to have rendered the three parties forming the coalition unpopular. This political environment is likely to slow the pace of economic reforms in 2018," Coface said.
Coface predicts Slovenia's government will be taken over by a new multi-party coalition, which seems popular, according to polls.