Slovenia recorded relatively strong economic growth in 2014, at 2.6%; the labour market situation also improved. With the improvement in the international environment, stabilisation of financial markets in the euro area and following economic policy measures adopted in the last few years, economic growth in 2014 was the strongest since the beginning of the economic crisis. Exports increased significantly due to higher competitiveness, coupled with stronger foreign demand. Investment also rose markedly; public investment in infrastructure was up due to the accelerated absorption of EU funds, while amid higher activity and more stable lending conditions, positive trends were also observed in private investment. Last year, employment rose for the first time since the beginning of the crisis, being up in most private-sector activities. During the year, the number of unemployed steadily decreased as more people found work and fewer became unemployed. The improvement in labour market conditions and a concurrent increase in earnings and other household receipts led to modest growth in private consumption.
The Spring Forecast is based on favourable developments in 2014 and assumes improvement in the international environment and a further implementation of economic policy measures for stabilising the situation in Slovenia. International institutions project higher economic growth in the euro area for this year and stable conditions on financial markets; the forecast also takes into account a continuation of favourable terms of trade. Furthermore, we have also assumed a continuation of fiscal consolidation measures and banking system restructuring, along with the structural adjustments announced in the development planning documents.
GDP will expand by 2.4% in 2015, again mainly owing to strong growth in exports and investment activity. Export growth will remain robust (at 5.6%), due to the faster recovery in most of Slovenia’s main trading partners, as well as to further gains in competitiveness. The increase in investment (by 4.8%) in 2015 will be similar to last year. Public investment will again rise in 2015 owing to the absorption of EU funds, albeit slightly less than last year; private investment in machinery and equipment will also expand. Amid higher capacity utilisation, private investment funding will be possible due to better business results, especially in the export-oriented part of the economy, while further deleveraging will open up possibilities for borrowing from the highly liquid banking sector. A further increase in employment, a decline in unemployment, and higher disposable income will boost consumer confidence. Private consumption is therefore projected to rise by 1.1%. Amid increased investment funded from public sources, expenditure on government consumption will decline this year, as fiscal consolidation will continue with similar measures as in 2014. Government consumption will thus fall (-0.4%) for the fifth consecutive year.
In 2016 and 2017, economic growth will hover around 2%, as growth in investment financed by EU funds is expected to slow at the transition to the new financial perspective. Positive impulses from the international environment are expected to continue in the next two years. We also anticipate further progress in correcting macroeconomic imbalances in both the entire euro area and Slovenia, with the exception of the current account surplus, which will remain high particularly as a result of the ongoing deleveraging in the Slovenian corporate sector. This will continue to be a major factor inhibiting a faster recovery. Exports will remain the key driver of growth. Growth in private consumption will gradually pick up, reflecting higher wage bill growth amid the continued recovery on the labour market. Investment volume will drop in 2016, with public investment projected to fall considerably amid a further increase in private investment. Experience shows that after the expiry of access to EU funds under the previous perspective, it is not possible to reach the same absorption rate in the first years of the new financial perspective. Government consumption in the same period will continue to be marked by the ongoing fiscal consolidation.