Economic activity remains favourable in the first quarter
Following last year’s high growth, the economy slowed as expected in the early part of this year, but remained in decent shape. Economic growth continues to be mainly driven by domestic demand, which is being reflected in particular in services (other than retail) and construction. Net exports thus made a positive contribution to GDP growth, mainly in connection with the realisation of past orders and the resulting sharp run-down of inventories. Amid all these developments, employment remains at record high levels. The favourable developments in the first quarter are improving the economic outlook for 2023, where robust domestic demand is keeping inflation high.
GDP growth remained favourable in the first quarter of 2023, at 0.6% in quarterly terms and 0.7% in year-on-year terms. Quarterly growth in Slovenia was 0.5 percentage points higher than the euro area average.
Economic activity continues to be driven by household consumption, fuelled by high employment and wage growth. Alongside private consumption, gross fixed capital formation also strengthened in the first quarter. The robust domestic demand is being reflected on the output side in higher turnover in services other than retail and increased construction activity.
In addition to domestic demand, GDP growth in the first quarter was also strongly driven by a trade surplus. Exports were up 1.9% in real terms on the same period last year, while imports were down 3.8%. The export activity is largely based on a backlog of orders, which explains the year-on-year decline in inventories and imports.
The favourable GDP growth in the first quarter is also improving the outlook for economic growth this year. At the same time the strong activity on the domestic market is being reflected in the high inflation, particularly core inflation excluding energy and food. Banka Slovenije will take account of the data released today when drawing up its new projections, which are scheduled for publication in mid-June.