Second quarter sees moderate economic growth

Year-on-year growth in economic activity in Slovenia slowed to a moderate 0.7% in the second quarter. It continued to be mainly driven by government and household consumption, while construction activity and export activity remain weak.

GDP in the second quarter was up 0.2% on the previous quarter, and up 0.7% in year-on-year terms. Slovenia thus saw economic growth that was comparable to the average rate in the euro area. Falling inflation and the robust labour market continued to drive up consumer confidence, and kept household consumption at a high level. Another factor in the relatively strong domestic demand in the second quarter was the high growth in government consumption, which in part reflected increased expenditure on healthcare and the post-flood reconstruction. Conversely economic growth was curtailed by falling construction investment, and by exports, the latter as a result of weak activity in key trading partners.

The robust domestic consumption is being reflected in solid year-on-year growth in the service sector. After last year’s difficulties, activity in manufacturing is also up this year, the recovery being driven in part by the renewed build-up of inventories. Construction activity by contrast is no longer contributing to economic growth. The decline in construction activity is attributable to the ending of several government projects at the close of the multi-annual European financial framework, and to a decline in housebuilding. Despite the current decline, the amount of construction put in place remains high, and is still up approximately a fifth on its pre-pandemic level.

The latest data points to economic growth being slightly slower than previously projected. According to Banka Slovenije’s June projections, it is forecast at 2.5% this year.