Decisions adopted by the Governing board on the occasion of its 329th regular meeting on 6 April 2006

The Governing Board of the Bank of Slovenia judges the fulfilment of the convergence criteria to have been sustainable, as all the basic macroeconomic equilibria have been maintained. According to provisional figures, the general government deficit as measured by the ESA95 methodology fell by 0.5 percentage points from the previous year to 1.8% of GDP. The balance of trade also remains sustainable. The current account deficit stood at 1.1% of GDP last year, smaller than had been forecast. Growth in consumer prices is continuing to slow, despite March’s relatively high monthly inflation rate, which was seasonal in nature. 
At its meeting of 6 April 2006, the Governing Board left the Bank of Slovenia’s key interest rates unchanged. Based on analysis of economic trends, the Governing board considers monetary policy to be appropriate.The level of interest rates is in line with the stability of the nominal tolar/euro exchange rate, while current inflation and inflationary expectations are in line with the target of medium-term price stability. The 12-monthly average of the year-on-year figures for the harmonised index of consumer prices stood at 2.3% in March, 0.3 percentage points below February’s reference figure for the price stability convergence criterion. The Governing Board judges that Slovenia will continue to meet the price stability criterion for the introduction of the euro. 
In the international environment, forecasts for this year’s economic growth in the eurozone and the USA were revised upwards. The ECB raised its growth forecast for the eurozone to 2.1%. The rise in the economic growth forecast for the eurozone is primarily the result of an improvement in the growth forecast for investment spending, which is expected to rise thanks to favourable terms of financing, high corporate profits and good foreign demand. The reason for the upward revision of growth in the USA is the slight increase in estimated growth in the final quarter of last year, primarily as a result of high investment growth. The oil price has stopped rising, but remains high: it was just over USD 60 per barrel in the middle of March. Prices of other commodities have been rising rapidly since the end of last year. Inflation fell slightly in February in the eurozone and the USA owing to a fall in oil prices, but remained relatively high at 2.3% in the eurozone and 3.6% in the USA. In light of the high oil and commodities prices, and the increase in the economic growth forecast, the ECB raised its inflation projection, which is set at between 1.9% and 2.5% for this year. Given the changes in the inflation forecasts, the financial markets are anticipating further rises in the ECB’s interest rates. In the USA, the Fed raised interest rates again in March, in line with expectations. 
Economic trends in Slovenia remain favourable. Real GDP grew by 3.7% year-on-year in the final quarter of last year, with the economy estimated to have grown by 3.9% in 2005. The largest factor in growth was net trade, while growth in private spending and in government spending was lower than GDP growth. Growth in gross investments was negative, mainly because of the decrease in inventories, but the latest figures and forecasts for investment in companies nevertheless point to a strong improvement in the capital expenditure trend. Growth in industrial production has remained high in the early part of the year. The value of work performed in the construction sector fell in January, but the forecasts for 2006 remain good. Less encouraging are some of the developments on the labour market, with registered unemployment having increased to 10.5% in January. The rise in the surveyed unemployment rate from 6.3% to 7.2% in the context of good economic conditions could point to structural problems on the labour market.