Slovenia’s economy grew by 1.8% in the second quarter, while year-on-year growth reached 5.0%. Following two years of slowing growth, economic activity was strong in the first half of the year and significantly exceeded expectations. High growth continued to be driven mainly by domestic consumption and investment, while stronger exports also supported growth in manufacturing. Despite the very strong first half of the year, the outlook for the remainder of the year remains uncertain due to heightened international tensions, particularly the still unclear effects of the war in the Middle East. The first economic effects of drought conditions in Europe could also emerge in the autumn.
Domestic demand continued to be supported by favourable labour market conditions, real wage growth and government investment in the second quarter. Private consumption was 3.4% higher year-on-year, while gross fixed capital formation increased by 13.2%. Construction investment made the largest contribution to its growth, while investment in machinery and equipment also increased further. Government consumption also continued to increase (5.2%), driven by the take-up of long-term care entitlements and rising employment in general government. As domestic demand remained stronger than foreign demand, the contribution of net trade was again negative, reducing GDP growth by 0.5 percentage points.
Stronger demand was reflected in growth across all groups of service activities, with international tourism continuing to contribute to these developments. In line with the improvement in goods trade, revenues in transport and storage increased. Construction again made a significant contribution to growth, with activity increasing year-on-year across all segments, particularly in civil engineering, supported by government infrastructure projects. This year, these projects are also being affected by local elections and the completion of projects co-financed by EU funds under the Recovery and Resilience Plan. Amid stronger exports, year-on-year growth in value added in manufacturing increased to 4.3%, the highest since the end of 2024.
Strong economic growth in the first half of the year prevailed amid high uncertainty and significantly exceeded our expectations. Nevertheless, the effects of the war in the Middle East and the ongoing uncertainty in the external environment remain a risk to economic activity in the remainder of the year, when we can also expect negative effects from drought conditions in Europe to materialize.