The Slovenian economy returned to growth in the second quarter, expanding in quarterly and year-on-year terms. The growth was driven primarily by final household consumption and a build-up of inventories, while foreign trade continued to act as a brake on growth.
GDP was up 0.7% on the first quarter, and was also up by the same amount in year-on-year terms. The quarterly rate of economic growth in Slovenia thus outpaced the euro area average (0.1%), while the year-on-year rate was lower than the euro area average (1.4%).
Amid an improvement in consumer confidence in the second quarter, solid wage growth and a robust labour market together with the timing of the easter holidays, which came in April this year, drove a sharp year-on-year increase of 3.6% in private consumption. Signs of recovery are also evident in gross fixed capital formation, which was up 1.9% on the previous quarter, but remained down in year-on-year terms (by 0.2%), largely as a result of this year’s increased uncertainty in the global environment. The latter also hit foreign demand from the main trading partners, which drove a year-on-year decline in exports (of 0.8%), while imports recorded solid growth (2.7%) in the uncertain economic situation, which given modest investment is primarily being attributed to a build-up of inventories, which raised economic growth by 1.7 percentage points. Amid these developments, the contribution to GDP growth made by net trade was negative again (in the amount of 2.7 percentage points). In sectoral terms the growth in consumption was driven above all by services. Value-added also returned to growth in the construction sector, but continued to decline in industry.
The available data largely confirms the outlook for this year’s economic growth given in Banka Slovenije’s June projections, although the downside risks remain elevated. According to the projections, the expectation in the second half of the year is for growth to gradually improve as activity related to international trade picks up alongside solid domestic factors, the rate thus reaching 1.3% this year.