The main focus of discussion at the April Spring Meetings of the World Bank Group and the IMF, which are taking place in Washington, D.C. this week, is once again the difficult global economic situation, marked by war in the Middle East and general global geopolitical tensions. Their consequences, mainly in the form of an impact on economic activity and inflation increases via energy price rises, are also being felt, although how strong they are will depend on how long these economic and political tensions last. This renewed economic uncertainty means that the IMF is forecasting, as it has on previous occasions, a continuation of the slowdown in global economic growth, with the same applying to the euro area.
The upshot of the discussions at the meetings this time round is that the situation has deteriorated since the war in Iran started and that uncertainty has increased as a result. The realisation of geopolitical risks through high oil and other energy prices is increasing the likelihood of stagflation. This is something that applies to the euro area as well.
In this situation, the IMF is therefore persisting with its forecast of slower economic growth in 2026, similar to the rate seen in 2025. Consequently, it has slightly downgraded the global economic growth forecasts it made in January. In its April forecasts, it estimates GDP growth of 3.1% in 2026 and 3.2% in 2027. However, for the euro area these figures are significantly lower, at 1.1% in 2026 and 1.2% in 2027. The IMF is also warning that a protracted realisation of the current risks could lead to a significant worsening of the economic situation going forward.
The IMF is expecting slightly lower growth for Slovenia in 2026 (2%) than was forecast back in the autumn (2.3%), and has adjusted its inflation forecast for this year upwards to 2.9%.
Banka Slovenije will, as usual, unveil its latest projections in June. Current indicators point to a gradual strengthening of economic growth in 2026, but this will be accompanied by slightly higher inflation than was forecast back in December as a result of the rise in energy prices.
Monetary policy response
We are also responding to the current situation of increased risks as usual on the Governing Council of the ECB. At the most recent meeting, we decided to keep interest rates unchanged given the uncertainty surrounding the future dimensions of the Middle East conflict. Recognising that a scenario is gradually emerging in which the conflict is unlikely to be resolved quickly, we stress that the ECB’s Governing Council is ready to act decisively when required. Its future decisions will therefore remain focused on seeing inflation stabilise sustainably over the medium term at its 2% target rate. The next steps will be based on an assessment of the inflation outlook and the risks surrounding it, the dynamics of underlying inflation, and the strength of monetary policy transmission.
Situation in the Slovenian banking system
Despite these uncertain times, the Slovenian banking system is continuing to operate well. Banks’ net profits last year were again above the average, totalling EUR 882 million across the system, although this figure was slightly lower than in 2023 and 2024. Our assessment is that the outlook, as far as the general systemic risk level in the banking sector is concerned, has deteriorated slightly in the last half-year. Increased risks are coming mainly from international geopolitical tensions and feeding into issues of cybersecurity, while other risks remain, in our assessment, low to moderate. Banka Slovenije is also playing its part in the banking system’s successful handling of the shocks from the environment, through preventive macroprudential policy measures aimed at strengthening resilience.