As a result of increased uncertainty, economic activity fell in Slovenia at the beginning of the year in quarterly and year-on-year terms. The fall was the result of the trade deficit and a further contraction in investment, with current growth in household spending also coming to a halt.
Economic activity fell by 0.8% in the first quarter compared to the quarter before, and was also down by the same percentage compared to the first quarter of 2024. Trends were therefore less favourable than the average for the eurozone, where initial estimates put quarterly GDP growth at 0.3% and year-on-year growth at 1.2%.
Amid rising global trade tensions and high levels of uncertainty, there was a decline in gross fixed capital formation (-5.1%) and a stagnation in exports (0.1%). With the fairly strong growth in imports, net trade therefore made a negative contribution to GDP growth (-1.4 percentage points). The relatively strong growth in imports alongside modest investment can be linked primarily to the build-up of stocks amid uncertain economic conditions. There has also been a noticeable slowdown in private household consumption, which rose by a mere 0.4% year-on-year. With employment otherwise high and with above-inflation wage growth, we can attribute this slowdown to more precautionary behaviour by consumers in response to the uncertain conditions. Growth in government spending also slowed. Looking at individual activities, the fall in value-added was broadly based, occurring in industry, construction and, to a lesser extent, in private services. Only public services saw a continuation in growth.
With the fall in economic activity in the first quarter and the deterioration in economic sentiment at the start of the second quarter, prospects for economic growth, which Banka Slovenije will address in the new forecasts in June, have become less certain. This is mainly the result of increased trade and geopolitical friction.