Slovenia: Economy to restore pre-coronavirus image by 2022

Slovenia: Economy to restore pre-coronavirus image by 2022

The European Commission sees the Slovenian economy contracting by 7.1% this year, roughly in accordance with its previous estimate. A rebound of 5.1% is expected in 2021, one percentage point lower than the July projections.

According to the Commission’s autumn report, the economy is expected to return to pre-coronavirus levels in 2022, when GDP growth is estimated at 3.8%.

Job losses have been smaller than expected and the measures adopted have avoided a surge in bankruptcies, owing to public policy measures, the commission says.

In 2021, employment is projected to increase slightly. The unemployment rate is expected to fall to 4.8% after marking a 5% apex at the end of this year.

Due to low energy prices and weak demand, inflation is expected to range close to 0% in 2020, before rising to 0.9% in 2021. With the recovery setting in, the rise in consumer prices is expected to strengthen to 1.8% in 2022.

Much like across the EU, Slovenia’s public finances will deteriorate, with general government deficit projected to surge to 8.7% this year, before dwindling to 5.1% next year.

Public debt is projected to climb to 82.2% of GDP this year before tumbling to 80.2% in 2021 and 79.8% in 2022.

The sharp rise in expenditure is driven by the Covid-19 response measures, with a total budgetary impact of 5.2% of GDP in 2020. The cost of mitigating the impact of the pandemic will continue to be felt in 2021.

Additionally, a significant increase in public investment is projected in 2021 and 2022, which can be partly attributed to the rollout of some of the projects to be financed by the Recovery and Resilience Facility, the report explains.

On the revenue side, taxes on production and imports are projected to fall sharply, mainly due to a decline in private consumption expenditure.

Revenues from taxes on income and wealth, as well as social security contributions are expected to be less affected, as the consequences of the crisis on the labour market and compensation of employees remain subdued. /ibna