Bank Of Slovenia Lowers 2025 GDP Growth Projection

(RTTNews) - The Bank of Slovenia trimmed its economic growth projection for this year and next on Wednesday and forecast slower employment growth during the forecast horizon.

Slovenia's gross domestic product is expected to grow 2.2 percent next year, which was less than the 2.6 percent projected in June, the bank said in its biannual macroeconomic projections.

The growth estimate for this year was lowered to 2.0 percent from 2.5 percent. The GDP growth projection for 2026 was retained at 2.8 percent. The Slovenian economy is forecast to grow 2.4 percent in 2027.

The bank expects economic growth in the coming years to be supported by private consumption that will be underpinned by high employment, real income growth and gradually improving consumer confidence.

Public investment is expected to improve due to the increased use of EU funds. Export demand is expected to increase as the economies of Slovenia's main trading partners recover. These are projected to have a stimulating effect on the growth of private investment in the country in addition to the better financing conditions on account of lower interest rates.

Employment growth is forecast to improve slightly to 0.2 percent next year from 0.1 percent this year and gradually strengthen in the two years thereafter. The jobless rate is forecast to fall to 3.4 percent next year from 3.5 percent this year and remain at that low level for the remaining years of the forecast horizon, suggesting a tight labor market.

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Inflation is projected to linger near the 2 percent monetary policy target over the forecast period. Headline inflation is expected to climb to 2.2 percent next year from 2.0 percent this year and stay at that level in 2026. The rate is forecast to drop to 2.1 percent in 2027.

The bank attributed the temporary strengthening of inflation at the end of 2024 and in the first months of 2025, mainly to rising food prices and base effects and the new system of calculating network charges for electricity prices. Higher environmental taxes are expected to affect inflation in 2027.

"The economic growth forecast is accompanied by predominantly negative risks, while those on the inflation side are slightly tilted to the upside," the Bank of Slovenia said.

"The domestic economic environment remains subject to structural challenges, which are, among other things, related to low past investment activity, pressures on export competitiveness and an unfavorable demographic picture."

Increased geopolitical uncertainty and possible tightening of protectionist measures in global trade add to foreign trade risks, the bank added.