Spring forecast

The Spring Forecast of Economic Trends was prepared in a situation of high uncertainty related to the war in Ukraine. After a deep downturn in 2020 and a strong rebound last year, we expect GDP growth of 4.2% this year, which is 0.5 p.p. lower than projected in our Autumn Forecast. We had already projected a slowdown of growth before the start of the war in Ukraine, mainly due to last year’s high base as well as increasing price pressures from high energy and commodity prices and supply chain bottlenecks. Moreover, we expect the volume of support measures that have a positive impact on economic growth to be lower this year than last year, even taking into account the measures taken until the middle of March. Economic growth this year will be largely driven by domestic consumption growth, while private consumption growth will slow under the impact of higher inflation. The easing of containment measures will lead to faster growth in the consumption of services, which was still far behind 2019 levels last year due to restrictions related to the epidemiological situation. Investment growth will remain high. We expect exports to continue to grow, albeit at a slower pace than last year, due to a slowdown in the growth of goods exports, which will be significantly affected by the consequences of the war in Ukraine, as well as a sharp decline in exports to Russia and, via the impact on the economic activity of Slovenia's main trading partners, a slowdown in the overall growth of external demand. Inflation continued to rise at the beginning of this year and is expected to remain relatively high this year, before gradually declining. The rise in employment and the decline in unemployment will continue, and at the same time demographic trends will increase the impact of labour shortages. We expect GDP growth to slow to around 3% over the next two years. The main risks to the realisation of the forecast are related to the unfolding of the war and energy prices. The downside risk also remains related to the epidemiological situation and increasingly to supply chain disruptions. Economic growth could also be higher than forecast if the situation in Ukraine stabilises and geopolitical tensions ease and will also depend on the adaptability of businesses and support policies during the war and sanctions against Russia.