Slovenian Economic Mirror 4/2023: Lower economic activity in international trade in goods and manufacturing in April, further growth in some services; inflation slightly down again in May

The value of some short-term economic indicators for Slovenia relating to international trade in goods and manufacturing declined in April. Trade in services showed an upward trend, mainly due to a significant recovery in trade in tourism-related services. Turnover in market services also increased in the first quarter, particularly in professional and technical services and architectural and engineering services, related to solid construction activity, which remained strong in April. Household spending on food, non-food products and overnight stays in Slovenia was lower in April than a year earlier, while spending on cars was higher. After falling in April, the year-on-year growth in consumer prices slowed slightly again, to 8.4% in May. The biggest impact on inflation came from the prices of services. The contribution from food prices remains high, although their growth slowed slightly. In this week’s Economic Mirror we present Eurostat’s new population projections for Slovenia (EUROPOP2023). The projections are helpful in identifying the challenges posed by changes in the population structure, with the number of persons aged 20 to 64 decreasing and the number of older persons increasing, and in taking the necessary policy measures, especially with regard to the adaptation of social protection systems.


Available indicators for the euro area point to weak economic growth in the second quarter, following a contraction in the first. Against a backdrop of weak disposable income growth, high inflation and tightened financing conditions, private consumption declined in the first quarter despite strong employment growth, while net exports had a positive impact on growth. Euro area GDP grew by 1% year-on-year in the first quarter. According to the available indicators, economic activity in the euro area strengthened slightly in the second quarter. This points to growth in services activity, while manufacturing output continues to be held back by weak demand. In their June forecasts, the OECD and ECB predict 0.9% economic growth for the euro area this year, accelerating to 1.5% in 2024. Risks to the forecast relate to the persistently high core inflation, risks in the financial markets and the economic consequences of the war in Ukraine. 

In Slovenia, the value of some economic activity indicators related to international trade in goods declined in April, while construction activity remained strong; developments in some services also showed a positive trend. Trade in goods continued to decline in April. After rising slightly in the first quarter, manufacturing output fell sharply in April. The year-on-year decline deepened, with the largest falls still seen in the energy-intensive paper and chemical industries. Despite a decline in April, year-on-year growth in trade in services remained strong in the first four months of the year, mainly due to a significant recovery in trade in tourism-related services. In the first quarter of this year, real turnover further increased quarter-on-quarter in most market services and was also higher year-on-year, with the exception of transportation and storage. Turnover in most trade segments was also lower year-on-year in April, with the exception of sales of motor vehicles, where, according to preliminary data, turnover was significantly higher year-on-year in April as well. Compared to last year, households in Slovenia spent more on cars and less on food, non-food products and overnight stays in April. According to the figures on the value of construction put in place, construction activity remained strong in April and significantly exceeded last year’s level in all segments in the first four months. Economic sentiment continued to deteriorate slightly in May. Only confidence among consumers and in services showed a positive trend. 

In April, the year-on-year growth in the number of persons in employment continued, and the number of unemployed fell further in May; the average gross wage was slightly higher year-on-year in real terms in the first quarter. Year-on-year growth in the number of persons in employment in April was slightly lower than in previous months, mainly due to a year-on-year decrease in the number of civil servants. The largest contribution to the growth in the number of persons in employment still came from the employment of foreign workers. The number of registered unemployed fell further in May, by 15.5% year-on-year. The number of long-term unemployed also declined, by just over one-quarter. After two months of growth, the average gross wage in March was 1.2% lower year-on-year in real terms, mainly due to a slightly higher year-before base and the year-on-year increase in inflation. Despite a year-on-year decline in real terms in March, the average gross wage in the first quarter on average remained slightly higher year-on-year in real terms.

The year-on-year growth in consumer prices slowed to 8.4% in May and growth in producer prices also slowed. The main contribution to inflation came from services prices (2.7 p.p.), the growth of which strengthened. The increase in food prices slowed slightly (from 15.6% to 14.7%), contributing 2.3 p.p. to inflation. The biggest impact on the moderation of year-on-year inflation came from lower price increases in transport and housing, water, electricity, gas and other fuels, mainly due to the high base from last year related to elevated energy prices. Slovenian industrial producer prices fell in April after about two and a half years of uninterrupted growth. Year-on-year growth also slowed further.

In the first four months of 2023, the deficit of the consolidated general government budgetary accounts amounted to EUR 44.6 million, compared to EUR 145.4 million in the same period last year. Revenues increased by 3.7% year-on-year (compared to 14.3% last year, which was due to a stronger recovery and one-off revenues). The growth was mainly due to an increase in social security contributions amid continued employment growth and stronger wage growth. The increase in excise duties on energy has led to a significant increase in excise revenue this year compared to the first four months of last year. Overall, tax revenue growth remained modest due to the reduction of certain tax burdens. EU funds received were lower due to the high base of last year (Recovery and Resilience Plan), as were some non-tax revenues. Expenditure increased by 2.3% year-on-year (after having decreased by 0.9% last year). The main reason for the increase was the rise in wages and some other remunerations, which were influenced by the agreement on wage increases in the public sector. Various transfers which had fallen in the same period last year due to the lifting of COVID-19 measures have also risen this year, due to measures to mitigate the impact of rising energy prices. Investment growth was similar to that last year.