The OECD projects that Slovenia’s economy will expand by 2.5% this year in its latest twice-yearly Economic Outlook, an upgrade of 0.4 points from spring. After slowing down to 1.9%, growth is expected to gain pace to 2.7% in 2017.
In the report, released on Monday, the Organisation for Economic Cooperation and Development (OECD) finds growth will be supported by strong exports and gradually recovering private consumption and investment.
“The improving labour market will raise incomes and the healthier corporate sector will boost investment and improve competitiveness.”
Growth is expected to slow temporarily to 1.9% in 2016, in a projection level with the one issued by OECD in June. This is because investment is expected to decelerate, due to the lower inflow of EU funds.
Unemployment is forecast to decline gradually, to 9.3% this year from 9.7% in 2014, and then to 9.1% in 2016 and lower still to 8.4% in 2017. The last time the rate was below 9% in Slovenia was in 2012, at 8.8%.
Remaining slack is expected to contain inflation; consumer prices are expected to fall by 0.6% this year with inflation returning in 2016 at 0.5%. The rate is to pick up to 1.1% in two years.
After representing 5% of GDP, the general government deficit is to fall to 2.9% of GDP this year, and further still to 2.3% in 2016 and 1.8% in 2017.
The OECD calls for “continued corporate restructuring and dealing with remaining non-performing loans in order to revive credit activity remain priorities”, along with further fiscal consolidation.
“Permanent measures are key to arrest growing public expenditure, but, at the same time, the incomes of the poorest need to be protected.”
The organisation therefore advises well-designed structural reforms in education, healthcare and public administration to create savings without jeopardising services.
Also urged is raising the participation rates of the young and old to mitigate ageing pressures, lowering regulatory burdens, continuing to pursue privatisation, and boosting foreign direct investment.