With strong growth in the final quarter of the year, Slovenia’s GDP expanded by 1.6% in 2023 and is forecast to accelerate to 2.3% in 2024 and to 2.6% in 2025. Inflation is expected to continue to decrease gradually over the forecast horizon. Employment is projected to continue to grow and the unemployment rate to remain low. The general government deficit is forecast to slightly increase to 2.8% in 2024 before declining to 2.2% in 2025, after having reached 2.5% in 2023. The debt-to-GDP ratio is projected to decrease from 69.2% in 2023 to 68.1% in 2024 and 66.4% in 2025.
| Indicators | 2023 | 2024 | 2025 |
|---|---|---|---|
| GDP growth (%, yoy) | 1.6 | 2.3 | 2.6 |
| Inflation (%, yoy) | 7.2 | 2.8 | 2.4 |
| Unemployment (%) | 3.7 | 3.7 | 3.6 |
| General government balance (% of GDP) | -2.5 | -2.8 | -2.2 |
| Gross public debt (% of GDP) | 69.2 | 68.1 | 66.4 |
| Current account balance (% of GDP) | 3.6 | 1.4 | 1.4 |
Growth to accelerate over the forecast horizon
GDP grew by 1.6% in 2023 with domestic demand proving resilient, in particular construction investment which increased by almost 25%. Imports fell much faster than exports, leading to a strong growth contribution from net exports that was offset by a very strong negative contribution from the change in inventories. After worsening for two years, terms of trade improved and the current account balance recorded a sizeable surplus in 2023. Employment continued to grow at a strong pace and real wages also increased. In August, devastating floods impacted many Slovenian regions, causing significant damage to property and infrastructure. In the final quarter of the year, growth accelerated, partly due to the start of reconstruction.
GDP growth is forecast to accelerate to 2.3% in 2024 and to 2.6% in 2025. Private consumption is projected to continue to grow in 2024-25, supported by employment growth and rising wages. Slovenia has introduced compulsory health contribution to replace private insurance, which is expected to lower private consumption and boost public consumption. Public investment is set to remain strong due to the expected deployment of RRF-financed measures, reconstruction works after floods and private investment, including into machinery and equipment. In 2024, exports are projected to increase in line with demand in the export markets. At the same time, imports are expected to increase, also to replenish the inventories, leading to a negative growth contribution from net exports. In 2025, contribution from net exports is projected to turn positive again. GDP growth is forecast to accelerate to 2.3% in 2024 and to 2.6% in 2025.
Labour market remains tight
Employment growth remained strong and the unemployment rate decreased to 3.7% in 2023. Employment is expected to continue to increase by 0.6% in both 2024 and 2025, driven by an inflow of foreign workers. The unemployment rate is set to remain stable at around the 3.6%. After a strong growth of some 11.8% in 2023 – and with demand for labour remaining robust – wages are forecast to increase by 6.1% in 2024 and by 4.4% in 2024.
Inflation to continue decelerating steadily
Inflation reached 7.2% in 2023, with a marked deceleration during the year. In the first quarter of 2024, inflation eased to 3.4% and a further fall is projected throughout the year. Inflation is forecast to average 2.8% in 2024 and 2.4% in 2025. Inflation excluding energy and food is expected to remain somewhat higher, as energy has an important role in the decline of headline inflation.
Public finances broadly stable
The general government deficit declined to 2.5% of GDP in 2023, in spite of the measures implemented to mitigate the impact of high energy prices, which increased by 0.4 pps. of GDP and accounted for 1.4% of GDP, and of expenditure for reconstruction after the floods, amounting to 0.4% of GDP. These increases were more than offset by a drop in social benefits by 1.0 pp. of GDP.
In 2024, the deficit is projected to increase to 2.8% of GDP. Expenditure is forecast to increase by 1.3 pps. of GDP owing to the indexation of social benefits, including pensions and higher spending on health. Public investment is set to increase by 0.5 pps. of GDP to 5.8%. This includes higher nationally financed expenditure for the reconstruction after the floods, projected at 0.7% of GDP. This increase in expenditure is partly offset by a decline in subsidies by 0.6 pps. of GDP, driven by an almost complete withdrawal of expenditure measures to mitigate the impact of high energy prices. Revenue is forecast to increase by 0.9 pps. of GDP, in particular due to the complete withdrawal of revenue-decreasing measures to mitigate the impact of high energy prices (lower VAT rates, excise duties, CO2 duty), and a temporary increase in corporate income tax rate by 3 pps. Overall, the net budgetary cost of energy related measures is set to decrease to 0.1% of GDP.
The deficit is set to decline to 2.2% of GDP in 2025 based on unchanged policies. A new long-term care contribution, to be levied as from July 2025, is projected to increase social contributions by around 0.4 pps. of GDP. Gradually lower expenditure for post-floods reconstruction will impact public investment, which is projected to decline by 0.4 pps. to 5.4% of GDP.
Projections for 2024, and especially for 2025, are subject to several country-specific risks. Investment, including to address flood damages, depends on planning and maturity of projects.
The debt-to-GDP ratio is forecast to decrease from 69.2% in 2023 to 68.1% in 2024 and 66.4% in 2025 due to the changes in the headline deficit and the increase in nominal GDP.