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Economic growth is projected to remain solid and broad-based. Investment will accelerate as more EU structural funds are disbursed and capacity constraints bite. A strong labour market will lead to faster wage gains, supporting private consumption. Euro area growth should help exports remain buoyant despite cost increases. Higher energy prices and the disappearance of economic slack should push up inflation.
The fiscal stance is broadly neutral, though the budget deficit continues to fall. Accommodative euro area monetary policy is having an expansionary effect, and bank balance sheets have improved substantially. To contain cost pressures, Slovenia should enhance competition by accelerating its privatisation programme, which would also bolster inward FDI opportunities, and also by undertaking product market reforms and reduce barriers to entrepreneurship.
Slovenia has not taken full advantage of globalisation, with a low FDI stock and comparatively weak integration into global value chains. The authorities could encourage internationally competitive firms to locate operations in Slovenia by reducing onerous regulation and creating competitive markets. Also, labour market rigidities push those with obsolete skills into long-term unemployment or early retirement. Inclusiveness would be boosted by giving such workers the training needed to find a new occupation.
Economic Survey of Slovenia (survey page)