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Economic activity is projected to gather pace in 2017 and 2018. Private consumption will accelerate on the back of employment gains and faster real wage growth. Investment will pick up as renewed EU structural funds bolster infrastructure investments, firms react to capacity constraints, and housing construction responds to higher property prices. Inflation is set to increase as economic slack disappears during 2018.
As the labour market tightens, there will be greater need for reforms to get the long-term unemployed back to work and improve labour force mobility to enhance the inclusiveness of economic growth. As economic slack is disappearing, fiscal tightening may be needed to prevent inflationary pressures. The sale of state-owned enterprises would promote competition and help to maintain the gains made in international competitiveness.
Fiscal space has narrowed as public debt is estimated to rise to 85% of GDP by the end of 2016 and interest payments have increased to almost 3% of GDP. The structure of fiscal policy could be more supportive on the supply side by moving the tax burden from labour towards property and shifting some spending on the unemployed in favour of training rather than passive income support.
Economic Survey of Slovenia (survey page)