Slovenia: Stable growth outlook amid resilient domestic demand

• 1Q24 GDP growth in line with expectations.

• ECB decides on first interest rate cut.

• Fiscal position remains comfortable.

• Weaker dollar expected.

GDP maintained a steady growth pace going into 2024, with the headline figure up 2.1% y/y in 1Q24. The detailed breakdown revealed that the positive domestic demand footprint continued, while net exports also had a positive contribution. Looking ahead, we expect domestic demand to remain the strongest growth driver, with both private consumption and investment activity gaining traction. On the other hand, the net export contribution should play a less supportive role, as the pick-up in import activity should outweigh the anticipated export recovery. FY24 GDP growth is expected around 2%, with risks remaining linked to external demand developments.

Inflation pressures additionally eased going into 2Q24, where CPI moved below 3% in May. We see inflation maintaining a moderate pace amid a supportive supply-side development, with average inflation expected to land around 2.5% in 2024. Following better than expected budget execution in 2023, this year should bring moderate deficit widening amid flood related reconstruction expenditures, while the fiscal position is set to remain comfortable, with a deficit around 3% of GDP. News on the rating side was in line with expectations, with S&P affirming Slovenia’s rating at ‘AA-’, with stable outlook.

GDP (real,y/y)

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