Page 76 - SE Outlook Regions 2023

2.11.1 GDP growth

The International Monetary Fund (IMF) expects Slovenia’s economy to
expand by 5.4% in 2022 and then to drop to 1.8% in 2023 due to lower
external demand and rising inflation. The projection is made under the
baseline scenario, which assumes no escalation of the war in Ukraine,
a continued normalisation of monetary policy, and fiscal stimulus in
2023. The slowdown will be caused by weaker external demand, and
also by high inflation and greater uncertainty, which are expected to
weigh on private consumption and investment growth..

Over the medium term, growth is expected to rebound to its potential of
around 3% per year.

According to the IMF, the key risks stem from the war in Ukraine and
include further commodity price increases, lower external demand, and
supply chain disruptions.

Inflation could also remain high for longer, possibly triggering higher
wages and higher inflation expectations, which would in turn require a
tighter policy stance. Other risks include a possible correction in real
estate prices, which are seen as overvalued. Upside risks include a
possible continued reduction in energy prices, and a
stronger-than-expected tourism rebound.

According to the Organisation for Economic Co-operation and
Development (OECD), Slovenia’s GDP growth is projected to slow in
2023 to only 0.5%, reflecting high inflation and weaker foreign demand.
Private consumption will be hit by the impact of high inflation on
households’ disposable income. Weaker demand and higher interest
rates will slow investment, although the inflow of EU funds should
moderate the fall to some extent.

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