Slovenia: Economy maintains strong momentum in the second quarter
Activity softened in the second quarter, with GDP expanding 8.2% year on year (Q1: +9.6 yoy). That said, Slovenia expanded at the fastest pace among all EU countries that have so far released data. The slowdown was due to weakening private consumption and investment, as well as a small contraction in government spending. Meanwhile, in contrast to Q1, net exports had a small positive contribution.
Private consumption increased 10.6% in the second quarter, which was below the first quarter’s 19.6% expansion. Public spending dropped at the sharpest pace since Q4 2020, contracting 0.5% (Q1: +3.2% yoy). Meanwhile, fixed investment growth waned to 6.4% in Q2, from 8.6% recorded in the previous quarter.
Exports of goods and services growth improved to 8.7% in Q2 (Q1: +8.4% yoy). Conversely, imports of goods and services growth softened to 8.5% in Q2 (Q1: +14.6% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth accelerated moderately to 0.9% in Q2, following the previous period’s 0.7% increase.
Despite the strong second quarter showing, the economy is set to lose steam in H2, and the Consensus is for quarter-on-quarter contractions in GDP in Q3 and Q4. Commenting on the outlook ahead, analysts at the EIU said:
“We expect falling business confidence, tightening monetary policy and weakening external demand to increasingly constrain economic activity this year, alongside efforts to reduce gas demand by 15% in line with an EU agreement. We expect a European energy crisis over the winter and gas rationing in central Europe to prompt a region-wide recession, with three consecutive quarterly contractions in real GDP in Slovenia, starting from the third quarter of 2022.”