According to International Monetary Fund (IMF) forecasts, economic growth in Slovenia will be weaker than expected this year. In October, growth was forecast at 2.6 percent, but it is now expected to be only 1.8 percent. The significant deterioration in the outlook can be attributed to developments in the global environment and unfavourable economic policies for the economy at home.
This is the latest and the worst economic growth forecast of all the institutional forecasts. In February, the Institute of Macroeconomic Analysis and Development of the Republic of Slovenia (UMAR) forecasted GDP growth of 2.1 percent, the European Bank for Reconstruction and Development (EBRD) 2 percent, the Bank of Slovenia 2.6 percent, and the European Commission 2.5 percent.
In its latest economic forecast, the IMF downgraded economic growth for most countries, including the United States and China, attributing this to the US increase in tariffs, which are currently at a 100-year high. In light of this, it should be noted that the White House announced universal tariffs for all trading partners, which are currently suspended for many countries.
World economic growth has been cut by 0.5 percentage points to 2.8, and by 0.3 percentage points to 3 percent for next year. Upward “revisions” are foreseen for the US and other developed economies in 2026, Reuters reports. The IMF added that the forecasts are based on data as of the 4th of April and could quickly become irrelevant, given the rapidly changing global economic environment.
“We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” IMF Chief Economist Pierre-Olivier Gourinchas told the media.
As he pointed out, the instability is mainly driven by trade tensions and a high degree of uncertainty about future policies. “It’s quite significant and it’s hitting all the regions of the world. We’re seeing lower growth in the US, lower growth in the euro area, lower growth in China, lower growth in other parts of the world,” Gourinchas said in an interview with Reuters. He added that if trade tensions between the US and other countries were to escalate further, this would create further uncertainty, increase volatility in financial markets and tighten financial business conditions. At the same time, the deterioration in the economic outlook has also reduced demand for dollars, but the IMF is not yet concerned about the resilience of the international monetary system.
Golob’s economic “reforms”
The negative global economic climate could, of course, be overcome by domestic measures – by easing the administrative and fiscal burden on the economy and on the fundamental input cost, energy.
Slovenia is one of the European countries with the highest tax burden on salaries, according to the Slovenian Chamber of Commerce and Industry (GZS). “As a result of the changes to the Income Tax Act introduced in the last three years and the additional taxes and contributions adopted, employees with an average gross salary in the period 2023-2026 will be deprived of a net 3,600 euros, while employees with 2 times the average salary will be deprived of as much as 5,200 euros in the aforementioned time period. The Chamber of Commerce and Industry of Slovenia has been warning the government of the unsustainable additional burdens on Slovenian companies and the urgent need to relieve the burdens on employee salaries,” the Chamber said in a press release in February.
Vesna Nahtigal, Director-General of the Chamber of Commerce and Industry, said, “The business environment in Slovenia has deteriorated significantly in recent years. We are concerned that the government’s actions do not show that it is aware of the seriousness of the situation that the Slovenian economy is facing.”
Administrative relief for businesses, or “deregulation” of the business environment, would also help to overcome the unfavourable global trends. Here is what the President of the Chamber of Commerce and Industry said at a recent roundtable of the Chamber – earlier this month: “In addition to numerous bureaucratic obstacles and high energy costs, our economy is also facing extremely high salary burdens. The OECD report showed that Slovenia ranks 7th out of 38 OECD countries in terms of the burden of income tax and social contributions on average wages. And instead of following the recommendations to relieve the burden on wages, we are already facing a new burden in the form of the long-term care contribution that is set to be introduced in July this year. This is expected to bring an extra 700 million euros to the country. But we still don’t know how the law will be implemented and where the money will go, since we already know that there is a shortage of staff to deliver long-term care.”
Ž. K.
