There seems to be no end in sight to the news about the stagnation and decline of the country under the government of Robert Golob. On Thursday, the Institute of Macroeconomic Analysis and Development (UMAR) downgraded its forecast for this year’s economic growth. Instead of 2.1 percent growth, the office now expects only a 0.8 percent increase in economic activity. The forecast for next year is also worse, with growth expected to reach 2.1 percent instead of 2.4 percent. In 2027, it is expected to be 2.2 percent.
The Institute of Macroeconomic Analysis and Development wanted to present the economic disaster as a consequence of negative risks related to the international and domestic environment, and claim that in the domestic environment, it is mainly related to the capacity to implement investment projects and the growth of labour costs. It also claims that despite the significant change in real GDP growth, changes in nominal GDP are very small and that the change in the nominal level of GDP in our autumn forecast for this year is a good 28 million euros lower, while next year it will be close to 120 million euros. Of course, the Institute is the PR arm of Golob’s government, and their words should be taken with a grain of salt.
However, this justification for economic disaster does not stand up to critical scrutiny, as Slovenia consistently ranks among the worst performers in the European Union in terms of GDP growth and other economic development indicators (industrial production, exports, corporate profits, etc.). And that is not the only bad news. Since the end of 2022, there has been a steady stream of data on the decline in industrial production, imports, and exports. Some time ago, we reported that the European Union statistical office – Eurostat had measured the largest decline in the volume of services in the European Union in Slovenia. The problems of the Slovenian economy are structural and, above all, politically created.
The government is completely oblivious to the problems
It is clear that three and a half years of the Golob coalition’s policies have left their mark. The socialist government naively expected that months of draining the economy with ever-new taxes and regulations would have no consequences. Minister of the Economy Matjaž Han and Prime Minister Robert Golob are caught up in some other dimension, comparing us to Germany and Switzerland and claiming that the economy is in excellent shape. Ironically, Germany has also become the sick man of Europe.
The parties that formed a coalition after the elections had already declared war on the economy before the elections – lower wages, higher taxes, more regulation, and squandering public money on a dystopian green agenda.
Despite warnings from experts, the government abolished the income tax reform introduced by Janez Janša‘s government and reduced the salaries of all Slovenians as of the 1st of January, 2023, claiming that the state could not afford an 800-million-euro budget shortfall, even though it then found a billion euros for the public sector. Let us not forget that Slovenia has one of the highest wage burdens in the EU compared to other member states, and the OECD has long been calling on us to reduce it. The additional wage burden has not stopped there – the government has added another 35 euros of levies to net wages in the form of “abolished” supplementary health insurance, an additional contribution for long-term care (1 percent for employees, 2 percent for sole proprietors), while also promising to tax severance pay, transportation to work, social contributions, and performance bonuses.
The government has also increased corporate income tax, raised excise duties, and further harassed entrepreneurs with the notorious “time-recording law” of the radical Left party (Levica). The government is therefore treating the economy like a cash cow that has no right to question central planning, but must quietly give up every last drop of milk it has to offer. The economy has become demonised and even despised, and entrepreneurs have become enemies of the working people.
In such an environment, no economy, however robust, can function normally. The Slovenian economy is still performing surprisingly well, considering the attacks from all sides. Nevertheless, it is not omnipotent.
Another indicator that points to the Slovenian government’s war on the economy is Slovenia’s decline in the Index of Economic Freedom, which is compiled annually by the US-based Heritage Foundation. We have fallen five places in this index in one year. We are falling behind in the innovation ranking and are at the bottom of the inflation ranking. The same applies to our country’s competitiveness ranking.
It should be noted that Bojan Ivanc, chief economist and head of the analytical service at the Chamber of Commerce and Industry of Slovenia (GZS), recently pointed out that the latest data published by Eurostat are worrying for Slovenia: “Given that data for 19 eurozone countries for the second quarter are currently available, we can see that we were only in 17th place among 19 countries in terms of economic growth in the first half of the year.”
According to Eurostat data, economic growth in the European Union in the second quarter was 0.8 percent on an annual basis and 0.7 percent on a quarterly basis. Slovenia is therefore lagging behind the European average.
The data, which shows us to be among the worst in comparison with others, thus refutes the Institute of Macroeconomic Analysis and Development’s analysis.
The budget receives sufficient funds, but the government spends too much
The paradox is that taxes have been increasing, meaning that more money is being spent, yet public services are stagnating or deteriorating. Data from the Statistical Office of the Republic of Slovenia (SURS) clearly show that the state has enough money, but is spending it excessively. Claims by government representatives that the coffers are empty are not true. Statistical Office’s data show that state revenues have increased – last year they were 6.3 percent higher than the year before. This means that the previous government was able to manage with lower revenues in the midst of the greatest crisis in history than the current government in times of relative peace.
Job losses and a cooling labour market – only the number of employees in public administration is rising
The data on the labour market is particularly worrying. In manufacturing, the number of jobs has fallen by 4,000, and there are also negative trends in construction. Ivanc added that the labour market has been cooling since last year. In December, for the first time in a long time, we recorded a lower number of jobs than in the previous year. The data for the first half of the year as a whole point to stagnation, while GDP in the EU increased by 1.8 percent.
Productivity refers to how much value each worker generates. If it declines, it means that we are working the same or more, but generating less wealth. In Slovenia, this is happening precisely because employment growth is coming only from the public sector, which does not generate profits.
This is why the biggest concern is the pressure on public finances. The public sector is growing, which means higher wages, more employees, and higher spending on pensions, healthcare, and social welfare. And who pays for this? All of us – through taxes. If the private sector declines, there is less money in the budget, which can lead to higher taxes, cuts in social programs, or even debt. In recent years, for example, we have seen an increase in healthcare spending due to an ageing population – Slovenia has an increasingly older society, which means more retirees and fewer workers.
The bill is being issued
The war declared on the economy under the ideological leadership of the Left party is thus also reflected in economic indicators – the Institute of Macroeconomic Analysis and Development’s fairy tales will be of no help to ordinary citizens as long as Slovenia remains at the bottom of the economic performance rankings. In light of all that, it should be noted that during Janša’s government, the situation was diametrically opposite – at that time, we were the second most economically successful country in the EU – and that during the coronavirus period.
I. K.
