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Umar: Growth in economic activity was supported by household consumption, construction and most services



Weak activity in the export economy

Umar notes in the latest edition of the Economic Mirror that the growth of economic activity in the first quarter came from household spending, construction investments and the growth of most service activities. Exchange of services has also strengthened.

Real gross domestic product (GDP) increased by 0.6 percent in the first quarter of this year compared to last year, and was 0.7 percent higher year-on-year, according to the Office of Macroeconomic Analysis and Development (Umar). According to their findings, household consumption contributed more than a percentage point to year-on-year GDP growth in the first quarter. Compared to the same period last year, households spent more on tourist services abroad and car purchases, and less on food, non-food items and overnight stays at home.

Along with the growth in the arrivals and overnight stays of foreign tourists, the growth in tourism-related services was high, Umar notes. Investment activity was also relatively high in the first quarter, particularly activity in the construction industry. The surprisingly high negative contribution of inventories (-6.5 percentage points), however, had an impact on the strong year-on-year decrease in gross investments, Umraj also wrote.

Weak activity in the export part of the economy

Activity in the export part of the economy was weak in the first quarter, as exports of goods and activity in manufacturing remained similar to the same period last year. However, exchange of services, especially travel, has strengthened, supported by the rapid post-coronavirus recovery in tourism. Total exports increased, while total imports decreased, which contributed to the high positive contribution of the foreign trade balance (5.1 percentage points).

After a period of strengthened growth, government consumption decreased year-on-year for the third quarter in a row, mainly in connection with lower expenditures for the control of the covid-19 epidemic.

The number of unemployed continues to fall

As stated on Umar, in the first quarter the largest contribution to the growth in the number of employed persons was again the employment of foreign citizens, while the decline in the number of unemployed continued in April.

Year-on-year growth in the number of employed persons in March was similar to that in the first two months (1.8%). Due to the lack of domestic workers in most activities, the biggest contribution to growth is the employment of foreign citizens, in March this contribution was already 83%. The highest growth was in the construction industry, which stands out due to the share of foreigners (48 percent) and is also among the activities with a large labor shortage.

At the end of April, 48,904 unemployed people were registered, which is 3.4 percent less than at the end of March, or 16.3 percent less than a year ago. The number of long-term unemployed also decreased by almost a third.

In February, the average gross wage was 1.2 percent higher in real terms year-on-year, which was mainly influenced by the significant increase in the minimum wage at the beginning of the year and also the relatively low last year’s base, wages in the public sector also increased.

Slightly lower, but still high growth in consumer prices

In April, the year-on-year growth of consumer prices decreased slightly, but remained high at 9.4 percent. Similar to previous months, the biggest contributor to growth was the prices of food and non-alcoholic beverages, which were 15.8 percent higher in April than a year ago.

Core inflation, i.e. price growth excluding the impact of energy, food and soft drinks prices, remained around 8 percent in April and was higher than in the euro area. The prices of Slovenian producers’ products decreased on a monthly basis in April after approximately two and a half years of continuous growth, and the year-on-year growth also slowed down, Umar announced.

The consolidated balance sheet of the public sector had a deficit of EUR 273.7 million in the first quarter of this year, which is slightly less than in the same period last year. Revenues increased by 2.6 percent year-on-year, the growth stemming mainly from the growth of social security contributions with continued employment growth and strengthened wage growth. Expenditures were 1.7 percent higher year-on-year, and the biggest contribution to this was the growth of wages and other labor costs, which were affected by the agreement on raising wages in the public sector.

Source: Rtvslo

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