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The government expects the economy to expand by 4.4 percent this year. Foto: Pixabay

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Slovenia central bank sees fast growth, urges more investment

12. October 2017 ob 12:09
Ljubljana - MMC RTV SLO, Reuters

Fast economic growth in Slovenia will increase the need for investment in production capacity and is likely to lead to a labour shortage, the central bank said on Thursday.

The government expects the economy to expand by 4.4 percent this year, up from 3.1 percent in 2016, but analysts expect even higher growth as exports, the main driver of the economy, jumped by almost 19 percent year-on-year in August. "Considering various survey indicators, fast economic growth will continue in the coming months," the Bank of Slovenia said in a report.

"High growth in industrial output, high utilisation of production capacity of the export sector and economic strengthening of the international environment show the need to invest in production capacities," it said.

The wages bill rose by 5.6 percent year-on-year in the first seven months of 2017 as unemployment fell, the bank said, adding that that did not worsen competitiveness as the growth of labour costs per unit of production remained lower than the euro zone average. "In the future, lack of labour will be one of the main challenges of retaining high economic growth," it said.

The government should focus on reducing public debt which reached 78.5 percent of GDP in 2016, the bank added.

Slovenia, which narrowly avoided an international bailout for its banks in 2013, returned to growth a year later and has significantly increased exports which include cars, car parts, pharmaceuticals and household appliances. In September the number of people out of work fell to 80,990 and was the lowest in 8.5 years.

The September unemployment rate will be published next month. In July, the latest data available, it reached 9.1 percent with 84,674 unemployed. On prices, the central bank said companies and households expect increases in the short term as price pressures rise mainly due to the cost of oil and raw materials.

Inflation reached 1.4 percent year-on-year in September, unchanged from August but well above 0.2 percent a year ago.

Reuters