OECD downgrades Slovenia's economic outlook
The Organisation for Economic Co-operation and Development (OECD) has downgraded Slovenia's economic outlook for 2025 by one percentage point to 1.6%. The forecast for next year is better but still poorer than in the OECD's December report; the economy is expected to grow by 2.4%, a downgrade of 0.2 points, CE Report quotes STA.
The growth will be driven by domestic demand, the OECD says. Private consumption will be fuelled by a strong increase in wages, while public funds for the 2023 floods reconstruction and EU funds will power investments.
The pressure of growing wages will keep inflation above 2% in 2025 and 2026, the report says.
"Risks are tilted to the downside and include rising trade tensions, stronger-than-expected wage growth, reduced competitiveness, and prolonged inflation."
Meanwhile, "upside risks involve faster reconstruction efforts and increased EU spending that boosts investment activity," the OECD says in its first economic outlook of 2025.
Increased defence and reconstruction spending will mean that fiscal policy will be expansionary.
"Structural measures include higher long-term care spending funded by a higher social security contribution rate."
Moreover, in addition to the planned pension reform, "further tax policy reforms are needed for fiscal sustainability in the long-term, while investment would benefit from supply-side reforms such as easier immigration processes and streamlined planning and permitting".
The budget deficit will grow to reach 1.7% of GDP this year and 1.5% in 2026. Public debt will decrease to 66.2% of GDP in 2025 and 65.6% in 2026.
The OECD's downgrade for Slovenia was the fifth most significant revision in this outlook report. The Finance Ministry commented that nevertheless, growth was to be at 1.6% in 2025 and increase to 2.4% in 2026, "and continue to exceed the average growth of the euro zone".
The 1.6% forecast for 2025 places Slovenia around the median among EU member state, excluding Malta and Cyprus, which were not covered in the report, and surpasses the average growth projections for both the Eurozone and the OECD.
Meanwhile, the outlook for next year puts Slovenia in sixth place in the EU, above both the eurozone and OECD averages.
