Slovenia: Economic growth softens in Q3 amid historic floods
GDP growth waned to 1.1% year on year in the third quarter, from 1.6% in the second quarter. The reading partly reflected August’s floods, which disrupted activity, particularly in the export-oriented automotive industry. On a seasonally adjusted quarter-on-quarter basis, GDP declined 0.2% in Q3, contrasting the previous quarter’s 1.0% growth. Q3’s reading marked the sharpest drop since Q4 2020.
The downturn was broad-based, with private spending, exports and growth in public consumption and fixed investment all weakening. Household spending contracted 0.8% in Q3 (Q2: +0.3% yoy), marking the worst result in a year. Government consumption growth moderated to 2.8% in Q3 (Q2: +3.4% yoy). In addition, fixed investment growth slowed to 8.3% in Q3 from 11.2% in the previous quarter. On the external front, exports of goods and services contracted 9.2% in Q3 (Q2: -1.3% yoy), marking the worst reading since Q2 2020. Meanwhile, imports of goods and services dropped at a quicker rate of 12.1% in Q3 (Q2: -6.2% yoy), also marking the worst reading since Q2 2020.
Looking ahead, GDP growth should accelerate from current levels in the coming quarters. Inflows of EU relief funds and the gradual recovery of business activity will support growth, with factory output expected to return to pre-flood levels in Q1 2024. In addition, lower inflation and interest rates next year should stimulate both domestic and external demand, supporting faster growth in private spending and exports compared to current rates.
Analysts at the EIU commented on the outlook:
“The large automotive and tourism sectors were among the hardest hit by the August floods, and localised disruption will persist in 2024. We estimate that the aggregate macroeconomic impact will be limited, with a stimulative effect on construction and investment activity largely offsetting negative effects on trade, industry and consumers. […] Modest support to real GDP in 2024–2025 will come from a recovering tourism sector, resilient pharmaceutical demand and expanding digital services and logistics industries.”