Slovenia Politics March 2018

Slovenia

Slovenia: Prime minister's resignation unlikely to derail economic momentum

March 26, 2018

Prime Minister Miro Cerar resigned on 14 March amid political pressure following a wave of public sector strikes and the Supreme Court’s verdict to annul September’s referendum approving a EUR 1.0 billion railway project—the government’s largest investment initiative. The move comes ahead of an already scheduled June election, and could see the vote moved forward. Political uncertainty over the abrupt departure is unlikely to influence the economy’s stellar performance, however, as the government will remain in a caretaker role until the election. That said, early polls have revealed that Cerar’s Modern Centre Party (SMC) is trailing, and a change in government could see a shift in economic policies. The president is currently consulting with political parties on whether to bring the vote forward.

The political turbulence comes against the backdrop of a stellar economic performance in Slovenia, which was one of the Eurozone’s top performers last year. Growth was fueled by surging exports, along with a solid performance by the domestic economy. A tight labor market and robust investment should drive another year of healthy growth, although the pace is expected to moderate from 2017’s high. Although some troubling signs emerged at the start of 2018, including a drop in consumer confidence and public sector strikes calling for higher wages, all-in-all the recent political developments are unlikely to dent the economy’s momentum.

GDP expanded a buoyant 5.0% in 2017. Following the resilient GDP reading, FocusEconomics Consensus Forecast panelists upgraded Slovenia’s growth outlook this month by 0.4 percentage points, and GDP expanding 4.1% in 2018. Next year, growth is seen moderating to 3.3%.


Author: Angela Bouzanis, Senior Economist

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