Economy rebounds in Q2

GDP recovers but remains weak: The economy bounced back in the second quarter, with GDP expanding 0.7% on an annual basis, from a short-lived 0.6% contraction in Q1. Still, the result remains weak by historical standards. On a seasonally-adjusted quarter-on-quarter basis, economic activity rebounded by 0.7% in Q2, contrasting the previous quarter's 0.7% decrease and marking the best result since Q1 2024.

Private consumption drives the rebound: Domestically, private consumption was the main driver of the year-on-year rebound, accelerating to 3.6% year on year in the second quarter (Q1: +0.4% yoy)—the best reading since Q2 2022; moderate inflation and robust wage growth likely boosted household spending. Moreover, fixed investment contracted at a milder rate of 0.2% in Q2, following the 5.6% decrease logged in the prior quarter, likely buttressed by the ECB’s easing cycle. In contrast, public consumption contracted 0.5% (Q1: +2.3% yoy). On the external front, exports of goods and services fell 0.8% in Q2 (Q1: +0.8% yoy), likely hit by U.S. tariffs on goods exports. Moreover, imports of goods and services growth waned to 2.7% in Q2 (Q1: +3.8% yoy).

GDP growth to remain weak: In 2025 as a whole, economic growth should remain close to its 2024 levels and well below its pre-Covid decade average of 1.9%. U.S. tariffs will have a knock-on impact on Slovenian export growth via the latter’s trade ties with the broader EU economy, and higher inflation compared to 2024 will weigh on private consumption growth. On a more positive side, EU funds and lower interest rates should drive a rebound in fixed investment. Weaker-than-expected EU demand is a downside risk.

Panelist insight: Commenting on the outlook, EIU analysts stated: “We […] forecast an ongoing stabilisation through the rest of the year after the EU struck a trade deal with the US in July. This deal includes a 15% tariff on most US imports from the EU, averting the risk of a damaging tit-for-tat escalation. This is less bad than recent threats of 30% or 50% tariffs—and will mean tariffs on cars are cut from 27.5% to 15%. Nonetheless, […] we note that the weighted average tariff rate is now several times worse than what the EU faced last year, weighing on the bloc's exports. Although the US is not a major trade partner for Slovenia directly, there is a secondary effect from Slovenia's links to the wider European automotive industry.”

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