Slovenia posts record ‘07 growth, slowdown seen

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Slovenia posted the highest economic growth since its 1991 independence last year, when it joined the euro zone, but analysts said it can expect a significant slowdown in 2008.

The statistics office, which released 2007 GDP data on Monday, said growth rose to 6.1% from 5.7 in 2006, lifted by a 17.8% hike in investment and a 13% rise in exports. “Adoption of the euro contributed to this high growth as it fuelled exports, increased foreign investment inflow and eased financing of investments,” said Janez Sustersic of Koper’s Faculty of Management.

But analysts said the country will this year experience a significant slowdown of economic growth, in line with downward trends in the rest of the European Union. “The slowdown is inevitable because of high oil prices, the strong euro and a cooling down of the real estate market in Europe,” said Matej Tomazin of investment firm Alfa Invest. He said growth could fall to between 3 and 4% this year, which is well below official forecasts. The government expects growth of 4.6% in 2008 and the central bank sees it at 4.4%. “At present I see no reasons why we should need to change our growth forecast of 4.6% for this year,” said Bostjan Vasle, head of the government’s Institute of Macroeconomic Analysis and Development. He said the expected slowdown in growth could lead to a rise of unemployment but would reduce pressure on prices. However, he also said this year’s inflation would mostly depend on global prices of oil and food.

Since adopting the euro in January 2007, Slovenia has experienced a hike in inflation, which reached 6.4% year-on-year this February and was double the euro-zone average inflation of 3.2% in the same month. France Krizanic of the Economic Institute at Ljubljana’s Law Faculty said growth this year will largely depend on the policy of the European Central Bank. “If the ECB reduces interest rates, growth will be at least as forecast (by the government),” said Krizanic. “But if that does not happen, it may be lower than forecast, which could cause additional troubles to Slovenian industry and increase unemployment,” he added. (Reuters)

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