Brussels Upgrades Growth Forecast for Slovenia
Slovenia's economy will expand to a ten-year high watermark of 6% of GDP this year and then gradually slow down to 4.6% in 2008 and 4% of GDP in 2009, the European Commission projects in the Autumn Forecast released in Brussels on Friday.
This means that Brussels has strongly upgraded its spring forecast of a 4.3% growth for Slovenia this year, which Finance Minister Andrej Bajuk labelled as an error then.
This year's record-high growth is buoyed by higher investment in fixed assets, particular in non-residential construction, such as motorways and other infrastructural facilities, as well in equipment and machinery. Consumer spending has been keen too, perked up by higher employment and lower taxation on individuals.
However, apart from more robust growth Slovenia can also expect higher inflation. The Commission puts this year's rate at 3.5%, and next year's to as much as 3.7%, while it is to drop to 2.9% in 2009. These rates are substantially above the average inflation levels in the euro area.
The Commission blames high inflation on various factors: higher capacity in companies and a lack of qualified workers, higher food and energy prices in most of the euro countries and the lack of competition in some industries.
Brussels also highlights the changeover to the euro: while its impacts seemed to be limited at first, there have been later some unusual price hikes. Inflationary pressures will also be caused by higher salaries, in particular in the public sector.
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