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Slovenia Business Week no. 16: CCIS Forecasts 4.1% Economic Growth for 2006

Inflation will stand around 2.3% and go up to 2.5% next year

The Chamber of Commerce and Industry of Slovenia (CCIS) forecasts that Slovenia's economic growth will be 4.1% in 2006 and 4% in 2007. Inflation will stand around 2.3% and go up to 2.5% next year, Irena Rostan of the CCIS's Economic Outlook and Policy Services told the press on Friday, 14 April.

The beginning of the year was marked by a dynamic economic activity, with industrial output and exports noting a positive growth rate. The trends were also good in the services sector, especially in trade, tourism, transport and business, she added.

Positive trends are expected to continue in international trade, with exports of goods and services steadily rising. According to Rostan, exports are still the main driving force of economic growth.

She believes that investments will influence domestic demand in the next two years, with a 4% rise in investments in intermediate goods, while private demand will go up by 3.1%. Meanwhile, gross wages per employee are to increase by 2.3% in 2006, and 2.5% in 2007.

The CCIS moreover expects a steady rise in employment, by 0.8% for this and 0.7% for next year. According to the ILO, however, the unemployment rate is to increase by 6.6% in 2006 and 6.7% in 2007. Last year, the ILO unemployment rate was 6.5%.

In Rostan's view, the forecast 2.3% or 2.5% inflation could be lower if prices of raw materials would no longer increase or would start dropping, which is unlikely given the current trends.

Another risk with inflation is Slovenia's euro changeover planned for the beginning of 2007, as the danger of retail prices increasing cannot be excluded despite the dual pricing period, according to Rostan.

The CCIS has in its forecasts considered all possible risks, such as the euro adoption, economic and social reforms (chiefly tax policy and labour market) as well as talks on the 2006-2009 social agreement and on the wages policy collective bargaining agreement.

Earlier this month, the Institute for Macroeconomic Analysis and Development upgraded its GDP forecast for 2006 by 0.2 percentage points to 4.2%. It attributed the upgraded figure to greater investment spending and better-than-expected trends in trade.

Source: Slovene Press Agency STA

Author: STA