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Slovenia Business Week no. 19/2005: CCIS: IMAD Spring Report Sets 2005 Inflation at 2.5%

According to the latest "Economic Mirror" report, Slovenia's inflation rate in the coming years will be slightly higher than the EU average as the country will have to catch up its EU counterparts in economic terms

The government Institute for Macroeconomic Analysis and Development (IMAD) forecasts in its spring report that Slovenia would report an inflation rate of 2.5% this year and that of 2.3% next year. According to the latest "Economic Mirror" report, Slovenia's inflation rate in the coming years will be slightly higher than the EU average as the country will have to catch up its EU counterparts in economic terms.

Given that Slovenia's productivity growth is expected to be higher than in its major EU business partners and given some remaining structural imbalances in the Slovenian economy, the country's inflation is predicted to be 1 to 1.5 percentage points higher than the average inflation in its main business partners.

Inflation could be curbed further, according to the report, by concluding structural reforms, especially in the sectors where prices are still regulated by the state, in the financial market and in the labour market.

Since the inflation rate has more than halved in the last two years, the IMAD expects the rate to continue falling so that Slovenia could meet the Maastricht criteria for the euro adoption by mid 2006.

The IMAD report also predicts a 3.8% economic growth this year and a 4.1% growth next year. Compared to the autumn report, the forecasts of the GDP growth structure in 2005 have been changed: import figures were upgraded, while domestic demand forecasts were lowered.

According to the report, the exports to EU countries would continue to grow in 2005 and 2006, while there will be not much increase in the exports to Croatia, Serbia-Montenegro and Russia, for which export figures were particularly high last year.

The rate of private investment and government spending is to stay at the same level in 2005 and 2006 as it was in the previous two years. The private spending is expected to report a growth above 3% in the coming two years.

Source: Slovene Press Agency STA

Author: STA