Central Bank of Slovenia flags continued third-quarter expansion as inflation eases and the fiscal deficit widens

The Central Bank of Slovenia published its latest Review of macroeconomic developments, reporting that the economy is still expanding in the third quarter but at a slightly slower pace than in the second quarter, while continuing to outperform the euro area average. It also noted a modest further easing in inflation, persistent labour market tightness and a widening general government deficit. Nowcast models point to quarterly GDP growth of 0.5% in the third quarter, with construction providing the main support, while domestic consumption signals softer momentum and manufacturing remains weak amid cost pressures and insufficient foreign demand. Inflation fell to 2.7% in September, with food prices the main driver since July and up 6.4% year on year, while services inflation stayed robust; core inflation slowed to 2.4% in September as non-energy industrial goods inflation eased and energy prices continued to slightly reduce headline inflation. The registered unemployment rate has stabilised at 4.5% alongside major labour shortages, and wage growth, although slowing, remains high, particularly in the public sector, with real wages rising faster than productivity. On public finances, the review points to weaker revenue growth amid subdued activity and higher spending linked to pay reforms, social security benefits and investment, with additional expenditure expected when the pension reform enters into force. The publication also includes analysis of external competitiveness and the pension reform’s implications for public finances and long-term sustainability.