The Central Bank of Slovenia published its Review of Macroeconomic Developments, finding that early-year indicators point to continued expansion in Slovenia and the euro area, while the escalation of the war in the Middle East has increased downside risks to growth and upside risks to inflation, with higher energy prices expected to lift prices in March. In the euro area, growth remained mainly services-led, with February’s manufacturing PMI rising back into expansion for the first time in six months. Headline inflation stood at 1.9% in February and core inflation rose to 2.4%, reflecting persistent service-sector price pressures. In Slovenia, year-on-year GDP growth was 2.0% in the fourth quarter and the nowcast for the first quarter points to quarterly growth of 0.5%, alongside signs of weaker consumption and softer survey-based demand assessments. HICP inflation rose to 2.8% in February, driven primarily by energy prices, while food inflation remained elevated at 4.3% and service inflation strengthened in parallel with rising labour costs. The consolidated general government deficit widened to 2.5% of GDP last year and, under government plans, is expected to widen further this year. On corporate investment, the review concludes that access to finance is among the least constraining factors and does not explain Slovenia’s investment underperformance versus comparable euro area countries, which is particularly evident in investment in intellectual property. Firms instead cited uncertainty and an unpredictable business environment, shortages of skilled labour, cost burdens, and bureaucracy and taxes. The analysis nevertheless identifies weaknesses in the macrofinancial environment’s support for SMEs and in encouraging innovation and digital transformation, noting that banks are perceived as supportive mainly for traditional investment such as machinery, equipment, and real estate.

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