Slovenia outlook: Growth expected to accelerate despite challenging environment

3Q24 GDP came in line with our expectations, accelerating to 1.4% y/y. Such performance was supported by the steady private consumption footprint, while net exports surprised on the positive side. We see similar growth performance going into 4Q24, suggesting overall FY24 performance around 1.5% mark. Looking into 2025, domestic demand is expected to drive growth while challenges regarding the external demand developments imply less supportive net exports contribution ahead. We see GDP gradually accelerating towards 2.0-2.5% band during 2025-26 period, with risks remaining present and linked to external demand uncertainties.

We saw significant inflation moderation throughout this year, with CPI reaching its year-low point in October at 0% y/y level. However, situation turned around going into November, with headline figure growth accelerating amid expiration of temporary measures and new system of electricity network charges. Following expected average CPI of 2.0% in 2024, headline figure is seen landing at more elevated level around 2.7% in 2025, before easing again towards lower grounds in 2026.

While 2024 budget performance is expected to slightly deviate from the consolidation path, fiscal position is expected to remain overall stable, with consolidation resuming from 2025 onwards.

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