Business News

Govt Forecaster Upgrades Growth Outlook to 2% (adds)

Ljubljana, 25 September (STA) - IMAD, the government's macroeconomic forecaster, significantly upgraded its growth forecast for the year Thursday. Driven by exports, the economy is projected to expand by 2% this year, up from its spring forecast of 0.5%.

Aside from exports, IMAD expects domestic consumption to pick up this year on the back of a recovery of the labour market and increased household spending, though government expenditure will remain subdued.

Growth is projected to continue in 2015 and 2016, albeit at the somewhat slower pace of 1.6%.

IMAD's forecast comes on the heels of significant upgrades by other institutions and better than expected Q2 GDP figures, but it is far more bullish.

The central bank's current forecast is 1.6% and the outlook by the European Bank for Reconstruction and Development 0.7%.

IMAD's forecasts are crucial in that they form the basis for the government's budgetary planning.

One of the first tasks of the new government will be to determine whether a supplementary budget is needed since the target deficit for the year has already been exceeded.

IMAD director Boštjan Vasle said future growth would largely depend on which instruments the government will select from its economic policy toolbox.

In any case, he does not expect growth to be driven by investment spending like it was in the first half of the year, when the economy expended 2.5% year-on-year.

IMAD expects end-year inflation at 0.3%, well below the target of 2%.

Inflation is expected to accelerate in the next two years, but IMAD expects it to remain "well below 2%".

The forecast is underpinned by "improvements in the main trading partners and the continuation of fiscal consolidation, but they are associated with significant uncertainty," Vasle said.

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