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IMAD Says Slovenia Must Boost Its Competitiveness

Otocec, 27 October (STA) - Director of the Institute of Macroeconomic Analysis and Development (IMAD) Bostjan Vasle said on Wednesday that while a modest growth of about 1% is expected in Slovenia by the end of the year, the key issue that requires more attention in the country was a drop in competitiveness.

Various short-term indicators and some global surveys show Slovenia's competitive position has been slightly deteriorating in recent years, the head of the government think-tank said at a panel of Slovenian suppliers in Otocec.

Since Slovenia as a small and open economy is very much dependent on the developments on the global market, improving its competitiveness is crucial for the future, he believes.

Current economic growth on the global scale has a positive effect on Slovenia's exports, according to Vasle. While export figures are therefore encouraging, those tied to the domestic market remain relatively weak.

IMAD expects Slovenian investments to drop this year compared to 2009. Private spending will also decrease and the state's contribution to economic growth through fiscal policies will be modest, Vasle said.

Raw material prices, which have been increasing this year, will continue to go up in 2012 as well.

Globally speaking, the economic growth is currently higher in countries which are still catching up with developed countries, Vasle noted. "We're estimating that apart from a stable economic growth in developing countries for the next two years, this is a key reason why raw material prices surged in recent months."

Energy and oil prices will follow this trend, according to Vasle. IMAD expects the prices next year not to change much from the end of 2010, he added.

The relatively weak economic activity in Slovenia and the eurozone is also reflected in the inflation and given that no major changes in Slovenia's economic growth are expected in the next years, there will also be no long-term pressure on inflation.

The monthly oscillation will depend on seasonal factors, but IMAD projects similar movements the country is experiencing at the moment, which means that inflation will range between 2% and 2.5%, Vasle said.

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