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									                                                                   Slovenian Economic Mirror, December 2008         3
                                                                                               In the Spotlight

In the spotlight
Due to deteriorating economic conditions and significantly lower forecasts for economic growth in Slovenia’s
main trading partners, we revised the Autumn Forecast of Economic Trends downward in December 2008,
predicting much slower economic growth in 2009 than anticipated in the autumn, as well as a slower revival
in 2010. Real GDP growth will total 4.1% in 2008 (instead of the 4.8% projected in the autumn); it will decelerate
to 1.1% (3.1%) in 2009, and strengthen to 3.1% in 2010 (4.0%). The greater-than-predicted slowdown of economic
growth in 2009 is mainly due to the deteriorating conditions in the international environment and tightening lending
conditions. The forecasts for exports and investment activity are, therefore, much lower than the autumn forecasts
and final domestic consumption growth will decline as well. As a result of significantly diminished economic activity,
employment is also expected to decline in 2009 (-1.3%). Due to a higher number of unemployed, the forecast for the
registered unemployment rate is higher compared with the autumn forecast (7.7%; 6.8% in the autumn). Growth
of wages in 2009 will also be weaker than projected. Nominal growth of the gross wage per employee will be 2.8
p.p. lower (5.0%); the slowdown will be higher in the private sector, while growth of public sector wages will remain
relatively strong as a consequence of the agreement on the implementation of the new wage system. The forecast
for inflation is also lower, largely due to lower prices of oil and other commodities. Inflation is thus expected to be
at 3.0% (3.6%) at the end of 2009; considering the price movements in 2008, average inflation will drop to 1.1%

After slowing gradually in the first ten months of 2008, the lending activity of domestic banks almost
stopped entirely in November due to tougher conditions in international interbank markets; it was at its
lowest since March 2005. Only general government loans recorded a s
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