development report 2012 - UMAR

Development Report 2012
Development by the priorities of SDS – A competitive economy and faster economic growth
17
different geographical orientation of these countries in
terms of exports, higher technological intensity, or cost
advantageous production, which enables them to take
better advantage than Slovenia of the global growth in
demand, which is actually reflected in Slovenia’s export
market share on the global market 5 .
The potential for economic growth in the medium-term
remains low. Adverse fiscal conditions, the deteriorated
financial environment, which affects company
operations, and gaps in competitiveness, are the factors
which are expected to have a prevailing influence on
the relatively slow recovery predicted for the Slovenian
economy in the years ahead. Additionally, growth in
foreign demand, which was a key factor in the growth
of economic activity in recent years, has slowed down.
In light of these circumstances, estimations of potential
GDP growth point to a diminishing potential for growth;
if compared to the period preceding the crisis, this
amounted to approximately 4% against 1% on average
with regard to the next medium-term period 6 . This
shows a need for urgent structural changes and reforms
in order to enhance the potential for growth, and to
prevent the situation deteriorating to an extent which
would inhibit the provision of the financial resources
required for development. This would help us avoid a
longer period of weak economic growth or stagnation,
which was characteristic of some countries during the
past decade (e.g. Portugal).
Weaker economic activity in recent years is reflected in
lower inflationary pressures. Last year, annual growth
was at 2%, which is similar to the values from the previous
three years. The growth in consumer prices resulted
mainly from the increase in energy prices and items of
food, which was linked to the increase in commodity
prices on the international markets. The prices of other
goods continued to fall, while the increase in prices for
services remained subdued. Such developments have
been observed since the beginning of the crisis, as well as
the related fall in demand and the absence of pressure on
the prices of goods whose purchase can be deferred. The
impact of the fiscal changes, in contrast to the previous
two years, has been neutral, while the growth of prices
under direct control of the government exceeded the
level for the previous year (1.6% against 0.8%); however,
it complied with the course of not exceeding 2%. The
increase in prices relating to industrial products sold
by domestic producers on the domestic market, which
points to eventual changes in consumer/retail prices
and would explain them, decreased in comparison
with the previous year (from 3.5 to 2.6%). The total
growth of these prices last year was mainly a result of
5
See also Chapter 1.2 Enhancing competitiveness and incentives
to entrepreneurial development.
6
The calculation based on the production function method
with Spring Forecast of Economic Trends 2012 considered
for the period from 2012 onwards. The bivariate Kalman filter
was applied for the exctraction of the total factor productivity
cyclical component.
an increase in food producers’ prices, while the highest
price growth occurred in the production of textiles and
clothing (by 8.9%). An international comparison based
on the harmonised index of consumer prices has shown
that inflation in Slovenia is more than half a percentage
point below the value in the euro area (2.7%). Given the
presence of the same key inflation factors as in the euro
area, it is estimated that lower inflation in Slovenia was
mainly a result of its weaker economic activities.
The growth in wages over the past two years has been
strongly affected by the economic crisis, a rise in the
minimum wage, and the austerity measures in the
public sector. Owing to the austerity measures in the
public sector, a rise in the gross wage per employee
in 2010 (3.9% nominal) and 2011 (2.0%) was solely a
consequence of growth in the private sector. Following
a prompt reaction to the crisis in 2009 7 , under the
conditions of low economic activity and a changed
structure of the employed 8 the growth of wages in the
,
private sector was influenced mainly by the rise in the
minimum wage in the past two years 9 . We estimate
that it contributed approximately 3 percentage points
to the rise in the gross wage in the private sector in
2010 (5.1%). Accordingly, wages this year rose above
the average, mainly in manufacturing, where growth
was also partly the result of strengthening industrial
production volumes and labour productivity, changes
in the employment structure, and of low comparative
basis, since the growth of wages in this sector came
close to stagnation in 2009. In 2011, the incremental
rise in the minimum wage had less influence on (in our
estimation, below one percentage point) average wage
growth in the private sector (2.6%). Moreover, growing
unemployment, relatively low inflation, only a slight
recovery in economic activity, and the aspiration of
companies to maintain their competitive positions, did
not allow for any visible growth in wages. In the second
half of the past year, this slowed down even further also
on account of lower Christmas bonus and 13 th month
payments, which were at their lowest for the past six
years. During the crisis, these payments were most
affected in the financial and insurance activities, which
have the highest average wage despite the lowest rise
7
The private sector had already responded to the crisis at the
end of 2008 by reducing the volume of overtime work, and
introducing shorter working hours and lower extraordinary
payments. In 2009, this approach continued and resulted in a
considerable slow down in nominal wage growth (from 7.8%
in 2008 to 1.8%).
8
This was the result of dismissals of employees with mostly low
wages, which in statistical terms increased the average wage
level. According to our estimates, the 0.9 percentage point of
the average wage growth in the private sector in 2009 was a
result of the aforementioned effect; during the next two years,
the figure was much lower (0.5 or 0.3 percentage point).
9
The average wage in the private sector increased through
higher basic payments; the increase was also partly due to higher
payments for overtime work, and overdue and extraordinary
payments to employees.