Release date 18 March 2022
Fear indicators rose as expected
Exports of services in Slovenia exceeded in January 2022 the monthly value before the outbreak of the pandemic for the first time (January 2020), that is by 1.2%. The growth of exports of transport services (+EUR 37 million), other business services (+EUR 13 million) and ICT services (+EUR 11 million) contributed the most. They compensated for the drop in foreign tourism receipts (-EUR 53 million), which amounted to 69% of those from January 2020. Monthly imports of services already exceeded those from the period before the outbreak of the covid-19 pandemics and were higher in January 2022 by 6.4% (+EUR 27 million) year over 2 years. Demand of Slovenia companies for transport services of foreign haulage companies was higher by EUR 43 million, while imports of other business services were higher by EUR 9 million. Tourism consumption of Slovenes abroad was lower by EUR 27 million and it accounted for 71% of that in January 2020. As the nominal decline in consumption of foreign tourists in Slovenia was even greater than that of domestic tourists abroad, the surplus in services (EUR 173 million) lagged that of January 2020 by one tenth but was one-fifth higher compared to January 2021. Compared to January 2020, the surplus was higher only in ICT services (+EUR 12 million) and insurance and pension services (+EUR 5 million). These data are nominal and do not include the change in prices in these services, which means that the real change in the last two years was lower by 5 to 10% for each type of service.
In January 2022 the prices of imported goods in industry to Slovenia were 2.3% higher than in the previous month and 26.4% higher than a year ago. At the monthly level, the most noticeable increase was in metals and ores (24.3%) where the 37.8% increase in crude oil and natural gas prices stood out. The prices of raw materials were higher by 4.3%, of energy products by 3.2%, of investment goods by 1.4% and of consumer goods by 0.6% compared to December 2021.
More economic topics are below in the attachment.
After first releases of a drop in optimism in real sector due to the war in Ukraine (lower PMI among large electronics manufacturers in last week), we also expected larger falls in other indicators, especially in Europe. The ZEW indicator, which measures the sentiment of German companies, fell (-93.6 points) even more than in the starting month of the covid-19 pandemic (-58.2 points in March 2020). The assessment of the current situation also deteriorated (falling from 13.3 to -21.4), which, according to German experts, reflects a slowdown in economic trends. Expectations of price movements increased by 108 points to 70 points. Expectations deteriorated more in energy-intensive companies and in the financial sector. These figures suggest possible stagflation, but ignore highly volatile prices (for example, the price of Brent crude fell to a range between USD 100 and USD 110 per barrel this week) as well as the lack of any data on order book cuts. The EC will very soon announce details on a new framework to provide Member States with fiscal support for rising energy prices in corporate sector.
At its meeting on March 16, the Federal Reserve decided to raise the key interest rate by 0.25 percentage points to between 0.25 and 0.5 percent. This is the first increase since 2018. At the same time, the Fed estimated that the key interest rate at the end of the year will be in the range between 1.75 and 2 percent, which means that this year will be followed by six more increases of a quarter of a percentage point. The Fed expects currently a 2.8% growth in US GDP this year, whereas in December it expected a 4% growth.
Can Europe manage if Russian oil and coal are cut off?; Ben Mcwilliams, Giovanni Sgaravatti, Simone Tagliapietra and Georg Zachmann; Bruegel Post; 17 March 2022. Available at: https://www.bruegel.org/2022/03/can-europe-manage-if-russian-oil-and-coal-are-cut-off/
Comment/Abstract: Authors believe that a stop to Russian oil and coal supplies would push Europe into a short and painful adjustment period. While stopping Russian gas imports would be difficult and costly, but feasible, it will likely be less painful for the EU to manage a complete interruption of Russian oil and coal imports. Oil and coal are more global and liquid markets than gas and rely less on rigid infrastructure like Europe’s gas import pipelines. However, this implies that a European halt to Russian oil and coal supplies would have substantial global second-round effects.
Economic sentiment index, Slovenia, March 2022, (25 March), Statistical Office of RS; 1.2
Comment: We expect a sizable drop in Slovenian economic sentiment index (from 6.8 to 1.2) which will be driven by uncertain outlook due to war in Ukraine as well as intensified inflation pressures. Sentiment in manufacturing and consumer sentiment are likely to be hit severely. Having that in mind this does not imply a corresponding drop in current activity but is more an expectation about the future which may lead some businesses to reconsider their investment plans.
“War is regarded as nothing but the continuation of state policy with other means.”
(Carl Von Clausewitz)