June 9 (SeeNews) - The Organisation for Economic Co-operation and Development (OECD) has downgraded its forecast for the economic growth of Slovenia in 2022 to 4.6% from 5.4% predicted in December, it said.
"GDP growth is projected to moderate to 4.6% in 2022 and 2.5% in 2023, in part reflecting the negative impact from the war in Ukraine. Domestic demand will be the main growth driver," OECD noted in its June 2022 Economic Outlook report on Wednesday.
The labour market is expected to remain tight, with historically high employment and low unemployment rates continuing to put pressure on wages and together with high and rising fuel and food prices, this will lead to higher headline inflation, OECD said.
"A major risk is that stronger wage growth could further raise inflation expectations and lead to a wage-price spiral," the OECD noted.
Fiscal policy is expected to tighten moderately in 2022, as temporary subsidies and tax measures aim to mitigate the effects of increasing electricity prices for most affected households, while additional support to households should be financed by spending cuts as the current fiscal stance risks prolonging inflationary pressures.
"Moreover, making the tax system more growth-friendly by further reducing labour taxes, financed by higher consumption and property taxes, could address labour shortages and raise potential growth," the OECD added.