Slovenia on track for euro entry inflation criterion

LJUBLJANA (Reuters) – Slovenia is expected to meet inflation criteria for joining the eurozone in 2006, as planned, despite recent hikes in oil prices, the Bank of Slovenia said in a statement yesterday. Slovenia plans to adopt the euro at the start of 2007. It is one of the most prosperous economies of the 10 countries that joined the European Union in May 2004 and was among the first to join the ERM-2 euro waiting zone one month later. The country meets euro entry requirements for public debt, budget deficit and interest rates but its inflation is still about 0.5 percentage points above the tolerable level. «Despite (growing oil prices), no large negative economic impacts can be expected at present, as global conditions of financing are relatively favorable and the companies’ business results are good,» the bank said in a statement. «It is an assessment of the Bank of Slovenia’s board that the inflation goal linked to the adoption of the euro will be met in time,» it added. The bank said production companies were less dependent on oil prices than in the past but warned against an increase of labor costs in Slovenia. «Too high labor costs would worsen the competitiveness of the Slovenian economy and initiate a tendency of price increases,» it said. Slovenia’s 12-month average inflation rate reached 2.7 percent in August, down from 2.9 percent in July and 4.1 percent in August 2004. The country expects gross domestic product to grow 3.8 percent in real terms in 2005.