Euro impact on Slovene CPI seen above forecast - PM

...Jansa said on Thursday.

"The calculations for the first half of 2007 show that the euro contributed 0.3 percent to the inflation but those calculations were probably a little low," Jansa told managers at an economic conference.

He said that prices have gone up since the end of obligatory double pricing in June as prices now no longer have to be shown also in Slovenia's previous currency, the tolar. Jansa pointed out the biggest hikes were detected in prices of small products.

"We cannot give the final number as to how much the euro has contributed to the inflation but I fear that 0.3 percent is not the final calculation," said Jansa.

Government's Institute of Macroeconomic Analysis and Development and the European Commission said in March that adoption of the euro is only expected to add some 0.3 percentage points to Slovenian inflation this year.

But inflation in the country has since rose significantly and is now the highest in the euro zone. It reached 3.6 percent year-on-year in September and was well above the euro zone's September inflation of 2.1 percent.

Jansa pointed out that Slovenia's economic growth is also significantly higher than in the euro zone. Slovenia's economy is expected to expand by 5.8 percent this year while euro zone growth is seen at 2.5 percent.

He said inflation was Slovenia's biggest problem also ahead of euro adoption, although the country managed to bring it down to tolerable levels at the end of 2005. In December, just before Slovenia adopted the euro, year-on-year inflation was 3 percent.

The government expects inflation to rise to 4.3 percent year-on-year by December, mainly on account of higher global food and oil prices, but hopes inflation will fall to 2.9 percent in 2008.

Slovenia, which joined the EU in 2004 along with nine other mostly east European states, is the first newcomer to have adopted the euro.

[LJUBLJANA/Reuters/Finance.cz]