Slovenia forecasts deeper, longer recession
Slovenia’s government yesterday said its recession would be deeper and longer than thought, forecasting a slump of two per cent in economic output this year and a further contraction of 1.4 per cent in 2013.
Previous official forecasts for the small eurozone country had been for a contraction of gross domestic output (GDP) 0.9 per cent in 2012 before returning to growth in 2013 with an expansion of 1.2 per cent.
A recovery would now only begin in 2014, with growth of 0.9 per cent forecasted for the year, said Bostjan Vasle, head of the official Institute of Macroeconomic Analysis and Development.
The institute was forced to slash its forecasts due to a sharp drop in domestic consumption, imports and exports – the main engine of growth – due to the eurozone crisis hitting demand in its main markets.
“Structural changes are needed urgently,” Vasle told journalists. He added that the institute expects unemployment in 2013 reaching 13.0 per cent of the workforce compared to 11.9 per cent this year.
Finance Minister Janez Sustersic said late on Thursday that the new forecasts were “realistic” but that nevertheless the government would stick to its target of cutting the budget deficit to below 3.0 percent of GDP in 2013.
Slovenia’s public deficit hit 6.4 per cent of GDP in 2011 but the government hopes to reduce it to between 3.5 and 4.0 per cent this year with recent austerity measures.
The former Yugoslav republic’s national debt, although low by eurozone standards, also almost doubled over the last four years to 45.5 per cent of GDP in 2011, according to the European Commission.
Recent weeks have seen speculation that Slovenia, which joined the single currency in 2007, may become the sixth eurozone member to need a bailout, mainly because of major problems with its banks.
Its credit ratings have been slashed and borrowing rates demanded by investors for its sovereign debt have hit seven per cent, a level seen as unsustainable in the long term without outside assistance.
Centre-right Prime Minister Janez Jansa, who took office earlier this year, in August warned the country may need a bailout unless the opposition backed his reform drive.