Slovenian Central Bank Worried About Rising Inflation

Slovenia’s central bank said it’s worried that rising inflation pressures may “strongly affect” the country’s economic competitiveness.

The inflation rate advanced to 1.9 percent in December and consumer prices are set to rise further on advancing global costs of commodities and food, Bostjan Vasle, the government’s forecasting institute director, said last month. The European Central Bank aims for an inflation rate of about 2 percent.

The export-driven economy of the euro-region member is slowing as austerity measures in Europe weaken demand for its exported goods. Gross domestic product grew 1.7 percent in the third quarter of 2010 compared with 2.1 percent in the previous three months.

“Economic growth and employment, which are dependent on international trade, are also tied to efforts that inflation doesn’t breach the target in the euro region,” the Ljubljana- based Banka Slovenije said in a statement today. “To anchor inflation expectations, the consideration of domestic price policies that ensure price stability will be in place.”

The government’s forecasting institute has said that lending at Slovenian banks “practically” ground to a halt in the last quarter of 2010, which will also weigh on the economic recovery.

Slovenia’s three largest banks, Nova Ljubljanska Banka d.d., Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. had their ratings placed on review for a possible downgrade by Moody’s Investor Service on Jan. 27 because of continued weakness in the country’s corporate sector and further increases in non-performing loans

“Preliminary data for 2010 show that the banking sector has made a loss, which is a reflection of taking risks in the past,” the central bank, led by Governor Marko Kranjec, said in the statement today. “Despite all this, there is a tendency of stabilizing in credit activity.”

-- Editors: Alan Crosby, Patrick Henry

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James Gomez at jagomez@bloomberg.net

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