Slovenia’s economy contracted for the second consecutive quarter in the last three months of 2011 as export growth slowed amid government austerity measures across Europe, a Bloomberg survey showed.
Gross domestic product fell 0.9 percent from a year earlier, compared with a 0.5 percent drop in the third quarter, according to the median estimate of six economists in a Bloomberg survey. The statistics office will publish the report at 10:30 a.m. in Ljubljana tomorrow.
“It looks like weak domestic demand continued to drag Slovenian growth down,” Liza Ermolenko, an emerging-markets economist at Capital Economics Ltd. in London said in an e-mail. “As the eurozone, Slovenia’s key export destination, is on the verge of a renewed recession, exports are on course to slow further. This year is going to be a tough year for Slovenia.”
Slovenia had its long-term credit rating lowered by Fitch to A from AA- with a negative outlook on Jan. 27 because of a lack of financing flexibility in the face of the debt crisis. The country is sliding into a recession because demand for its exports in Europe is slowing as nations trim spending to lower their debt burden.
Nova Ljubljanska Banka d.d., the country’s biggest lender, reported a 239 million-euro ($321 million) loss last year on surging bad-loan provisions. Abanka Vipa d.d., the third-largest bank, had a 119 million-euro loss in 2011.
Europe, where Slovenia sends about two-thirds of all exported goods, may also enter a “deep recession,” Capital Economics has said. GDP of the 17-member bloc is forecast to decline 0.3 percent this year, while the Slovenian economy is set to drop an annual 0.1 percent, the European Commission said in a Feb. 23 report. That compares with a 0.2 growth forecast by the government’s economic institute.
The commission, the executive arm of the European Union, said Feb. 14 that Slovenia needs an in-depth review of its imbalances, including “high debt at the banking industry.”
The government of Prime Minister Janez Jansa, which took power on Feb. 10 after a snap vote in December, pledged to cut spending by 800 million euros to allay investors’ concern over public debt that has more than doubled since 2007, when the former Yugoslav nation adopted the euro.
Since September, when the previous government of Borut Pahor was ousted, Slovenia’s credit ratings have been cut by Moody’s Investors Service, Fitch Ratings and Standard & Poor’s on a weak outlook for the banking industry and the economy.