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Slovenia’s Economy Continued to Shrink in First Quarter

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May 7 (Bloomberg) -- Slovenia’s economy continued to shrink this year as austerity measures in Europe cut demand for its exports, the central bank said.

Monthly indicators suggest that Slovenia’s gross domestic product was lower in the first quarter, Banka Slovenije in the capital Ljubljana said today in its monthly report. The euro-region nation’s economy expanded 2.1 percent in the first quarter a year ago, before entering its second recession in three years in the last quarter of 2011, when GDP contracted 0.7 percent from the previous three months.

“Weak activity in the euro region is affecting export demand, as well as manufacturing and we are seeing lower revenue growth in services, such as transport and storage,” the central bank said.

GDP is forecast to drop an annual 1.2 percent this year on weak demand in Europe and in its home market, according to the central bank.

The shrinking economy may complicate efforts by the government of Prime Minister Janez Jansa to cut public spending and follow the German-inspired austerity program in Europe that is meant to allay investors’ concern over the euro-area’s debt load. The government pledged to reduce the spending by about 800 million euros ($1.04 billion) to below 3 percent of GDP by year’s end.

The government needs to avoid “any extraordinary expenditures, which last year contributed 1.3 percent of GDP to the shortfall,” in order to meet this year’s task of narrowing the gap, the central bank said.

Last year, the government deficit surged to 6.4 percent of total output from 6 percent a year earlier as the previous administration of premier Borut Pahor boosted the capital of Nova Ljubljanska Banka d.d. and helped other state-owned companies.

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

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

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