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Slovenian Economy Unexpectedly Exits Recession on Demand

May 31 (Bloomberg) -- Slovenia’s economy unexpectedly exited its recession in the first quarter as gains in domestic consumption offset slower investment growth.

Gross domestic product advanced 0.2 percent from the previous three months, when it contracted 0.7 percent, the statistics office in the capital Ljubljana said on its website today. Economic output fell 0.2 percent from a year earlier, it said. A Bloomberg survey of six economists forecast a 1.5 percent contraction from a year ago.

“It’s a surprise and it seems we were too pessimistic about growth in this period,” Bojan Ivanc, an analyst at KD Bank d.d. in Ljubljana, said by phone. “But the outlook for the next quarters isn’t promising.”

Slovenia fell into its second recession in three years in the last quarter of 2011 after austerity measures and the debt crisis damped demand for its exported goods. GDP will shrink 2 percent in 2012, according to an estimate by the Organization for Economic Cooperation and Development. That compares with a 1.4 percent fall forecast by the European Commission and a 0.9 percent drop estimated by the government’s economic institute.

Economic Boost

The Adriatic country will spend 377 million euros ($468 million) to spur the economy, Radovan Zerjav, the Economy Minister told reporters today in Ljubljana.

“The money will go into subsidies, guarantees and public investments,” Zerjav said. Reducing bureaucracy, creating industrial zones for small companies as well as changes in legislation to speed up investment in the construction industry are among the proposals the government expects will boost growth, he said.

Prime Minister Janez Jansa’s government is trying to trim the budget deficit by implementing an 800 million-euro ($993 million) savings package to win back investor confidence and reduce borrowing costs, which surged in November.

The economy will probably shrink 0.4 percent next year, according to the OECD.

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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