Slovenia’s economy will shrink more than forecast as exports to Europe slow and credit dries up because of a struggling bank industry, the government’s economic institute said.
Gross domestic product will contract 1.9 percent this year and grow 0.2 percent in 2014, the Ljubljana-based institute said today, cutting an earlier estimate made in September for a 1.4 contraction in 2013 and 0.9 percent growth next year. The European Commission has forecast a 2 percent decline this year, the most in the European Union after Greece and Cyprus.
Slovenia, grappling with its second recession since 2009, is trying to avoid becoming the next euro-region nation to ask for a bailout as investors worry Premier Alenka Bratusek’s government will fail to prop up banks and lose access to financing abroad as the cost of borrowing rises. GDP contracted 3 percent in the fourth quarter.
“Along with the worsening economic situation in the international environment, key elements for the decline will be the state’s continued fiscal consolidation and the rebuilding of the banking system,” Bostjan Vasle, the institute’s director, told reporters.
The yield on the dollar-denominated debt maturing in 2022 surged to a record 6.382 percent on March 27. The yield dropped one basis point to 6.09 percent at 11:30 a.m. in Ljubljana, according to data compiled by Bloomberg.
The Adriatic nation won’t need a bailout, central bank Governor Marko Kranjec said in an interview with STA newswire yesterday. He acknowledged the country is in a big financial and economic crisis.
Vasle said the country’s jobless rate, which jumped to 13.6 percent in January, the highest since May 1999, will continue to rise this year.
Slovenia’s fundamentals and “business model” put the country in a stronger position than most other illiquid peripherals, Credit Agricole Corporate & Investment Bank economist Frederik Ducrozet said yesterday in a report. He said there is a risk the Alpine nation could be forced into a bailout in the coming months to secure a stable funding for bank recapitalizations.