In the forecasts, released on Tuesday, the Commission also projected a slight further deterioration of Slovenia's structural budget this year before its expected improvement in 2020.

Meanwhile, the Commission slightly downgraded growth projections for the eurozone and the whole EU for this year, to 1.2% and 1.4%, down 0.1 and 0.2 percentage points, respectively.

Next year, the eurozone is still expected to grow at the rate of 1.5%, but the forecast for the EU was downgraded by 0.1 percentage point to 1.6%.

The Commission expects Slovenia's growth to slow down somewhat from the 4.5% rate reached in 2018 as the external environment weakens, leaving domestic demand as the main driver of growth.

Exports growth is expected to slow down from 7.2% in 2018 to 5.4% in 2019 and 5.6% in 2020. Coupled with somewhat higher import growth rates (6.2% and 7.2%), net contribution of exports to GDP is to turn negative.

Growth is thus expected to come from domestic demand. Private consumption is expected to continue to enjoy the support of rising employment and wages, as well as favourable bank lending conditions.

After growing at a 2.2% rate last year, the growth in private consumption is expected to gather pace to 2.5% this year and 3.2% the next.

Investment growth is projected to slow down from almost 11% in 2017 and 2018, but remain strong, at around 7.5% in both years.

Apart from companies' investing into new equipment and production expansion, the growth is expected to be driven by a pick-up in housing construction, and public investment stimulated by an increased uptake of EU funds as the programming period draws to a close.

Public consumption is expected to expand by 2.5% this year, roughly the same rate as last year, before slowing down to 2.2% in 2020.

Negative risks to the growth outlook are mainly external with the Commission noting that slower export demand growth would affect both exports and business investment.

On the upside, households could lower their saving rate and increase consumption.

Employment is forecast to grow by 2.3% in 2019 before easing to 2.1% in 2020. The survey unemployment rate is projected to fall to 4.6% in 2020, which would be below its long-term average.

An inflow of foreign workers and a rising participation rate is expected to help alleviate labour supply constraints to some extent.

Wage growth is expected to increase to 4.8% this year before slowing down to 3.7%, which is expected to constrain export growth somewhat, but some additional market share gains are still projected.

The Commission projects for Slovenia's general government surplus to remain unchanged at 0.7% of GDP, before improving to 0.9% of GDP in 2020. This is 0.1 percentage points below what the government projected in the general government budget framework for 2020-2022.

Meanwhile, the structural deficit is projected to continue to deteriorate slightly, from 0.7% in 2018 to 0.8% this year, before improving to 0.3% of GDP.

The main downside risk to public finances stems from expenditure pressures, particularly on wages and social benefits, as well as potential unexpected one-offs, for instance due to unfavourable court rulings.

On the upside, the Commission notes that proceeds from the privatisations of Abanka and NLB could reduce debt further.

The debt-to-GDP ratio is expected to decrease significantly from 70.1% of GDP in 2018 to 61.7% of GDP in 2020.