The Slovenia Times

GDP Growth to Slow to 0.3% in 2012


The trend is on par with the projections for the eurozone as a whole, which is expected to grow at a rate of 1.6% this year, 0.2% in 2012 and 1.4% in 2013, according to the Organisation for Economic Cooperation and Development (OECD).

The OECD says the deleveraging of the corporate sector in Slovenia and a weak external environment will weaken growth throughout the first half of 2012, with both consumption and investment flat.

Activity is projected to begin to recover gradually thereafter, with increasing confidence and a pick-up in world trade bolstering private consumption and investment.

Private and government consumption are expected to be flat next year, whereupon private consumption is to inch higher and government spending decline by 0.8%, picking up only in 2013.

Gross capital formation is to plunge by 12.2% next year and 2.1% in 2012, to rise by only 3.8% the year after that. Export growth is to slow down from 9.5% this year to 8% in 2012 and 3.5% in 2012.

Employment rate is projected to remain close to the current level, hovering at above 8% into 2013, with inflation projected to remain below 2%.

The OECD projections for 2012 and 2013 are much more pessimistic than the October forecast of the Slovenian central bank, which expects the country's growth to amount to 1.7% and 2%, respectively.

The European Commission projects Slovenia's GDP to grow by 1% in 2012 and by 1.5% in 2013.

Banka Slovenije responded to the forecast by saying that the discrepancies in the assessments of different institutions showed that economic trends in 2012 were very uncertain.

"In recent weeks the problems in the international environment, stemming largely from the ever greater problems of individual eurozone states in securing funding for public finances, including Slovenia, have deteriorated significantly," the bank wrote, stressing this was bad for lending and exports.

The central bank plans to draw up its next forecast in April next year, saying that the latest indicators suggest modest positive growth in the coming year and faster growth in 2013, which is in line with the OECD's projections.

The Institute of Macroeconomic Analysis and Development (IMAD), a government think tank which last forecast 1.5% growth for 2011 and 2% for 2012 albeit with a disclaimer, said today that the OECD forecast was compliant with the noted significant deterioration of the situation in the eurozone in recent months.

IMAD said that this would affect Slovenia's exports and that it would start drawing up a revised forecast following Wednesday's third quarter GDP growth report by the Statistics Office.

The office of PM Borut Pahor also pointed to Slovenia's export links to other economies and to the general instability which is causing discrepancies in forecasts. It again called for reforms that will allow Slovenia to cope with the quickly changing international economic environment.

The unreliability of forecasts in the present situation was also highlighted for the STA by economist Rasto Ovin.

He however added that the deteriorating forecasts for Slovenia were a consistent trend related to the broader environment and the high borrowing costs, but also to the country's "specifics", such as the failure to secure pension reform.

The Chamber of Commerce and Industry (GZS) responded by stressing its economists had been forecasting 0.5%-1% growth in 2011 all along and that the OECD's projections were realistic given the global decline - also affecting Slovenia's main export partner Germany, - and the lack of measures that would boost investment.


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