In what is the conclusion of regular consultations with Slovenia, IMF executive directors noted that Slovenia's economy was suffering from the "negative feedback loops of recession, bank deleveraging, and corporate distress against a background of structural weaknesses, financial sector vulnerabilities, and weak domestic and external demand".

All this calls for "strong and prompt action". Accordingly, the IMF supports the government's plans for fiscal consolidation and structural reforms to restore macroeconomic and financial stability and economic growth.

The directors encouraged focusing on structural rather than on nominal targets, and endorsed the goal of a structurally balanced budget by 2015 net of bank restructuring costs. They called for inclusion of the golden fiscal rule in the Constitution and enhanced medium-term fiscal planning.

They emphasized the importance of structural reforms to "ensure fiscal sustainability, enhance competitiveness, and spur growth".

They deem the proposed pension reform a step in the right direction but stress that more decisive measures will be needed to ensure medium-term fiscal and debt sustainability.

They also welcomed the dialogue with social partners on the labour market reform, which they believe is essential to reduce market segmentation and improve competitiveness.

Praising the proposed establishment of a Bank Asset Management Company to address the build-up of non-performing loans, as a positive move, the executive board warned that timely transfer of bad clams was of the essence.

The IMF assesses that the three biggest majority state-owned banks may need more capital and highlight as a problem the fact that the corporate sector is highly leveraged.

The board encouraged the government to "move decisively to restructure, recapitalize and ultimately privatize banks and corporations".

As participially important the IMF underlined the importance of strengthening the regulatory and supervisory framework and improving macroprudential oversight and crisis contingency arrangements.

The IMF report on Slovenia, drawn up by a mission during its regular autumn visit to the country, highlighted the problems that other international institutions are also warning about. Particularly worrying are the problems of the banking system.

The IMF projects that Slovenia's GDP will contract by around 2.2% in 2012 and by around 1% in 2013, but expects growth to resume in the second half of 2013.

General government debt should raise from this year's 52.7% of GDP to 70% of GDP by 2016 due to the tackling of bad banks' claims and then gradually decrease.