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The international environment has improved since June, as positive signals are coming from Slovenia's trading partners. However, bank restructuring and fiscal consolidation continue to weigh down on recovery, IMAD director Boštjan Vasle told the press.

According to him, it is good for Slovenia that funds for refinancing of debt and budget deficit have become more available to a majority of eurozone countries.

Fiscal consolidation is urgent, but no country has managed to consolidate its public finances without a negative impact on its economic activity and the labour market in the same year, he said.

"It is about balancing between effects which are negative in the short run, but which become positive in the long run, and enable cheaper borrowing by countries on the international markets," Vasle added.

IMAD projects that bank lending will continue to decline through 2014, albeit at a slower pace, but the contraction is expected to stop towards the end of the year.

Exports are to rise 2% this year and 3% in 2014, exerting a positive impact on growth. Nevertheless, Vasle warned that export companies were also being affected by domestic problems, in particular bank restructuring.

Domestic spending continues to decrease - its is projected to fall by 4.1% this year and by 1.8% in 2014. There are some positive signs in the construction sector however, as the number of building permits is increasing, according to Vasle.

IMAD forecasts that the number of employed persons will decrease by 2.3% this year, and by 1.4% in 2014. "The number of active population is shrinking both in the private and public sectors," Vasle said, adding that the jobless number will increase to an estimated 120,600 this year and to 122,100 in 2014.

The GDP forecast for this year remains unchanged at -2.4%, roughly in line with international forecasts that range from -2% to -2.5%.