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Slovenia's GDP growth is expected to stand at 1.7% next year and at 2.5% in 2016, according to the autumn forecast of the European Commission for EU member states released on Tuesday.

The forecast is more optimistic than the government's expectations, which see the Slovenian economy expanding at a 2% rate this year, and at a 1.6% rate next year.

The expected budget deficit for this year, which includes the impact of bank bail-outs, is at 4.4% of GDP both in the government's and the European Commission's forecast.

The Commission expects that Slovenia will record a budget deficit of 2.9% of GDP next year, which is 0.1 percentage points higher than planned by the government, and a deficit of 2.7% of GDP in 2016.

The recovery in Slovenia is gaining momentum, powered by net exports and strong infrastructural investments. Public finances are still burdened by bank recapitalisations, but this burden is expected to be reduced by the end of 2016, the report says.

Commenting on the report, Commissioner for Economic and Financial Affairs Pierre Moscovici said the slow-down in growth projected for 2015 was more of a technical than of economic nature.

A better-than-expected growth in exports and strong investment in particular in EU-funded projects, which will boost growth this year, will have a less pronounced effect in 2015, according to the commissioner.

This is then expected to be followed by a gradual enhancement of private consumption and private investment in equipment and machinery, which is to strengthen growth from the second half of 2015.

Moscovici said that growth in 2016 would be broad-based, with a positive contribution from all elements of GDP with domestic consumption expected to rise gradually on the account of net exports.

Pay growth and a drop in unemployment are expected to boost private spending, while private investment in equipment and machinery is to be buoyed by more confidence, high capacity utilisation and a gradual slowdown in deleveraging needs, Moscovici said.

The Commission's report moreover projects general government debt at 82.2% of GDP this year, which is expected to peak at 82.9% of GDP in 2015, and then start decreasing, reaching 80.6% in 2016.

This is significantly above the 60% threshold set by the EU budgetary rules in the stability and growth pact, but still better than the average for the EU and the eurozone.

The autumn forecast for Slovenia is an upgrade over the May forecast, when the Commission announced a 0.8% growth rate this year and 1.4% growth in 2015. The forecast for budget deficit has also been upgraded from 3.1% in the spring projection.

The Commission's projection regarding structural deficit (deficit that does not take into account economic cycle effects), which in line with the fiscal pact must not exceed 0.5% of GDP at the annual level, is considerably worse.

The government is committed under the Stability Programme to make Slovenia's public finance structurally balanced by 2017, while the constitutional fiscal rule envisages that the budget must be balanced in the medium term without borrowing.

The Commission expects that Slovenia will finish the year with a structural deficit of 2.5% GDP, while it is expected to stand at 2.2% next year and at 2.8% in 2016.

The unemployment rate is expected to decrease gradually from the expected rate for this year of 9.8%. Next year the rate is projected to stand at 9.2% and to 8.4% in 2016, which is better than the average for the EU and the eurozone.

Inflation is projected to remain low in Slovenia, like in the entire EU and the eurozone. Annual inflation for this year is expected to stand at 0.4%, and to increase to 1% next year and to 1.5% in 2016, which is close to the EU and eurozone averages.