EBRD upgrades Slovenia’s GDP forecast to 5% growth this year

London – The European Bank for Reconstruction and Development (EBRD) has upgraded by 1.5 percentage points its GDP growth forecast for Slovenia in 2021 to 5%. The institution expects that Slovenia’s economy will expand by a further 4% next year.

The updated forecast, published on Tuesday, comes after the autumn projection in which the EBRD said it expected the country’s GDP to expand by 3.5% this year.

The bank noted that the Covid-19 pandemic had significantly affected the Slovenian economy last year, with GDP dropping by 5.5%. This is, however, 2.5 percentage points fewer than projected by the EBRD last autumn.

It said that the key factors of the contraction were private consumption and investments, which were down 9.7% and 4.1%, respectively.

Slovenia, as a small and open economy strongly integrated in global value chains, also felt shocks in international trade, although exports of goods started recovering by the end of last year, the report says.

While exports of goods continue to grow, exports of services remain well below the pre-pandemic level. On the other hand, investment activity had experienced a rapid recovery by the end of 2020.

The EBRD expects the general government deficit, which last year reached 8.4% of GDP, to increase this year to 8.6%, as the government has largely kept implementing an expansive fiscal policy.

The bank says that vaccination and gradual relaxation of measures to stem the pandemic will lead to gradual recovery of consumption and services, while exports of goods and investment will continue to support economic growth.

The EBRD also warns against short-term risk factors, as new waves of coronavirus infections could restrict the recovery of the tourism sector and other services, while disruptions in supply chains could affect production and exports of goods.