LJUBLJANA (Slovenia), May 13 (SeeNews) – The European Bank for Reconstruction and Development (EBRD) said on Wednesday it expects the Slovenian economy to contract 5.5% this year hit by the global coronavirus pandemic, reversing its forecast for a 2.8% growth made in November.
Slovenia's GDP is projected to somewhat recover in 2021, expanding by 5.0%, as the economy returns to normality, the EBRD said in its latest Regional Economic Prospects report.
This year's contraction will be mainly due to lower exports of goods, which contribute more than 80% of the country's GDP, the bank said.
"Slovenia is among the EBRD countries most highly integrated into global value chains, which were already heavily disrupted in the first quarter of 2020, with the disruption expected to continue. Also, around 10 per cent of GDP worth of exports go to the severely hit Italian economy," the EBRD said.
In addition, the government measures to fight the coronavirus spread will significantly affect private consumption, and especially spending on recreation and durables which together account for 44% of private spending and contribute nearly 30% of GDP.
Tourism, which accounts for some 7% of GDP, will also have a considerable negative effect on growth this year.
The EBRD noted that the government in Ljubljana has introduced a fiscal package of some 10% of GDP to help the Slovenian economy and citizens weather the coronavirus crisis.
"In addition, as a Eurozone member, Slovenia stands to benefit from the ECB measures aimed at providing additional liquidity and ensuring financial stability," the bank said, noting that the economic activity in the country has started to pick up as of late April, with the automotive industry, among others, resuming production.
The GDP of the EBRD's region of Central Europe and the Baltic States, which comprises Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia, is expected to decrease by 4.3% in 2020 before expanding by 4.5% in 2021. Back in November, the EBRD predicted that the region's economy will grow by 3.2% this year.