LJUBLJANA (Slovenia), May 14 (SeeNews) – The European Bank for Reconstruction and Development (EBRD) said on Wednesday it has raised its forecast for Slovenia’s 2014 economic growth to zero from a 2.0% contraction projected earlier this year.
The Slovenian economy is expected to grow by 1.0% in 2015, the EBRD said in its Regional Economic Prospects Report.
Slovenia’s gross domestic product (GDP) contracted by 1.1% in 2013, but it turned positive in the last quarter of the last year, the EBRD said in a report.
“The major culprit behind the negative growth was the depressed domestic demand, which stem from the rising unemployment, decline in real wages, high cost of finance, and firms’ limited access to capital and credit.”
The EBRD said that if sustained, the recapitalization and restructuring of banking and corporate sectors, which started following the asset quality review and stress tests in December, will prove a turning point for Slovenian reforms and growth.
“So far, the credible progress in reforms has boosted the confidence of the market and led to a fall in the country risk premium and the costs of sovereign financing,” the EBRD said, adding that it is crucial Slovenia to persevere with the necessary reforms that have been underway during the past year.
Alongside rising export demand from the euro zone this will partly compensate the above-mentioned temporary negative effect of restructuring, keeping the economic activity still in 2014 and pushing the growth up to 1.0% in 2015.