LJUBLJANA (Slovenia), May 6 (SeeNews) – The European Commission said on Wednesday it expects the Slovenian economy to shrink 7% this year, hit by the coronavirus pandemic, and to partially recover in 2021, posting 6.7% growth.
“As a small open economy, Slovenia is particularly vulnerable to the effects of the COVID-19 pandemic. The economy is projected to shrink significantly in 2020, but the large stimulus package announced by the authorities is expected to partly cushion losses to employment and household incomes and pave the way to a strong rebound in 2021,” the European Commission said in its Spring 2020 Economic Forecast report.
Even though the Slovenian economy has been already slowing in the second half of last year, the country entered the coronavirus crisis in a relatively strong position, the EC recalled, pointing out to its winter forecast projecting 2.7% GDP expansion in 2020.
In iew of the coronavirus pandemic, private consumption is seen shrinking 6.1% this year, while public consumption will increase by 4.7% compared to 2019.
The jobless rate will climb to 7% from last year's 4.5%, while inflation is projected to fall to 0.5% in 2020 due to low energy prices and weak demand.
Slovenia is expected to see exceptionally weak exports of services this year, especially in the transport and tourism sectors, which however will be compensated by a similar drop in imports, with the current account surplus projected to remain unchanged at 6.8% of GDP, according to the report.
The ongoing uncertainty and supply chain disruptions will likely result in the private sector postponing new investment decisions towards 2021, it added.
The general government budget is forecast to turn to a 7.2%-of-GDP deficit in 2020 from a 0.5%-of-GDP surplus in 2019, due to the projected decline in economic activity and the government's stimulus measures to mitigate the economic and social impact of the COVID-19 pandemic, the EC noted.
Slovenia’s debt-to-GDP ratio is forecast to increase significantly to around 83.75% of GDP in 2020, driven by the high projected deficit and stock-flow adjustment due to tax deferrals and pre-financing for 2021, and to start declining again in 2021, it added.