LJUBLJANA (Slovenia), March 22 (SeeNews) – The International Monetary Fund (IMF) expects Slovenia's economy to grow by 3.7% in 2021 and 4.5% in 2022, driven by consumption and investment, it said.
"We estimate that, even with the support measures, it will take until some time in 2022 for output to return to its pre-crisis level. Key downside risks include the potential for new variants of the virus to appear, disruption to the vaccination campaign, and turbulence in international financial markets," the IMF said in a statement on Friday, following the conclusion of Article IV consultations.
Fiscal policy needs to remain strongly supportive until the recovery is entrenched. In this regard, the budget plan for 2021 appropriately maintain support to fight the COVID-19 crisis, while the effectiveness of the measures deployed so far should be assessed and adjustments should be made where necessary, the IMF said.
"We therefore support the ambitious increase in capital outlays in the 2021 budget that is supported by new resources under the Next Generation and Cohesion Policy EU instruments. However, execution risks related to this plan need to be mitigated," the Fund said.
The liquidity and regulatory capital positions of banks have so far hovered comfortably above requirements, but risks have grown as non-performing loans (NPL) in COVID-sensitive sectors have begun to rise, heightening the risks of cliff effects when the loan moratoria end.
Therefore, frequent reviews of macroprudential measures should continue to ensure the right balance between financial stability and the need for credit in the economy, while the exit from the support measures for firms and banks will require a careful balancing act, the IMF noted.
Ensuring smooth reallocation of labor across, and upskilling within, sectors would minimize the economic and social costs of the pandemic, the IMF said. "To deliver on its commitments under the Paris Agreement, Slovenia should combine investment in green projects (supported by the RRF), with strengthened taxation of polluting industries, especially transport with significant greenhouse gas impact."