September 24 (SeeNews) - Slovenia's economic output is expected to shrink by 6.7% this year due to the coronavirus crisis, government analysts said, revising their June forecast for a deeper 7.6% fall in 2020 gross domestic product (GDP).
"The decline in GDP as a consequence of sharp contraction of activity in Q2 will be deep this year, but smaller than projected in the summer; next year growth, pace of recovery uncertain and dependent on the epidemiological situation," the government's Institute of Macroeconomic Analysis and Development, UMAR, said in a statement on Wednesday.
UMAR pointed out that the forecasts for the 2020 economic performance of Slovenia’s main trading partners have also improved since June, while the European Union agreement on the financial package for faster recovery from the epidemic has given a boost of confidence indicators in the period from May to July.
"Following the containment of the epidemic and the easing of the most stringent protection measures, economic activity has started to recover, but as the virus is still present and some restrictions in Slovenia and trading partners remain in place, the recovery will be gradual and its pace uneven across sectors," UMAR said.
This year’s decline in value added will be the sharpest in accommodation and food service activities, arts, entertainment and recreation, personal service activities and transport. Manufacturing and construction will suffer a somewhat smaller but still significant decrease.
The government analysts also expect a significant decline in this year's exports and imports, with the high uncertainty around the pandemic affecting investment decisions, and in particular investment in machinery and equipment.
"Due to limited movement and supply during the lockdown, coupled with increased uncertainty and precautionary saving, private consumption will also drop more strongly, although disposable income will remain similar to that last year due to the government’s support measures," the analysts said.
Only government consumption is seen strengthening temporarily in the crisis conditions. Employment will decline, while unemployment will rise, already reaching a peek of registered jobless people in April.
"Assuming that the coronavirus is contained in a way that does not require any new major shutdowns of activity, the gradual recovery is expected to continue in the next two years, albeit at different speeds across activities," UMAR concluded.
In June, Slovenia's central bank said the country's economic output is expected to shrink by 6.5% this year, as a result of the pandemic, and to gradually recover by growing 4.9% in 2021 and 3.6% in 2022.
The European Commission, the International Monetary Fund and Slovenia's government have predicted a contraction of some 7-8% for the country's economy in 2020.