June 25 (SeeNews) - Slovenia's economic output may fall by 7.6% this year, hit by the ongoing coronavirus crisis, government analysts said, slightly moderating their previous forecast for an 8% drop in gross domestic product (GDP) made in May.
"As the virus is still present and some restrictions remain in place, the recovery will be gradual and uneven across activities. Uncertainty and the risks of an even sharper decline in GDP linked to possible recurrences of major outbreaks of the epidemic remain high," the government's Institute of Macroeconomic Analysis and Development, UMAR, said in a statement on Wednesday.
It pointed out that if a new, more intense outbreak of the novel coronavirus disease takes place, the stringent measures to contain its spread of the infection will be reintroduced, severely hampering the sectors of services and industry.
"If this happens this year, GDP would fall by two to three percentage points more, and bankruptcies and increased unemployment would also contribute to a slower recovery next year," the head of UMAR, Maja Bednas, said in the statement.
However, if a vaccine or a medicine is made available soon, or if the spread of the virus is limited for a longer period of time, the economic activity could recover faster than predicted in UMAR's baseline scenario prepared earlier this month. According to that scenario, the Slovenian economy is expected to recover from this year's slump by growing 4.5% in 2021.
This year’s decline in value added will be most visible in accommodation and food service activities, arts, entertainment and recreation, personal service activities and transport. Manufacturing will suffer a somewhat smaller but still significant decrease.
"A fall in demand and disruptions in supply chains due to containment measures at home and abroad will also contribute to a sharp decline in exports and imports. With high uncertainty, which is affecting investment decisions, investment will also fall markedly, particularly in machinery and equipment," UMAR said.
Private consumption is expected to decline significantly in 2020, while government spending will strengthen temporarily in crisis conditions.
The deteriorated economic environment will be affecting the labour market, with employment falling and unemployment rising notably, despite the government's intervention measures, the analysts concluded.
Earlier in June, Slovenia's central bank said the country's economic output is expected to shrink 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 or 8% for the country in 2020.