Slovenia's GDP to fall 6.7% in 2020, less than earlier expected - Erste

"Despite 3Q20 GDP bringing some relief, the recovery outlook remains under pressure amid the deteriorated epidemiological picture that arrived in 4Q20. Having that in mind, we slightly fine-tuned our 2020 GDP forecast, expecting a 6.7% contraction this year, followed by a rebound to around the 4% mark in 2021," Erste said in its latest Macro Outlook report on Slovenia published earlier this week.

Slovenia's GDP fell by 2.6% year-on-year in the third quarter, significantly less than the 6.7% drop predicted by the bank analysts.

According to Erste, the rising uncertainty and the new measures implemented to fight the spread of the second wave of Covid-19 will affect the rebound outlook in the final quarter of this year and in the first quarter of 2021.

Therefore, the recovery of the Slovenian economy is expected to start from the second quarter of 2021 onward, supported by revived domestic demand, especially on the investments side.

Erste also noted that even though the deflationary pressures eased in the third quarter of 2020, the consumer price deflation deepened to 0.9% in November, from 0.1% in October, mainly reflecting lower transport prices.

"Going forward, we see the deflationary footprint toning down from current levels, although still not seeing any stronger upward price movements, as demand-side pressures remain weak and energy price developments are benign. Bottom line, inflation should average close to zero this year, followed by moderate acceleration during 2021," Erste said.

In their report, Erste made the following macroeconomic projections for Slovenia for 2020, 2021 and 2022: