Ljubljana, 29 November (STA) - Slovenia's economy will grow by 1.1% this year, expand by 1.9% next year and a more robust 2.6% in 2012, according to the autumn economic forecast released by the European Commission on Monday.
The projection shows Slovenia's general government deficit will stand at 5.8% of GDP this year, but will then fall to 5.3% in 2011 and to 4.7% of GDP in 2012. The government has announced a 4.8% deficit for 2011.
The projection means that Slovenia's economic growth this year will be below the average for the eurozone, but will rise to above the average in the coming two years. The deficit will be below the average this year, but above it in the coming two years.
The Commission projected 1.7% growth in GDP for the eurozone for this year, to be followed by slightly slower 1.5% growth next year and 1.8% growth in 2012. The average deficit is to reach 6.3% of GDP in 2010, 4.6% in 2011 and 3.9% in 2012.
According to the Commission, Slovenia's weak presence in high growth markets means "the pace of the export-led recovery is set by demand in the country's main EU and Western Balkan trade partners. Accordingly, growth is expected to be moderate and to ease somewhat heading into 2011".
"Faster growth is also being hampered by the tight credit conditions in the indebted corporate sector and slow adjustment in the construction sector, which may take until late 2011 or 2012 to complete," the report says.
In May, the Commission forecast 1.1% growth in GDP for Slovenia for this year and 1.8% for 2011. The budget deficit forecast in May was 6.1% for this year and 5.2% for 2011.
Slovenia has forecast lower budget deficits for this year and the next, at 5.4% and 4.7% of GDP, respectively. The Finance Ministry attributed today the difference between the projections to a difference in the method used to calculate the deficit as well as the effects of Slovenia's reforms.
The methodology applied makes for a 0.1 points and the effects of reforms for 0.5 points in the total difference of 0.6 points in the deficit projections for next year, the ministry said.
This was echoed by economist Bogomir Kovac, who pointed out that Slovenia and the Commission relied on different methods in coming to a final forecast. But Kovac suggested that being more recent, the Commission's projections could me more precise.
Projections are most precise when they are made towards the close of a given period. The more downbeat European projections for the budget deficit are therefore a result of more realistic assessments of the current situation, he believes.
Slovenia needs to bring its general government deficit to below 3% of GDP, as required by the Stability and Growth Pact, by 2013.
The country's unemployment rate is projected to stand at 7.2% this and next year, but to drop to 6.6% in 2012. In all three years unemployment is projected to be below the average for the euro area.
The country's public debt is projected to remain below the 60% of GDP Stability and Growth Pact cap this year, in 2011 as well as in 2012, and substantially lower than the eurozone average, but is increasing.
According to the Commission, public debt will stand at 40.7% of GDP this year, at 44.8% next year and at 47.6% in 2012.
Inflation forecasts for Slovenia exceed the eurozone average of 1.5%, 1.8% and 1.7% for 2010, 2011 and 2012, respectively. The figures for Slovenia are 2.1%, 2% and 2.2%, respectively.