London, 26 October (STA) - The European Bank for Reconstruction and Development (EBRD) has downgraded its forecast for Slovenia for 2012 and 2013. It said on Friday that it expected Slovenia's GDP to drop by 2.5% this year and by another 2% in 2013. In July, the EBRD projected Slovenia's GDP to drop by 2% in 2012 and by 1.4% the next year.
Slovenia's "all-too timid recovery of last year has turned into a second recession", the bank says in a press release. "Further fiscal consolidation and growing fears over asset quality in the banking sector have depressed domestic demand, and this is compounded a weak external environment."
The EBRD labels the government-sponsored reform package as promising, and notes that the parliament has adopted an act establishing a bad bank.
Rescued banks would need further capital injections, and non-performing bank assets would require restructuring, the EBRD believes.
"Wide ranging reforms, in particular of the pensions system and in the labour market, will be needed to secure sovereign debt sustainability."
The EBRD says that Slovenia, as well as Hungary and Croatia, will experience at least one more year of recession.