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IMAD Says Economy Recovering, But Slowly

Ljubljana, 03 November (STA) - Slovenia's economy keeps growing, as all key areas bar the construction sector show positive trends, the Institute for Macroeconomic Analysis and Development (IMAD) said on Wednesday. $If exports are boosting economic growth, construction is holding it back,$ its director Bostjan Vasle said.

If this trend continues until the end of the year, Slovenia will reach the projected growth for 2010, but not the average eurozone growth, said the government think-tank, which in September projected a 0.9% growth rate for this year.

The recovery in Slovenia is very similar to that in the eurozone, only slower, Vasle told a press conference in Ljubljana.

While noting that construction was not problematic only in Slovenia but in the entire eurozone, Vasle said the problems Slovenia was struggling with were much bigger.

Foreign demand remains a key generator of economic growth, but if Slovenia retains the current export rate, exports will not reach pre-crisis levels before mid-2011, Vasle said.

While exports decreased at a 20%-25% rate in the first half of 2009 year-on-year, they are now increasing at a rate of about 10%.

Nevertheless, Vasle highlighted the planned investment projects as a reason for optimism, especially the announced state investments into railway infrastructure.

He pointed to technological development as a key precondition for more exports and economic growth. "Only high-tech industries are improving their results in terms of exports compared to 2008."

The problems of the construction sector also reflect in company insolvencies, IMAD says in the latest issue of The Economic Mirror, and projects a significant rise in the number of insolvent companies by the end of 2010.

Also contributing to the slow recovery is weak activity on the credit markets. According to Vasle, net lending to companies remains very low, just like in the eurozone. Loans to households are meanwhile picking up, especially for housing renovation or purchases.

The banking sector is being additionally hit by banks' writedowns in recent months. These increased somewhat in 2009 and will continue to rise this year, especially in December, according to Vasle.

"The total scope of provisions this year will be higher than last year, which reflects the banks' concern that more companies will declare insolvency than last year," he explained.

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