Ljubljana, 31 August (STA) - The Slovenian economy shrank at an annual rate of 2.2% adjusted for working days and season in the second quarter of 2012 as domestic consumption plummeted by 6.8%. Compared to the first quarter, the country's output contracted by 1%, according to data from the Statistics Office.
Unadjusted data show even more pronounced contraction in Slovenia's GDP in the second quarter of the year at an annual rate of 3.2% and by 1.6% quarter-on-quarter.
The statisticians recorded a fall in all final consumption expenditure year-on-year: government expenditure fell by 2%, and household consumption dropped by 3%, as a result of a 8.4% decrease in spending on durable goods and 1.5% lower expenditure on other products.
Moreover, investment spending collapsed by 22.1% year-on-year. Gross fixed capital formation fell by 8.9%, investment in buildings and structures contracted by 14.9%, and investment in machinery and equipment dropped by 3%. Investments in inventories had a very negative impact on GDP growth.
Meanwhile, external trade balance had a positive effect on GDP at 3.4 percentage points. However, both exports and imports fell. Due to reduced external demand, exports dropped by 0.5% and imports slumped by 5.4% as a result of lower domestic consumption.
"Here we have a trend that we started to observe at the beginning of last year with imports and exports at high levels but at the same time growing at an increasingly slower rate," head of the Statistics Office's department for macroeconomic statistics Karmen Hren commented at a news conference in Ljubljana on Friday.
Value added fell in nearly all activities, shrinking by 2.2% overall in the second quarter on the same quarter a year ago.
The Finance Ministry responded to the news by describing it as "worrying". It added however that a new supplementary budget for this year will not be necessary according to the data presently available.
The ministry moreover pointed out that Slovenia as well as other EU members were facing a further decline in economic activity and deterioration in all business segments.
It however maintains that meeting public finance commitments given to the EU is paramount for restoring Slovenia's credibility, as is the execution of key reforms.
Economists speaking to the STA described the figures as "alarming", while concern, especially about the fall in exports, was also expressed by the Institute of Macroeconomic Analysis and Development (IMAD).
The government think-tank noted that the contraction was the biggest since 2009 and among the biggest in the eurozone.
GDP in the eurozone as well as in the EU as a whole contracted by 0.2% in the second quarter on the quarter before, data from Eurostat show.
The comparable quarter-on-quarter fall of 1% in Slovenia was "one of biggest according to available data for 22 countries. This leaves us in the group of EU member states with the most pronounced fall in economic activity during the crisis," IMAD stated.
"It is especially worrying that exports contracted for the first time in two years," the think-tank said, noting that exports had so far been the main factor of the country's weak economic recovery.
Economists Jože Damijan and Mitja Kovač have assessed that the GDP dynamics indicate a trend of deepening recession. Unless the government will change its economic policy, the recession will deepen, they warn.
"The GDP data released today are alarming, although expected when it comes to domestic expenditure as a result of the austerity measures, general uncertainty and distrust," Kovač commented.
The "shocking" trends of contraction and the slide into a depression spiral are being accelerated and call for "immediate action through instruments to kick-start economic growth".
Similarly, Damijan warned that unless the government "launches a new economic cycle with a New Deal, we are in for a deep recession not only this year but also the next".
This would reflect in higher yields on Slovenian sovereign bonds, and a new downgrade in credit ratings for financial institutions and companies, the economist cautioned.
Pointing to the huge impact of the slump in domestic consumption, Damijan noted that the main government austerity measures, including the cut in public sector pay, would yet show in the third quarter.
The calls for immediate measures were echoed by the Chamber of Commerce and Industry (GZS), which wants the government and parliament to hold a session to openly talk about the situation and solutions that will prevent a collapse of the Slovenian economy.
The Statistics Office today amended GDP data for the first quarter. Season and working days unadjusted data show a 0.2% growth at the annual level, while adjusted data, an EU standard, point to a 0.7% contraction year-on-year and a stagnation on the final quarter of 2011.
The office also amended figures for last year. "Based on the current data we can say the economic situation last year was better than assessed in February this year. The current estimate is that GDP last year rose by 0.6% rather than fell by 0.2%," Hren said, pointing to 7% rise in exports as the key growth factor.