Ljubljana, 13 September (STA) - Two years after the start of the financial crisis in the US, which also plunged Slovenia into a deep recession, economies around the world are slowly starting to recover. The second quarter of 2010 brought the first significant growth figures for Slovenia following the crisis, however analysts are warning that the road to recovery might be long.
The Institute of Macroeconomic Analysis and Development (IMAD), the government's economic think-tank, said last week that "a further deterioration of financial conditions in the second quarter and announced public finance saving indicate that growth at this level will not be sustained in the eurozone in the second half of the year".
The crisis found Slovenia after several years of fast economic growth: in 2005 GDP growth was at 4.5%, in 2006 at 5.6% and at 6.9% in 2007. A turn for the worse came as early as 2008 when growth was down to 3.7%.
The slowdown was most pronounced in the last quarter of 2008 and the beginning of 2009. Although relative stability was restored in the second quarter of 2009, the year-on-year drop spelled 9.3%. By the end of the year the economy contracted by 8.1%.
The second quarter of 2010 brought the first significant growth figure of 2.2%, however IMAD warned that a change in stocks played the key role in the expansion and forecast 0.6% overall growth for the year.
Prime Minister Borut Pahor has remained confident that Slovenia will emerge out of the crisis victorious. "Positive growth will be restored in 2011, new jobs will open, unemployment will drop, wages in the real sector will go up and conditions will also be created for the pay increase in the public sector," the PM said after the cabinet met following a short summer break.
The job market was hurt seriously by the crisis, although the government was quick to react with a number of measures helping employers, workers as well as job seekers. Orders were down, which prompted layoffs and an increase in the number of unemployed to nearly 100,000 in February this year.
While unemployment figures stopped rising in recent months, a number of companies are operating on the verge of bankruptcy. Although official forecasts are not excluding the possibility of 120,000 unemployed by the end of the year, Labour, Family and Social Affairs Minister Ivan Svetlik does not believe in this scenario.
"Although problems may arise in some sectors, I believe that this figure should not be much higher than 105,000," he told the press in August.
Hit hardest has been manufacturing, with around 10% of jobs lost in the sector in 2009. Value added in manufacturing was down 16.5% in real terms, although growth has again been restored this year as a result of more foreign demand.
Construction followed with an almost 16% drop and has notably not seen a recovery, recording the lowest level of value added since the start of the crisis.
Insolvency became widespread in 2009, also because more stringent loan policies on the side of banks. The government addressed the problem soon after the onset of the crisis with a series of measures aimed at stabilising the financial system and securing the liquidity of banks.
While borrowing started to pick up again in 2010, it remains modest. Banka Slovenije, the central bank, has noted that financing is mostly focused on activities that saw excessive borrowing and debt in the past and that such banking policies decrease loan accessibility for smaller companies and promising projects in manufacturing and services.