Instead of a 7.6% contraction at the annual level predicted in the summer, Slovenian government’s macroeconomic forecaster IMAD (The Institute of Macroeconomic Analysis and Development of the Republic of Slovenia) now expects the economy to shrink by 6.7%for this year.
However, it warns that uncertainty remains high.
In its autumn forecast, released yesterday, IMAD said that economic activity is expected to reach pre-pandemic levels by 2022, but only assuming that there is not a new lockdown affecting certain activities.
“If that to happen this year, the contraction would accelerate by two percentage points, while bankruptcies and higher unemployment would slow down the recovery in the coming years,” IMAD director Maja Bednaš wrote.
The upgrade of GDP projection is underpinned by more favourable forecasts in Slovenia’s main trading partners, the adoption of the EU recovery deal, and improvement of confidence indicators from May to July.
Economic activity has already picked up, but IMAD warns it will not be equal across industries.
Exports and imports are expected to contract at double-digit rates this year before recovering at a rate just below 10% in 2021 and slightly under 7% in 2022.
Private spending is expected to contract by 6.6% this year and grow by 4.7% in 2021 and 3% in 2022.
The unemployment rate, projected to hit 9.1% this year, is expected to increase slightly in 2021 before declining to 8.5% in 2022.
Gross wages are projected to grow across the entire three-year period.
And while emphasising that the uncertainty remains high, IMAD said that the recovery could accelerate beyond current predictions in the event a vaccine is put to broad use or the novel coronavirus is sustainably contained in another way.
IMAD assumes that stimulus measures in Slovenia “significantly cushioned” the consequences of the pandemic. Without them, the contraction would have been three percentage points deeper.
The Slovenian economy is forecast to grow by 5.1% next year and by 3.7% in 2022, as all components of GDP are expected to recover, while government spending eases.
Investments, exports, imports and private consumption are projected to return to pre-crisis levels in 2022.
The government was informed about the forecast at Wednesday’s session and will include the projections in its budget plans for the next two years./ibna