Bloomberg News

Slovenian GDP Shrinks in Third Quarter as Recession Looms

December 01, 2011

(Updates with economist’s comment in fourth paragraph, markets in ninth.)

Nov. 30 (Bloomberg) -- Slovenia’s economy unexpectedly contracted in the third quarter as export growth lost pace and construction failed to recover.

Gross domestic product shrank 0.5 percent from a year earlier, compared with revised growth of 0.8 percent in the second quarter, the statistics office in the capital, Ljubljana, said on its website today. Economists expected GDP to rise 0.8 percent, the median of seven estimates in a Bloomberg News survey showed.

Slovenia’s export-dependent economy is sliding into a recession with demand for its goods in Europe waning as governments carry out austerity measures to tackle the worsening sovereign-debt crisis. Europe, where Slovenia sends about two- thirds of all exported goods, may also enter a “deep recession,” Capital Economics said yesterday.

“It’s a negative surprise as I expected a drop only in the next quarter,” Radivoj Pregelj, an analyst at lender Abanka Vipa d.d. said in an e-mail. “This doesn’t bode well for next year as forecasts aren’t promising.”

Exports rose an annual 5.6 percent in the third quarter from a year ago, down from an 8.5 percent pace in the second quarter, the statistics office said. Construction, which powered the expansion before the financial crisis that started in 2008, fell again in the third quarter, declining just under 20 percent from a year earlier, today’s data showed.

GDP Forecasts

Slovenian GDP will expand 1 percent this year and slow to a 0.3 percent pace in 2012, the Paris-based Organization for Economic Cooperation and Development said in a Nov. 28 report. The central bank, which in October forecast 1.3 percent growth in 2011, said risks from the debt crisis may jeopardize the estimate.

“This will make the next government’s task to reduce the deficit even more difficult,” Michal Dybula, an economist at BNP Paribas in Warsaw, said by phone. “The new Cabinet can either inflate the deficit even further and risk the increase in risk premiums, or cut it more boldly to allay investors’ concern over debt.”

Slovenians will elect a new government on Dec.4 to replace the outgoing administration of Prime Minister Borut Pahor. The new Cabinet will need to tackle the worsening fiscal position, which prompted Standard & Poor’s, Moody’s Investors Service and Fitch Ratings to lower the country’s credit score one level, starting in September.

Deficit and Debt

Slovenia’s deficit is estimated to narrow to 5.7 percent of GDP this year from 5.8 percent in 2010, according to the European Commission. Public debt, which has doubled since 2007, will widen to 45.5 percent of GDP this year and reach 50 percent in 2012, the EU’s executive arm said on Nov. 10.

Yields on Slovenian 10-year bonds, which reached a record 7.7 percent on Nov. 11, were just below that threshold today. The yield on notes maturing in January 2021 was at 6.934 percent at 12:46 p.m. in Ljubljana, according to Bloomberg data.

Consumer prices in Slovenia rose 2.7 percent in November from a year earlier, the same pace as the previous month, and 0.3 percent in the month. Retail sales rose 1.8 percent from a year earlier and 0.8 percent in the month, the statistics office said today.

--Editors: Jeffrey Donovan, Andrew Langley

To contact the reporter on this story: Boris Cerni in Ljubljana, Slovenia at bcerni@bloomberg.net

To contact the editor responsible for this story: James Gomez at jagomez@bloomberg.net


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