Slovenia’s economy will probably shrink in the second quarter as confidence drops and austerity measures cut demand, the country’s central bank said.
“The outlook for the second quarter is unfavorable for the moment as confidence indicators remain low, uncertainties in the international environment have increased and fiscal austerity measures will have an impact on consumption as early as June,” Ljubljana-based Banka Slovenije said in a report today.
Gross domestic product rose 0.2 percent in the first quarter from the previous three months as household and government consumption offset slowing exports and a decline in investment. GDP shrank 0.2 percent in the period compared with a year earlier.
The country’s banks are relying on financing from the European Central Bank as record losses and uncertainty in the European banking industry limits access to wholesale funding.
Lending to the economy stagnated and the Slovenian banking industry’s assets rose 1.4 billion euros ($1.76 billion) in March after lenders took out 2 billion euros of loans from the ECB, the report said. Banks, including Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. used the loans to repay maturing debt.
The banking industry reported a loss of 19.7 million euros in the first quarter on high impairment and provisioning charges, it said.
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