Slovenia’s government must continue to cut the budget deficit even as the euro-region nation struggles with a recession, the central bank said.
“Achieving a fiscal balance in the coming years is crucial to lowering uncertainty in the economy and to ensure unhindered access to funding on international markets,” Banka Slovenije said in an e-mailed statement today. “For a credible consolidation of public finances, their long-term viability must be ensured, especially through a pension overhaul.”
The economy has been hit by faltering domestic demand because of uncertainty in the labor market, the central bank said. The unfavorable business climate, surplus capacity in companies and difficulties obtaining credit are compounding the problem, causing a fall in investment and inventories, it said.
Slovenia’s export-driven economy slid into its second recession in three years in the third quarter as consumption waned and exports to Europe slowed. The central bank predicts gross domestic product will shrink 2 percent this year after contracting 3.3 percent in the third quarter from a year ago.
Lawmakers in the capital, Ljubljana, are set to adopt pension changes today after scrapping an extension of the retirement age.
Prime Minister Janez Jansa’s government wants to cut the budget gap to about 4 percent of GDP this year from 6.4 percent a year ago. Total debt is forecast to rise to 59 percent of GDP by the end of 2013 from 47 percent at the end of 2011, according to a Nov. 7 European Commission forecast.
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