Slovenia’s economy will shrink more than previously forecast next year as the ailing banking industry and austerity measures prevent the euro member’s recovery, the government’s economic institute said.
Gross domestic product will shrink 0.8 percent in 2014, the institute said today in the capital Ljubljana, revising its June estimate for a 0.2 percent contraction, while maintaining its prediction for a 2.4 percent slump this year. The economy will expand 0.4 percent in 2015, the institute predicted.
“The lower estimate for next year is mainly due to the delay in repairing the banks and the fact that the government is extending its austerity measures,” Bostjan Vasle, the institute’s director, told reporters. “The credit shortage is set to ease by the end of next year, while the main risk to the 2015 recovery is a possible delay in fixing the banks.”
Slovenian banks, burdened by bad loans worth more than a fifth of the country’s economic output, pushed the nation to the brink of a bailout in March after a crisis in Cyprus prompted investors to sell the Balkan nation’s assets. Speculation about a rescue intensified in recent days after officials, including Prime Minister Alenka Bratusek, said the country may turn to the European Stability Mechanism, the euro-region rescue fund, for aid to prop up the banks.
Non-performing loans overdue for 90 days surged to 7.9 billion euros ($10.7 billion) at the end of July, the central bank said in a report today. That accounts for 17 percent of all outstanding loans, it said.
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