Slovenia central bank slashes growth forecasts

Slovenia's central bank slashed its growth forecasts for the wobbly eurozone member on Tuesday, saying the recession will be deeper and longer than feared while not ruling out a bailout request. According to the bank's new autumn forecasts, gross domestic product (GDP) will slump 2.6 percent this year, compared to an earlier forecast of a contraction of 1.9 percent. Next year it had been expecting an expansion of 0.5 percent but it now projects that GDP will shrink 0.7 percent. Growth will return only in 2015, for the first time since 2011, with an expansion of 1.4 percent, it said. Governor Bostjan Jazbec also did not rule out Slovenia becoming the sixth member of the eurozone to seek outside help if its bond yields, currently close to the danger level of seven percent, remain high. "There are and we are examining different scenarios. Everything is still open. The crucial thing is what's going to happen with the economy. Nobody would like Slovenia to ask for help," Jazbec told a news conference. "The decision to seek help depends strongly on the financial markets' confidence in Slovenia. All measures in recent months aim at convincing investors that Slovenia can solve its problems in a transparent and credible way." Earlier on Tuesday, Prime Minister Alenka Bratusek said she was sure the former Yugoslav republic would not need outside assistance. "I am convinced that Slovenia will not ask for help. We are working very intensively on measures needed to avoid seeking help," Bratusek said in an interview with the state news agency STA. She also said that the economy could pick up in 2014 if the country managed to save its state-owned banks, currently crushed under a mountain of bad loans. "Although economic forecasts predict (a recovery to start) in 2015, I'm personally convinced that if we fix the banks, we might exit the crisis in 2014," Bratusek said. Installed in March after a period of political instability, the centre-left Bratusek has embarked on a plan to avoid a bailout, including a "bad bank" to absorb nonperforming loans, external audits of lenders, privatisations and tax hikes. The International Monetary Fund on Tuesday also cut its growth forecasts for Slovenia in its new World Economic Outlook report. It predicted a contraction of 2.6 percent this year, compared to 2.0 percent, and for GDP to shrink 1.4 percent in 2014, slashed from an earlier forecast of growth of 1.5 percent. The official national economic institute UMAR last week cut its 2014 GDP forecast to a contraction of 0.8 percent, keeping its projection of a slide of 2.4 percent in 2013 unchanged. For 2015 it expects growth of 0.4 percent.