Sunday, April 12, 2009

Slovenia's Contraction Continues

Slovenia’s economic contraction continues to bite, and industrial output fell the most in at least six years in February as the worsening European recession continued to hit demand for exports. Annual output declined 22.3 percent, the fifth consecutive month that it dropped, from a 17.4 percent decrease in January. Month on month, production fell 0.9 percent.

Slovenia, like many East European economies is far more dependent on European markets like Germany than on local government stimulus measures. Slovenia’s export-driven economy is sliding deeper into recession as demand whithers across the 27-nation European Union. Gross domestic product in the Adriatic nation is set to shrink 4 percent this year according to the government’s forecasting institute.

Slovenia’s economy contracted for the first time in more than 15 years in the fourth quarter of 2008, and is almost certainly heading for quite a deep recession as a construction boom came to an end while demand dropped for exports to other economies in the European Union. Gross domestic product shrank 0.8 percent year on year following a revised 3.9 percent expansion in the previous quarter. More astonishingly, quarter on quarter GDP contracted a seasonally adjusted 4.1 percent. Only Estonia and Latvia contracted at a faster rate.

Prime Minister Borut Pahor has introduced subsidies for shorter working hours to help exporters and set up a 12 billion-euro state-guarantee plan to restart bank lending. The outlook for the coming months is “bleak” since all economic indicators have fallen to their lowest level on record, according to the government forecasting institute.

Exports were down again sharply in February 2009, with goods worth EUR 1,266.1 million leaving the country and goods worth EUR 1,324.5 million entering, which means that exports were 25.1% lower than in February 2008, while imports decreased by 29.1%, and the country ran a trade deficit of 58.5 million euros.

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