Although Slovenia moved out of recession already in the second quarter of 2009, the precipitous decline in the previous two quarters was severe enough to give a year-on-year output fall in 2009 of close to 8%. A mild rebound has been occurring and is expected to continue through 2010, driven by external demand, before growth strengthens further in 2011 on the back of stronger investment. Inflation should remain moderate due to the negative output gap and high unemployment. Private consumption will be adversely affected by rising unemployment but should progressively recover with more dynamic wage developments in the private sector at the end of the projection period.
Following the strong 2009 fiscal stimulus, the fiscal stance is set to tighten in 2010 and 2011 given the need for consolidation. A new pension reform should bolster fiscal consolidation while labour market reforms to increase flexibility should help speed up employment recovery.
©OECD Observer 2010