IMF downgrades forecast for Slovenia’s economy in 2021

Ljubljana – The International Monetary Fund (IMF) has downgraded its forecast for Slovenia’s growth in 2021 from 5.2% to 3.7%. For 2022, it forecasts 4.5% growth, Bernardin Akitoby, chief of the IMF mission for Slovenia, said on Friday. This means Slovenia’s economy would reach the pre-pandemic level next year.

He presented the mission’s preliminary findings online at the end of regular consultations between Slovenia and the IMF, with a detailed report yet to be compiled.

Akitoby said risks to recovery were another epidemic wave due to new coronavirus strains, delays in vaccination, and shocks in international financial markets.

Given the current situation, the government’s priority is to contain the spread of the virus and continue with strong support for businesses until vaccination rate is high enough to allow lifting restrictions.

The IMF maintains that Slovenia responded to the negative consequences of the epidemic with rapid, extensive and well coordinated measures, Akitoby said.

He also highlighted what the IMF considers the four main priorities of Slovenia’s economic policy.

The first one is preserving the strong fiscal support until the economy’s recovery has become sustainable. Once recovery is sustainable, fiscal support should be redirected towards measures to prepare for future challenges.

The second priority is to closely monitor companies and banks and their exposure to sectors that have been severely hit by the epidemic.

In this respect, a prudent exit from support measures for banks and companies is important to prevent bankruptcies.

Here he also hailed central bank Banka Slovenije’s excellent job in preserving financial stability and crediting.

Now that the government has managed to preserve jobs, the third priority will be redirecting workers among sectors and train them for sectors with higher added value.

The last priority is enhancing digital transformation and investment into green technologies to raise productivity and improve competitiveness.

Akitoby said the government had designed digitalisation as one of the main areas of investment to be co-funded from EU recovery funds.

But in order for Slovenia to meet Paris Agreement commitments, these investments should be combined with a more efficient taxation of sectors which produce the largest amount of greenhouse gas emissions, such as transport.

Since Slovenia has a long tradition of social dialogue, Akitoby urged the government to build on it and further improve it.

Akitoby presented the findings together with central bank Governor Boštjan Vasle and Finance Minister Andrej Šircelj.

Vasle said the IMF and Slovenian representatives shared many views, including that economic policies must support the economy in the given situation, while structural policies will come to the forefront after the epidemic.

He believes the pace of Slovenia’s recovery will depend on how it will address the structural challenges.

Šircelj meanwhile welcomed the IMF’s position that fiscal support was key for the economy to survive the crisis and unemployment not to increase too much.

The minister believes Slovenia must make an effort to exit the crisis more competitive, friendlier to the environment and with a higher level of prosperity.

Apart from Akitoby, the IMF mission for Slovenia also includes Michelle Hassine and Rosen Aleksandrov Rozenov.

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