March 24 (SeeNews) - Slovenia's gross domestic product may decrease by up to 8% this year, hit by the ongoing coronavirus crisis, the government's Institute of Macroeconomic Analysis and Development, UMAR, said, reversing its previous forecast for 1.5% GDP growth.
However, if the present state continues for more than two months, the Slovenian economy could also suffer a double-digit contraction this year, UMAR said in a statement on Monday.
"Assuming that the current harsh situation and the severe obstruction to the operations of manufacturing and services continue for two months and then gradually return to the pre-epidemic level, we expect a drop of over 5% of gross domestic product. Based on this assumption, our current estimates range between 6% and 8%," UMAR analysts noted.
The institute made its previous projection for Slovenia's 2020 economic growth just ten days ago, in its spring 2020 economic forecast report. Back then, it halved its GDP growth estimate from an earlier anticipated 3.0% increase to reflect the impact of the coronavirus pandemic on the Slovenian economy
"Things have changed dramatically since our last announcement," UMAR said, pointing out to the spread of the disease in neighbouring Italy and other European countries, and the introduction of restrictions that have impacted economic activity.
UMAR said that the sectors most exposed to the crisis, such as hotel and catering services and trade in non-food items, are expected to report a large drop in revenue, as well as a decrease of 70% or more in value added. Other sectors, including industry, trade, transport and other business services, which are currently experiencing a decline in orders, and cancelled or impeded supply and sales channels, will probably see their value added halved.
On the other hand, the contraction will be less perceptible in sectors such as energy, and minimal in areas such as agriculture, while in sectors such as telecommunications value added is even expected to increase as a result of the current situation.
"If the period of severely impeded economic activity lasts longer, which seems (unfortunately) an increasingly likely assumption, the impact will certainly be greater as well as far reaching," UMAR warned, adding that in this case some businesses will close down, bankruptcies will increase, and the impact will be felt on the labour market.
"The drop of the gross domestic product could also be double-digit this year, with slower recovery from the epidemic," the government analysts noted. They also said that in such hard times measures for support of the normal operations of the health system are a key and absolute priority, as well as measures aimed at helping businesses and individuals overcome their liquidity problems caused by the crisis.