IMAD, the government’s macroeconomic forecaster, has upgraded its GDP projections for this year. Instead of a 7.6% contraction at the annual level predicted in the summer, it now expects the economy to shrink by 6.7%. However, it warns that uncertainty remains high.
Economic activity is expected to reach pre-pandemic levels by 2022, but only assuming that there is not a new lockdown affecting certain activities, IMAD said in its autumn forecast released on Wednesday.
“Were that to happen this year, the contraction would accelerate by two percentage points, while bankruptcies and higher unemployment would slow down the recovery in the coming years,” IMAD director Maja Bednaš wrote.
The upgrade is underpinned by more favourable forecasts in Slovenia’s main trading partners, the adoption of the EU recovery deal, and an improvement of confidence indicators from May to July. Economic activity has already picked up, but IMAD warns it will be uneven across industries.
And while emphasising that the uncertainty remains high, IMAD says that the recovery could accelerate beyond current predictions in the event a vaccine is put to broad use or the novel coronavirus is sustainably contained in another way.
IMAD assumes that stimulus measures in Slovenia “significantly cushioned” the consequences of the pandemic. Without these measures, the contraction would have been three percentage points deeper.