Slovenian cuts public deficit to 3.7%

Slovenia's public deficit fell to 3.7 percent of gross domestic product (GDP) in 2012 from 6.4 percent a year earlier, Slovenia's statistics office said on Friday.

However the public deficit in 2013 is expected to increase to 4.2 percent of GDP mainly due to a 420-million-euro ($538 million) capital hike for the country's state-owned bank in the first quarter of this year, the statisticians estimated.

Slovenia's public debt reached 54.1 percent of GDP at the end of 2012 compared to 46.9 percent in 2011, according to a first estimation.

Separately, the government's Macroeconomic Analysis and Research Institute (UMAR) said that the austerity measures the previous government introduced to cut the deficit would cause a bigger contraction in the economy than it had previously expected.

It said it now forecasts that Slovenia's economy will contract by 1.9 percent this year, instead of the 1.4 percent it expected previously.

Slovenia's economy had contracted by 2.3 percent of GDP in 2012.

"Risks are high that growth could be even lower," UMAR's head Bostjan Vasle told journalists adding they were linked to the international environment and the measures to consolidate the country's public finances.

Slovenia, once a model EU newcomer, has struggled against economic recession and problems facing its banks, which are mired in bad debt, prompting concerns that it might be the next eurozone member to seek a bailout from the EU and IMF.

The European Commission in its winter forecast estimated Slovenia's public deficit in 2012 was 4.4 percent of GDP and predicted a 5.1 percent of GDP deficit for this year.