Slovenian central bank cuts 2013 growth forecast

Slovenia's economy will contract more than previously expected this year, the central bank said Tuesday, forecasting gross domestic product to shrink by 1.9 percent.

In its previous prediction, the central bank said the economy would contract by 0.7 percent.

Slovenia will start a modest recovery in 2014, with 0.5-percent growth speeding up to 1.4 percent of GDP in 2015, the bank also said.

Central bank governor Marko Kranjec, also a member of the European Central Bank's governing body, warned however that: "Much will depend this and next year on what will the state do."

"Risks are high and a clear message that we want to stabilise the economic situation cannot be avoided," he told journalists.

In 2014, "much will still depend on the international environment but mainly on the domestic situation," he added.

The new centre-left government, appointed last month, has promised to continue implementing measures adopted by the previous government -- including pension and labour reforms and a plan to create a so-called bad bank.

At the same time, it says it plans to "soften" austerity measures aimed at cutting public sector spending.

"We are still waiting for the government's programme to be presented shortly and hope it will help stabilise the situation," Kranjec said.

"The government... has to do whatever is necessary to stabilise the economic and financial conditions," he added, urging Prime Minister Alenka Bratusek to "make it clear she is serious about such measures."

In its economic forecast last week, the government's Macroeconomic Analysis and Research Institute (UMAR) also predicted a 1.9-percent contraction this year, followed by modest 0.2-percent growth in 2014.

Last year, the economy contracted by 2.3 percent of GDP.

On inflation, the central bank kept its forecast unchanged on Tuesday, predicting a 2.3-percent hike in consumer prices this year and by 1.4 percent in 2014.