April 28, 2020 / 3:22 PM / a month ago

UPDATE 1-Slovenia to plunge into big deficit due to coronavirus

(Adds quote, details, background)

By Marja Novak

LJUBLJANA, April 28 (Reuters) - Slovenia could rack up a general government deficit of 8.1% of GPD due to the economic shock of the coronavirus pandemic, the government said on Tuesday, after running a small surplus or a balanced budget for the past three years.

It has previously been on track for a surplus of 1% of GDP. It ran a deficit for more than 20 years until 2017.

The government’s macroeconomic institute UMAR expects the economy to contract by around 8% this year, it said, although all projections remain “very uncertain”.

Slovenia, whose economy expanded by 2.4% last year, has so far confirmed 1,408 cases of the coronavirus and 86 deaths.

The government, in its decree on budget preparation published on the parliamentary website, raised the maximum level of general government spending this year to 23.6 billion euros ($25.61 billion) from 21.5 billion before the epidemic.

“Slovenia will fully use the flexibility, offered by the fiscal framework of the EU, to make it easier to member states to overcome the coronvirus epidemics and its consequences,” it said.

Export-oriented Slovenia has so far offered 3 billion euros, or about 6% of GDP, in financial help to citizens and companies hit by the coronavirus lockdown.

The parliament is later on Tuesday expected to enforce a scheme that will enable government guarantees of up to 2 billion euros for loans to companies hit by the outbreak.

Since the middle of March, many firms have had to suspend production due to a lack of parts, lower demand or with an aim to reduce the spread of the disease.

Revoz, the Slovenian arm of French car maker Renault , resumed production on Tuesday.

To tackle the outbreak, Slovenia has closed schools, bars, restaurants, hotels, churches and shops, apart from food and drug stores, and cancelled public transport.

Citizens are not allowed to socialise in public spaces or leave their local community.

Last week, shops that sell furniture, construction materials, cars and bicycles were allowed to reopen, while on May 4 churches, hairdressers and beauty parlours are due to resume their services. ($1 = 0.9217 euros) (Reporting by Marja Novak; Editing by Catherine Evans and Alison Williams)

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