Boston, MA -- (SBWIRE) -- 04/30/2014 -- Political instability will remain elevated as the four-party government coalition attempts to push through harsh austerity measures that will very likely prompt parliamentary tensions and social unrest.

The short-term economic outlook has improved in light of accelerating regional economic activity and a slight rebound in domestic demand.

The corporate sector remains overleveraged and will remain a major risk to the banking sector unless some form of restructuring takes place. This could include restructuring the loans to reduce debt servicing costs, or cost cutting (shedding jobs/trimming investment).

Major Forecast Changes

We have adjusted our real GDP growth forecasts to take into account recent data and now expect that Slovenia will exit recession in 2014, growing by 0.5% against our previous forecast for a 0.5% contraction.

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Key Risks To Outlook

Politics remains a key risk to the national reform programme, with the details of how to slash the budget deficit during a downturn likely to highlight differences between coalition partners. Any sign that the reform programme is at risk of delay or suspension will have an immediate and punishing impact on market sentiment towards Slovenia, pushing the country closer to a bailout.

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