LJUBLJANA, Feb 5 (Reuters) - Slovenia's economy is not expected to improve in the first half of 2013 because of difficult global conditions and the slow pace of local reforms, the Bank of Slovenia said on Tuesday.
Slovenia is struggling to avoid becoming another euro zone member in need of a bailout but is also faced with a government crisis after two junior partners quit Prime Minister Janez Jansa's coalition, depriving it of a parliamentary majority.
'Due to difficult conditions in international environment and the need for structural reforms of the domestic economy, an improvement of economic conditions cannot be expected at least in the first half of the year,' the bank said in a statement after a regular bi-monthly board meeting.
It said Slovenia needed to cut labour costs compared to productivity to improve its competitiveness.
The central bank also urged the government and local authorities to improve the management of state-controlled utilities so as to prevent price hikes of services like electricity and water, which would increase companies' costs.
From this year the prices of water supply and garbage disposal are set by local governments and not by the central government.
Export-oriented Slovenia was badly hit by the global crisis and fell into a new recession in 2012 amid lower export demand and a fall of domestic spending because of budget cuts.
The government expects the economy to contract by 1.4 percent this year after a contraction of about 2 percent in 2012. Unemployment reached 12.2 percent in November and is expected to continue rising throughout this year.
In October, Slovenia managed to issue its first sovereign bond in 19 months, averting the need for an international bailout at least until June.
(Reporting By Marja Novak; editing by Zoran Radosavljevic and Patrick Graham) Keywords: SLOVENIA CBANK/
(Marja.Novak@thomsonreuters.com)(Reuters Messaging: firstname.lastname@example.org)
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