January 10, 2017 / 1:20 PM / 6 months ago

UPDATE 1-Slovenian central bank urges curbing of public spending

3 Min Read

(Updates with quotes, details on bank performance)

By Marja Novak

LJUBLJANA, Jan 10 (Reuters) - Slovenia should continue to curb public spending as economic indicators improve, in order to meet its fiscal goals, which include reducing the budget deficit, the central bank said on Tuesday.

"Over the past months the pressure of various interest groups on public spending has strongly increased, which could make it difficult to meet fiscal goals if economic conditions worsen compared to what is expected at the moment," the bank said in a statement after its board meeting.

The central bank also said local banks had a joint pre-tax profit of 362 million euros in the first 10 months in 2016, which is 54 percent higher than in the same period of the previous year, mainly due to lower provisions for bad loans.

Banks managed to reduce loans whose repayment had been delayed by 90 days or more to 6.3 percent of all loans in October from 6.4 percent in September, the central bank said.

Earlier on Tuesday, the government's macroeconomic institute reported that corporate loans by local banks fell by 11 percent year-on-year in November in spite of favourable economic data.

Slovenia, which narrowly avoided an international bailout for its banks in 2013, returned to growth in 2014, and the government now expects the economy to expand 2.9 percent in 2017, compared with 2.3 percent last year.

Favourable economic forecasts have led public-sector trade unions to demand wage increases, and pensioners are pressing for pensions to be raised.

In December, the government agreed to increase public-sector wages by 3.8 percent this year. Wage talks with doctors' trade unions continue after doctors staged a partial two-week strike in November.

The central bank also said prospects for export growth remain encouraging in 2017. Slovenian growth exceeds that of most other eurozone states, it said, mostly because of the competitiveness of its export sector.

Slovenia exports about 70 percent of its production, mainly to other EU states. Exports include cars, car parts, pharmaceutical products and household appliances.

In line with European Commission's demands, Slovenia hopes to reduce its budget deficit to 1.7 percent of gross domestic product this year from about 2.2 percent in 2016 and bring it to zero by the end of 2020. (Reporting By Marja Novak, editing by Larry King)

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