Slovenia exports, industry output rise in August

By Marja Novak

LJUBLJANA, Oct 10 (Reuters) - Slovenia's exports and industry picked up in August, raising hopes it can avoid asking for a bailout just as the country prepares to make its second attempt this year to sell bonds internationally.

Exports, the main driver of the Slovenian economy, rose by 2.5 percent year-on-year, the first increase in four months, the statistics office reported on Wednesday. Industrial output jumped by 4.2 percent, the biggest annual rise in 15 months.

"These figures are positive and give me optimism that Slovenia will be able to avoid a bailout, providing it manages to raise money in bonds or by privatisation in the near future," said Jure Vrhunec of Raiffeisen Bank.

Slovenia plans to issue a $1.5 billion 10-year bond in the next few weeks after postponing a similar issue in euros in April because the yield demanded exceeded 5 percent.

Yields have since climbed further amid speculation that Slovenia could become the sixth euro zone state to apply for a bailout. The yield on Slovenia's benchmark 10-year bond peaked at 7.6 percent in August, and was 6.1 percent on Wednesday, according to Reuters data.

"Export and industry data show that everything is not black ... but Slovenia has to simultaneously enforce a number of reforms to win back market confidence," said Matej Tomazin, head of investment firm KD Skladi.

The conservative government of Prime Minister Janez Jansa plans to raise the retirement age and enact laws to increase labour market flexibility by the end of the year.

It also plans to establish a new state company that would take over bad debts of local banks, which now amount to some 6.5 billion euros or 18 percent of GDP, and another that will manage all state assets and speed up privatisation.

But the government has yet to reach agreement on the new reform laws with trade unions and the centre-left opposition, seen as crucial to avoid possible referendums that could postpone or reject reforms.

Slovenia, an exporter of cars, car parts, pharmaceuticals and household appliances, was the fastest growing euro zone member in 2007 but was badly hit by the global crisis due to its dependency on exports.

After a mild recovery in 2010 and 2011, the government expects the economy to contract by 2 percent this year and by another 1.4 percent in 2013 due to lower export demand and a fall in domestic consumption amid budget cuts.

(Reporting by Marja Novak; Editing by Catherine Evans)