The International Monetary Fund said that Slovenia is facing a deep recession and the country must clean up its banks and restructure the corporate sector to help the economy recover.

'Slovenia is facing a deep recession resulting from a vicious circle of strained corporate and bank balance sheets, weak domestic demand, and needed fiscal consolidation," the IMF said in a review report on Monday.

According to the Washington-based lender, cleaning up and recapitalizing banks is an immediate priority to break this cycle. The IMF mission to Slovenia also urged the authorities to restructure the over-indebted corporate sector and reduce the role of the state in the economy to sustain any recovery.

At the same time, the report pointed out that without these reforms, recapitalizing banks will be only an expensive stop-gap solution.

IMF expects a slow, export-driven recovery to take hold in the second half of 2014. However, a more robust and sustained recovery can happen only after the financial and corporate sectors are repaired, the lender said.

RTTNews