* March exports down 19.8 pct y/y
* Industrial output down 18.5 pct y/y
* Analysts see '09 GDP contraction of 5 pct or more
By Marja Novak
LJUBLJANA, May 8 (Reuters) - Slovenia's exports and industrial output slumped further in March, heralding a much stronger than forecast economic downturn in the fastest growing euro zone member of the past two years.
Exports dropped 19.8 percent year-on-year while industrial output was down 18.5 percent, the statistics office reported on Friday. It said stocks of industrial products increased 6.3 percent year-on-year.
"These figures indicate that economic contraction this year will be higher than forecast and will reach between 5 and 10 percent," said Saso Polanec of Ljubljana's Faculty of Economy.
He said economic downturn would continue in 2010, although contraction would be smaller than this year.
The government expects Slovenia's economy to shrink 4 percent this year but grow one percent in 2010. The European Commission said this week Slovenian economy will contract 3.4 percent in 2009 and expand 0.7 percent in 2010.
Most analysts said there would be no growth in 2010.
"The economy will shrink 5 to 6 percent this year. There will be some improvement in 2010 but GDP growth will still be negative," economist Bogomir Kovac said.
Slovenia exports 70 percent of its production, most of it to to the European Union, and analysts said its economic fate was closely linked to that of the bloc.
Slovenia's top exporters include Revoz, a subsidiary of
France's Renault
Analysts said unemployment would also continue to rise this year and next, as companies will have to cut workforces due to lower demand for their products.
Slovenia's jobless rate reached 8.2 percent in February after touching a record low 6.3 percent in September. The government expect unemployment rate to reach 8.9 percent by the end of 2009 but analysts said that figure was conservative.
"Many companies are delaying layoffs but at some point delays will no longer be possible and then we may face a sudden big fall in employment," Polanec said.
So far some 630 companies with over 63,000 employees asked for state subsidies which the government has offered to firms that chose to cut labour hours rather than reduce workforces.
(Reporting by Marja Novak, Edited by Zoran Radosavljevic and Andy Bruce)