(Updates with finance minister, analyst quotes; detail, background)
By Marja Novak
LJUBLJANA, March 9 (Reuters) - Euro zone member Slovenia's economy is likely to contract by 1 percent or more in 2009, the head of the Bank of Slovenia's analytical and research centre told Reuters on Monday.
Economic growth in Slovenia, the euro zone's faster growing member in the past two years, slowed more than expected in 2008 and analysts said the economy was likely to contract in 2009.
Gross domestic product (GDP) rose by 3.5 percent in 2008, do wn from a record growth of 6.8 percent in 2007, the statistics office said on Monday.
"It is likely that economic growth will be negative in 2009 and we are talking of a negative growth (rate) of more than 1 percent," Damjan Kozamernik said in the first indication that the bank could considerably cut its earlier forecast.
Finance Minister France Krizanic said the first quarter would be worse than the last quarter of 2008, when the economy shrank 0.8 percent, contracting for the first time since 1993.
"The result in the first quarter will be worse than in the last quarter of 2008 but positive growth is still possible in the whole of 2009 depending upon export demand," Krizanic said.
Both the government and the central bank had forecast economic expansion this year but are due to revise forecasts in April.
The government's Institute of Macroeconomic Analysis and Development in February put 2009 GDP growth at 0.6 percent, while the central bank's projection in October saw this year's growth at 3.5 percent.
Earlier on Monday, the statistics office reported that the economy of euro zone's fastest growing member in the past two years had shrunk 0.8 percent in the last quarter of 2008.
This brought full-year economic growth to a lower than forecast 3.5 percent, from a record 6.8 percent growth in 2007.
Many institutions, including the European Commission and the World Bank, have expected Slovenia to be among rare European Union economies with a positive growth this year.
But most economic indicators have worsened in the past few weeks. Economic sentiment fell to an all-time low in February, while exports slumped 15.3 percent year-on-year in December.
"The risks are firmly on the downside so 2009 growth may well be lower than -0.5 percent," said Christian Jenni, an analyst at credit rating agency D&B.
So far some 350 companies have shortened labour hours due to lower demand for their products, further depressing industrial production, which fell 17.5 percent year-on-year in December.
"Slovenia is already in recession. I expect economic growth in the first two quarters of 2009 ... will be negative, with the economy experiencing the worst hit in the second quarter of this year," said Bogomir Kovac of the Faculty of Economy of Ljubljana.
Slovenia, which joined the EU in 2004 and adopted the euro in 2007, exports some 70 percent of its production, around three quarters of that to the EU's common market. (Reporting by Marja Novak, Editing by Zoran Radosavljevic and Ron Askew)