WASHINGTON Slovenia has made impressive headway in cutting inflation and boosting economic growth, but needs to step up the implementation of certain structural reforms, the International Monetary Fund said on Friday. The IMF said faster progress with liberalizing financial markets, deregulating product markets, privatizing state firms and making labor markets more flexible was crucial in view of Slovenia's desire to join the European Union within the next few years.

It would also boost long-run growth prospects. Summarizing an assessment by the fund's executive board following a routine review of the Slovenian economy, the fund said directors had underscored the importance of proceeding forcefully with the process of structural reform, which had been subject to delays. Directors noted that the reform backlog had continued, especially with regard to the enactment of policy legislation, said the report, released at Slovenia's request.

The IMF said it expects Slovenia's economy to grow by 3.8 percent this year, just below last year's 3.9 percent rate. But it warned the balance of risks is clearly on the downside because the nation's high openness to foreign trade made it more vulnerable to economic troubles elsewhere in the world. Consumer price inflation is expected to inch up to 8.0 percent this year from 6.5 percent in 1998.

Reducing inflation required more fiscal restraint by the government, continued wage restraint in the public sector and a liberalization of key interest rates, the IMF said. Slovenia, a country of two million people, declared independence from the former Yugoslavia in 1991. (Reuter)