The 5.5 percent slump in September over the same month last year indicated that recession could be deeper than officially forecast and heightened the risk that the country might have to seek international financial aid next year.

The September fall was the biggest in almost three years, the statistics office said on Friday, adding that export growth in the first nine months was still 0.3 percent higher than in the same period of 2011. It also said September industrial output fell by 0.2 percent year-on-year.

"Economic indicators for the euro zone are negative which means Slovenian exports might continue to fall. As a consequence GDP could fall up to 2.5 percent this year," Igor Masten, a professor at Ljubljana's Faculty of Economy, told Reuters.

Exports of cars, car parts, pharmaceutical products and household appliances are the main driver of Slovenia's economy. The country, which joined the euro zone in 2007, exports about 70 percent of its production, mostly to other EU states.

The government in September forecast economic contraction of 2 percent this year due to lower export demand and a fall in domestic spending caused by budget cuts.

But Matej Tomazin, head of investment firm KD Skladi, said internal political conflicts stalling the reforms promised by Janez Jansa's government were also hurting the economy.

"Apart from a successful bond issue, there have been no positive signals from the political side in Slovenia over the past two to three months and that has an impact on the economic environment in the country," said Tomazin.

Last month Jansa's conservative government issued its first sovereign bond this year, a 10-year $2.25 billion bond with a yield of 5.7 percent, averting a bailout for at least six months.

But at the same time it held off implementing long-delayed reforms of labour, pensions and the public sector because of strong opposition from trade unions and opposition parties.

In October parliament passed two reform laws which are now both on hold because the centre-left opposition and trade unions have demanded national referendums on them.

They say the laws, which would establish a "bad bank" and a state holding to manage all state assets, would enable a non-transparent sell-off of state companies.

The government also plans to raise the retirement age and cut public sector wages and unemployment benefits but has yet to reach an agreement with the opposition and trade unions.

Last year a number of reform laws passed by the previous centre-left government were rejected at referendums demanded by trade unions, students' unions and the opposition, led by Jansa.

The rejections led to the fall of the government and early elections which brought Jansa's coalition to power. (Reuters)