As indicated in the focus di Intesa Sanpaolo, the deep recession of 2009 (-8,0%) in Slovenia was followed in the following two years by a insufficient economic recovery, with real GDP growth settling at 1,2% and 0,6% respectively. Up until the beginning of 2011, the recovery had been driven by a recovery in foreign demand, in particular from the EU and the Balkan markets. However, the driving force of these markets has greatly reduced with the intensification of the Eurozone crisis, so that in 2012 the weakness of foreign demand added to the contraction of domestic demand, on which the cuts in the salaries of public employees, the high unemployment and the substantial debt service that households and businesses have to bear due to the high debt accumulated in recent years have weighed. GDP decreased by 3,0% in the 4th quarter of 2012 compared to the same period of the previous year. According to estimates, during 2012, GDP decreased by 2,3%, with net foreign demand representing the only national accounts item capable of providing a positive contribution to the GDP trend, but only due to the strong contraction in imports. In fact, domestic demand contracted by 5,7%, due to the negative dynamics of expenditure both for final consumption (-2,6%) and for investments (-17,8%), especially in construction and infrastructure (-18,5% in the fourth quarter of 2012), penalized by the unfavorable conditions on the credit market.
In the last few years, due to deterioration of bad loans, which make up about 14% of loans granted by local banks, the basis of capital of the largest Slovenian credit institutions has deteriorated and the Slovenian banking system, especially the banks controlled directly or indirectly by the state, is facing a difficult liquidity situation. On the supply side, all production sectors recorded a contraction in 2012: the construction sector suffered the greatest decline (-11,6%), followed by the food and forestry sector (-5,8%), also penalized by unfavorable seasonal variables, and by the financial insurance sector (-2,2%), while the contraction in manufacturing was more contained (-0,9%).
In this context, the economic weakness recorded in 2012 also continued in the first months of 2013, when retail sales contracted by 10% in real terms, penalized by an unemployment rate close to 13%. Considering the prospects of a still negative economic dynamics in the Eurozone during 2013 and taking into account the restrictive orientation of the fiscal policy in Slovenia to consolidate the public finances, it is expected that the recession of the Slovenian economy will continue for the entire duration of this year, albeit moving towards a path of recovery (-1,6%). In the best forecasts, the economic dynamics could register positive performances towards the end of 2013 before consolidating during the next year, when the GDP could mark a growth of around 1,0%. But they remain strong downside risks connected above all to the weakness of the banking system. This has repercussions on the production systems by virtue of a low degree of diversification of economic activity, where the production of machinery and means of locomotion dominates with about 40% of total exports.
Here then is that the difficulties in accessing credit, the inefficient bureaucratic system and the rigid regulation of the labor market call for the need for timely reforms, while the quality of the education system still represents one of the strengths of the country.
