In the past few days, Intesa San Paolo SpA, through its economist of the Study and Research Service Antonio Pesce, has published an interesting document entitled "Slovenia - Focus on Economy".
In the last years the Slovenia was characterized by a strong political instability, three different governments have alternated in just over three years. TO July 2014, took office on government of Miro Cerar thanks to the support of centre-left coalition (52 out of 90 seats).
Of note in terms of international relations is the delicate relationship that Slovenia has with Croatia. While on the one hand there is a weakening of the maritime border dispute, on the other there is no improvement on important issues not yet resolved, in particular the attribution of the costs for the disposal of radioactive waste deriving from the Krsko nuclear plant in Slovenia of which Croatia is co-owner.
The Slovenian economy shows slight signs of improvement. In 2009 Slovenia suffered a deep recession (GDP: -8%), in 2010-2011 the economic recovery was anemic (real GDP growth of 1,3% and 0,7% respectively). Up until 2011, growth had been driven in particular by foreign demand, specifically from the EU and the Balkan markets. In 2012, the contraction in domestic demand was compounded by the weakening of foreign demand due to the intensification of the Eurozone crisis.
The drop in demand brought the economy back into a state of recession (-2,5%), which then decreased in 2013 (-1,1%). In 2014, the favorable trend in exports (4,9% and 5,2%) bodes well and sustained GDP growth of 2,1% and 2,9% in the first and second quarters year-over-year in the two quarters respectively. Signals positive they also come from the measure of investments which returned to growth at a rate of 5%, while the domestic dynamics of consumer demand was still modest.
The high-frequency economic data following the first half of the year signal a still positive cyclical phase, albeit in a fragile economic context due to the weakness of domestic demand.
All these elements lead Intesa SanPaolo to predict 1,5% GDP growth this year: especially this variation will be mainly the result of foreign demand, to a lesser extent by the contribution made to the GDP dynamics by the increase in investments, and to a negative extent by the contributions of both public and private consumption demand.
Average inflation has come down progressively during 2013 (average figure for the year 1,9%), in 2014 no reversal of the trend is expected, indeed from January to October the average inflation is equal to 0,6%. The public debt has had an increasing trend in recent years, going from 46,9 in 2011 to 54,4 in 2012. From 2012 to 2013, also due to the one-off measures aimed at recapitalizing several banks in the country, the public debt rose to 71,7% of GDP . These measures had been envisaged in the Asset Quality Review concluded last December, which estimated a recapitalization need for Slovenian banks of approximately 3,6 billion euros, of which 3,4 for state-controlled banks and more of 200 million to set up the capital of the Bank Asset Management Company (BAMC) useful for lightening the burden of non-performing loans on the banking system.
Assuming nominal GDP growth of 3,8% in the long run, IMF estimates predict that Slovenia must maintain a deficit of no more than 2,2% in order not to exceed the constraints imposed by the Maastricht Treaty.
The government has planned to reduce the public deficit gradually and have a deficit of 2015% of GDP in 2,4, this will only be possible thanks to a positive primary surplus of 0,9% and the sale of some state-owned companies including the largest telecom operator, Telekom Slovenije, the second largest bank, Nova Kreditna Banka Maribor (Nova KBM), Ljubljana Airport and the national airline, Adria Airways.
With regard to the competitiveness according to the Global Competitiveness Index, calculated by the World Economic Forum, there doesn't seem to be any improvement. Slovenia suffers: difficulty in accessing credit, an inefficient bureaucratic system and the rigid regulation of the labor market. To report positively and the quality of the education system.
There are mainly two risk factors for Slovenia: the low degree of diversification of the economy and the liquidity conditions of Slovenian banks.
For the first factor, it is enough to report a data: 40% of the total export is due to the production of machinery and means of locomotion. For the second risk factor, it should be noted that in recent years, due to the size of NPLs (about 14%, estimate on Central Bank data), the capital base of the major Slovenian credit institutions has deteriorated and the banking system, especially the banks controlled directly or by the State, finds itself managing a difficult liquidity condition. Slovenia is trying to reduce or, better, eliminate the second risk factor through the measures envisaged in the Asset Quality Review.
According to the S&P agency, the country falls into class A-, while the evaluations of both Fitch (BBB+) and Moody's (Ba1) are more cautious. As evidenced by the rating agencies, the next judgments will be strongly conditioned not only by the political stability of the country, but also by the effective implementation of the national reform plan approved by the Government in May last year, especially le privatizations
