Slovenia Business Forecast Report Q3 2008

Publication Date	May 2008
Publisher	Business Monitor
Product Type	Report
Pages	53
ISBN Number	1744-8832
Product Code	BMI02064

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Summary

Trouble Ahead? The economy continues to grow at an impressive clip, though inflation is emerging as an increasing threat to stability. In the first three months of 2008, annual price growth surged to 6.9%, the highest rate for over five years. Much of the increase in aggregate price pressures can be attributed to the high costs of food and energy commodities, which are complicating inflation outlooks in countries throughout the world. Furthermore, the introduction of the euro had a small one-off impact last year.

The main concern now, however, is that the initial spike in inflation becomes a more permanent phenomenon due to second-round effects. Labour unions are already protesting against what they perceive as a fall in purchasing power, as wages fall behind the rise in prices. With this being an election year, we could see some fiscal impulse via popular spending, which could exacerbate the current trend. For now, we still expect inflation to ease in the second half of 2008, reaching 4.5% by year end.

2008 is an important year for politics in Slovenia with H108 dominated by the country's holding of the rotating EU presidency, and parliamentary elections due in the autumn. While the government can boast about leading Slovenia to the front of the new accession states in terms of convergence, it is likely to face a difficult test in the domestic vote, as public discontent with the distribution of benefits from EU entry grows, and reform fatigue settles in. Campaigning is yet to get underway, but the defeat of the ruling Social Democrat Party (SDS)'s presidential candidate in November last year is a concern for Prime Minister Janez Jana's government. Uncertainty as the vote nears is likely to increase, though with all major political parties united behind a pro-European policy direction, we believe the risks of radical changes to be minimal. That said, populist pre-election pledges could threaten the short-term fiscal outlook, and add to inflation concerns.

The economy continues to grow way above the eurozone average, posting a record expansion of 6.1% in 2007. However, we believe that Slovenia has now reached the peak of its economic upturn, and expect GDP growth to moderate over the forecast period. Signs of a slowdown were already evident in Q407, with a 4.7% year-on-year (y-o-y) expansion the slowest for two years.

There are signs that the boom in construction and fixed investment - which have been the major drivers of economic growth of late - is coming to an end, with consumption and exports taking a more important role going forward. Our core scenario sees a soft landing for the economy, with GDP growth registering 5.0% and 4.3% in 2008 and 2009, respectively. However, uncertain external conditions in the wake of the global credit crunch pose a downside risk to our target.

Slovenia's business climate better resembles that of a developed European state than one in transition. An excellent infrastructure, open markets, a skilled workforce and stable political institutions all combine to make the country an attractive investment opportunity. Joining the single currency union at the start of 2007 and the Schengen free movement zone in 2008 underscores the progress made. Inward foreign direct investment (FDI) doubled last year, and we expect it to continue growing at a robust rate over the next few years.

Content

Executive Summary
- Trouble Ahead?
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Looking Ahead to Elections
- Parliamentary Elections Are Due in October, and The Ruling Slovenian Democratic Party (Sds) Will Likely Face A
- Stiff Challenge, as Unreliable Coalition Parties and An Increasingly Restless Public Threaten Its Quest for A
- Second Term
- Foreign Policy
- The Pupil Becomes The Teacher
- Slovenia Is Taking Advantage of Its Position as Eu President in H108 to Prioritise Its Own Agenda in The Western
- Balkans, with The Stabilisation of Kosovo and Serbia, and A Long-Running Dispute with Croatia at The Top of The List
List of Tables
- Table: Slovenian Political Overview
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Economic Expansion to Cool
- Slovenia's Economic Upswing Continued in 2007, with A Record Outturn of 6.1%. However, Activity Slowed in The
- Fourth Quarter, and We Expect This Trend to Continue, with Economic Growth Moderating over Our Five-Year Forecast
- Period
List of Tables
- Table: Economic Activity
- Balance of Payments
- Not as Bad as IT Looks
- Slovenia's Current Account Widened Sharply to 4.9% of Gdp in 2007, as Imports Soared on The Back of Strong
- Economic Activity
List of Tables
- Table: Balance of Payments
- Monetary Policy
- Price Pressures Intensify in Slovenia
- Consumer Prices Continued to Surge in March, Which Is Starting to Prove More Painful in Light of The European
- Central Bank (Ecb)'S Control of Monetary Policy
List of Tables
- Table: Monetary Policy
- Fiscal Policy
- Returning to Deficit
- Slovenia Posted Its First Post-Independence Budget Surplus in 2007, as The Incumbent Government Continued Its
- Positive Fiscal Record
List of Tables
- Table: Fiscal Policy
Chapter 3: Special Report
- Business Outlook for Global Frontier Markets
- Growing Fast on The New Frontier
- The 41 States That Bmi Examines in A New Report on Our Online Service May Make up Only A Small Slice of The
- World Economy, but They Possess Characteristics That Will See Them Gain Importance in The Eyes of Investors and
- Global Businesses over The Coming Years
List of Tables
- Table: Frontier Markets - Key Data and Projections for Top 10 Countries
- Frontier Investment
- Potential and Pitfalls
- The Spectacular Macroeconomic Performance of Frontier Markets in Recent Years Has Been Matched by Mildly
- Successful Efforts to Deepen Capital Markets
List of Tables
- Table: Gdp per Capita, US$ (in Order of % Increase)
- Table: Diversify through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indives
- Regional Overview
- Laos
- Neighbouring Economies The Key to Growth
- Laos's Gdp Growth Has Been Boosted in Recent Years as Neighbours China, Thailand and Vietnam Compete for Its
- Natural Resources. Gdp Expansion in 2007 Has Been Estimated at 7.6% and We See Annual Growth Remaining above
- 7% for Our Five-Year Forecast Period
- Yemen
- Huge Potential, but Don't Bank on Gcc Membership
- Markets Do Not Come Much More Frontier than Yemen, and, as Would Be Expected, There Is Huge Potential for
- Development, with The Prospect of Eventual Gcc Membership Likely to Act A Key Investment Pull
List of Tables
- Table: Yemen - Economic Activity
- Democratic Republic of The Congo
- Mining Industry to Drive Growth
- The Democratic Republic of The Congo's Mining Industry Will Be A Key Driver of Growth and Is Likely to Attract
- Significant Levels of Fdi, with Our Real Gdp Forecasts Standing at 8.3% and 7.9% in 2008 and 2009, Respectively
List of Tables
- Table: Democratic Republic of The Congo - Economic Activity
- Cuba
- Investment Prospects after Fidel
- The Accession of A New Leadership Structure in Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- with The US May Be Lifted and Cuba May Move toward Market Liberalisation
List of Tables
- Table: Cuba Macroeconomic Data and Foorecasts
- Mongolia
- Minerals to Drive Economic Boom
- Mongolia Is in The Midst of A Massive Resource-LED Economic Boom That Should Lift Gdp Growth into The Double
- Digits and Underpin Robust Increases in Exports and Inflows of Foreign Investment Capital over The Long Term
List of Tables
- Table: Mongolia - Economic Activity
Chapter 4: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Introduction
List of Tables
- Table: Bmi Business and Operational Risk Ratings
- Institutions
List of Tables
- Table: Bmi Legal Framework Ratings
- Infrastructure
- Market Orientation
List of Tables
- Table: Fdi Emerging Europe
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Operational Risk
Chapter 5: Key Sector
- Oil & Gas
List of Tables
- Table: Slovenia Oil & Gas - Historic Data & Forecasts