Country Report Slovenia April 2009

Outlook for 2009-10

• The centre-left coalition government, elected in September 2008, is likely to remain in office throughout the forecast period.
• Animosity among the coalition partners, headed by the Social Democrats (SD), may cause friction and occasional instability.
• Relations between Slovenia and Croatia are likely to remain strained over their territorial dispute, which the EU is trying to resolve through mediation.
• In 2009 the government will focus on countering the effects of the global financial and economic crisis. Even once the economy starts to recover, we do not expect any significant social or economic reforms to be implemented.
• The expected recession will lead to a substantial increase in public expenditure. We forecast the budget deficit to exceed EU-mandated limits in 2009, before falling below these limits in 2010.
• We forecast a fall in real GDP of 1.5% in 2009, following growth of 3.5% in 2008, as the prospects for domestic and foreign demand deteriorate markedly. In 2010 GDP is forecast to grow modestly, by 1%.

Monthly review

• The opposition Slovenian Democratic Party (SDS) has called for a no-confidence vote in the interior minister, Katarina Kresal, over her determination to give residency to non-citizens "erased" from official records.
• The second-largest party in the ruling coalition, For Real-New Politics (Zares), has sparked friction with its coalition partners by openly criticising the government's performance.
• Slovenia and Croatia have reiterated their differences over how to resolve their territorial dispute, which is holding up Croatian EU accession talks.
• The government has drafted a revised budget, with increased spending to deal with the expected recession, which targets a deficit of 2.9% of GDP, up from an originally forecast deficit of 0.3%.
• Real GDP contracted by 0.8% year on year in the fourth quarter of 2008, bringing full-year growth to 3.5% from 5% in the first three quarters, following a slump in demand for exports in Slovenia's main euro zone markets.
• The contraction in foreign trade continued in January 2009, when exports dropped by 26% year on year and imports dropped by 31.5%.
• Unemployment rose at a record rate (12% month on month) in January, to reach 74,000, or 7.8% of the labour force.

Source: Country Report