Country Report Slovenia July 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 threats to stability.
• Relations between Slovenia and Croatia are likely to remain strained over their border dispute, which the EU is trying to resolve through arbitration.
• In 2009 the government will focus on countering the effects of the global economic crisis, which will further slow progress on structural reforms.
• The government will try to limit the impact of the recession by increasing public expenditure. The Economist Intelligence Unit forecasts a budget deficit of 5.3% of GDP in 2009, well in excess of EU-mandated limits.
• We have revised down our forecast for real GDP growth in 2009, to -5% (from a 4% contraction previously), in the light of the worse than expected first-quarter results. We expect a modest rebound, of 0.5% growth, in 2010.

Monthly review

• The opposition Slovenian Democratic Party (SDS) beat the SD into second place in the European election. However, the ruling coalition won four seats in the European Parliament, against the centre-right opposition's three seats.
• The government suffered a setback to its standing when the leader of a junior coalition party, For Real-New Politics (Zares), Gregor Golobic, admitted that he had misled the public by denying that he had a stake in a company.
• Talks between Slovenia and Croatia about their border dispute broke down in mid-June, after Croatia rejected Slovenian amendments to the EU's proposal for an arbitration tribunal to resolve the matter.
• The government launched a new scheme in June to protect employment by subsidising the pay of workers who are sent on extended leave by their companies, because of a lack of orders.
• The government has set up a company to take over the stakes that state-owned banks acquire in firms that cannot repay their bank loans.
• Slovenia entered recession as real GDP contracted by 8.5% year on year in the first quarter, following a 0.8% decline in the previous quarter. Gross fixed capital formation plunged by 23.6%, sharpening the fall in GDP.
• Consumer price inflation declined to 0.5% year on year in May, dropping to its lowest level since 1991, owing to weak demand, as well as low international oil and other commodity prices.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;60
NAICS Code: 336;52