Country Report Slovenia March 2009

Outlook for 2009-10

• After winning the parliamentary election in September 2008, the Social Democrats (SD) formed a coalition with Zares, the Liberal Democracy of Slovenia (LDS) and the Democratic Party of Slovenian Pensioners (DeSUS).
• The government is likely to remain in office throughout the forecast period, although animosity between the centre-left parties could cause occasional instability, as could clashes between these parties and DeSUS.
• 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 sharp economic slowdown will lead to a substantial increase in public expenditure. As a result, we expect the budget deficit to exceed EU-mandated limits in 2009, before falling below these limits in 2010.
• We now forecast a fall in real GDP growth to 0.5% in 2009, from an estimated 3.9% in 2008, as the growth of domestic and foreign demand slows markedly. In 2010 GDP growth is forecast to pick up modestly, to 1.2%.

Monthly review

• The ruling coalition headed by the SD of the prime minister, Borut Pahor, has shown increasing signs of strain only a few months after coming to power, which the opposition has sought to exploit.
• Parliament ratified Croatian NATO accession on February 9th, but the non-parliamentary Party of the Slovenian Nation (SSN) has chosen not to drop its request for a referendum on the issue.
• Slovenia and Croatia still differ on the mechanism to adopt in order to deal with their territorial dispute and allow Croatia to continue its EU accession process.
• In view of the rapidly deteriorating economic situation in Slovenia, in mid-February the government introduced another package of anti-crisis measures.
• Evidence is accumulating that the economy contracted in the first quarter of 2009, after having come to a virtual standstill in the fourth quarter of 2008.
• The overall sentiment indicator calculated by the Statistical Office of the Republic of Slovenia (SORS) fell to a fresh all-time low of -27 in Januarya level consistent with an outright fall in GDP on an annual basis.
• In January headline consumer price inflation fell to 1.6% year on year from 2.1% in December 2008, and from a peak of around 7% reached in June 2008.

This report covers the following industry codes:
SIC Code: 60;53;49
NAICS Code: 52;44;22