Country Report Slovenia October 2009

Outlook for 2010-11

• The centre-left government, elected in September 2008, is expected to remain in office throughout the forecast period.
• Animosity among the coalition partners, headed by the Social Democrats (SD), may cause friction and threats to stability.
• Relations between Slovenia and Croatia are likely to improve, following an agreement in September between the prime ministers of the two countries on how to resolve their long-standing border dispute.
• The government will initially focus on mitigating the effects on Slovenia of the global economic downturn. Progress on structural reforms will be slow.
• The Economist Intelligence Unit forecasts that the budget deficit will contract from an estimated 6% of GDP in 2009 to an average of 4.4% of GDP in 2010-11, as a return to growth lifts tax receipts.
• We estimate that real GDP in 2009 will contract by around 6.5%. We expect growth to return in 2010-11 to an average of 1.9%, as demand for Slovenian products gradually picks up in the euro zone.
• We forecast a rise in the current-account deficit, from the equivalent of an estimated 1.3% GDP in 2009 to an average of 3% of GDP in 2010-11, as imports, including raw materials for processing for exports, increase.

Monthly review

• The prime minister, Borut Pahor, and his Croatian counterpart, Jadranka Kosor, reached an outline agreement in September on how to resolve the two countries' border dispute.
• The finance minister, France Krizanic, dropped plans to raise the highest income tax band to 50%, after meeting opposition within the ruling coalition.
• The government is considering raising some taxes and introducing new ones to rein in the budget deficit, as revenue in January-July fell well short of target.
• The government is planning to reform pension provisions by encouraging the development of pension funds and occupational pension schemes.
• In July industrial output shrank, for the tenth consecutive month, but the contraction in production, at 20.1% year on year, began to slow.
• The number of unemployed decreased in August, by 0.4% month on month, marking the first decline in 12 months, as some firms began to recruit labour.
• The trade balance continued to improve in July, as imports shrank by 32.3% year on year and exports declined by only 22.4%. Import coverage rose to 96.6%, from an average of 86% in 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;70
NAICS Code: 52;72