Country Report Slovenia September 2009

Outlook for 2009-10

• 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 remain strained over their border dispute, following failed bids by the EU to mediate a solution.
• In 2009 the government will focus on mitigating the effects on Slovenia of the global economic downturn; progress on structural reforms will be slow.
• The government will try to limit the impact of the recession by increasing public expenditure. The Economist Intelligence Unit forecasts a budget deficit of 6.1% of GDP in 2009, well in excess of EU-mandated limits.
• We have revised down our forecast for real GDP growth in 2009 to -7% (from -6% previously) in the light of worse than expected second-quarter results. We expect zero growth in 2010.
• The current-account deficit is expected to shrink from 6.1% of GDP in 2008 to an average of 2% of GDP in 2009-10, with the fall in imports, including of raw materials for processing, outpacing the drop in exports.

Monthly review

• There have been further disagreements among the members of the ruling coalition over appointments to state-owned companies.
• After meeting his new Croatian counterpart in late July, the Slovenian prime minister, Borut Pahor, expressed the hope that his country's border dispute with Croatia could be resolved by the end of 2009.
• The government has introduced new home-loan guarantees to help people on short-term contracts and families with young children to acquire their own homes, and in the process try to revive the ailing property market.
• Slovenia will need to purchase carbon dioxide emission credits, worth at least ???80m (US$109m), after it exceeded its emission limits for 2008, set by the EU.
• Real GDP shrank more than expected, by 9.3% year on year (on a seasonally unadjusted basis), in the second quarter of 2009. Gross fixed capital formation contracted by 27.3% and industrial output fell by 23.5%.
• The consumer price index (CPI) declined by 0.6% year on year in July, marking the first case of deflation in Slovenia since independence in 1991. The deflation followed a sharp fall in international oil and food prices.

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