Keywords : fiscal, Accountancy
While Slovenia is not facing the same sort of macroeconomic crisis risks as several of its Central and Eastern European counterparts, we nonetheless expect the impact of the global financial crisis on the economy to be profound. Indeed, aggregate demand is expected to contract significantly as foreign credit into the economy dries up and export demand falls. This will not only weigh on private consumption but also gross fixed capital ...
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While Slovenia is not facing the same sort of macroeconomic crisis risks as several of its Central
and Eastern European counterparts, we nonetheless expect the impact of the global financial crisis
on the economy to be profound. Indeed, aggregate demand is expected to contract significantly
as foreign credit into the economy dries up and export demand falls. This will not only weigh on
private consumption but also gross fixed capital formation as well. As a result, we do not believe
that Slovenia will be able to avoid a very deep recession in 2009, and alongside our global projections ,
do not expect a marked full-year recovery until 2011. To be sure, we stress that the adoption
of the euro in 2007 will provide a layer of stability to the economy and we have factored this
into Slovenia’s overall macroeconomic risk profile. An external debt refinancing crisis is unlikely
in the country and we expect the sovereign to maintain its ability to guarantee key private segment
borrowing through support to the banking segment , through the crisis.
With the Slovenian economy expected to fall deeper into recession in 2009, we maintain our view
that the government’s core policy focus will remain the economy. While a comprehensive fiscal
stimulus package is unlikely, we maintain that the budget programme this year will be expansionary.
For the most part, we expect economic policy measures to continue to be ad hoc and targeted to
mitigate specific effects of the global financial crisis. State refinancing guarantees for the banking
sector are likely to continue through the latter half of the year and other proactive measures such
as subsidies to prop up employment and consumption are also expected to be implemented.
We have revised down our 2009 economic growth projection for Slovenia and now expect a contraction
of 5.0%. Not only does this factor in a recent downward revision to our eurozone growth projection
to -4.2%, but also the continued deterioration of domestic demand and credit conditions through
Q109. While Slovenia’s adoption of the euro will provide a degree of protection from refinancing
risks in the private segment , we caution that the economy will nonetheless be hit hard by the general
deleveraging process globally.
The Slovenian government announced plans on April 16 to double the level of income tax for the
highest wage earners in state-owned firms . The measure will levy a 90% tax on any portion
of net salaries that exceed Euros 12,500 per month for an employee of any directly or indirectly
state-owned firm. The tax will also apply to employees of companies that have received state guarantees
for loans. While the move will apply to a small minority of individuals, it will apply to several of
the country’s largest corporations including telecommunications firm Telekom, most energy companies
and the country’s largest banks. Elevated income taxes will negatively affect the attractiveness of
Slovenia to foreign investors, especially as a destination for high value added markets . While
we believe these taxes will be repealed eventually, should they be prolonged into 2010 we would
expect a marked impact on capital inflows into the country.
Accounting And Corporate Finance Industry in Slovenia
Executive Summary... 7
The World Recession: Impact On Slovenia
Chapter 1: Political Outlook 9
Industry SWOT Analysis ......9
BMI Political Risk Ratings....... 10
Domestic Politics.....11
Recession To Elevate Political Pressures
We expect the Slovenian government’s policy focus to remain on the economy as the country’s recession deepens
through 2009.
Data : Political Overview.. 12
Foreign Policy..........12
Croatia Dispute To Undermine EU Influence
We reaffirm our view that a territorial dispute with Croatia will remain Slovenia’s key foreign policy priority through
2009.
Chapter 2: Economic Outlook....... 15
Industry SWOT Analysis .. 15
BMI Economic Risk Ratings.... 16
Economic Activity....17
Deepest Recession Since 1992 Ahead
We have revised down our 2009 economic growth projection for Slovenia and now expect a contraction of 5.0%.
TABLE: ECONOMIC ACTIVITY.....17
Economic Activity II..19
Banking Segment : Credit Growth To Turn Negative
Slovenia’s banking segment is better positioned to weather the global recession and a protracted credit constriction
than most of its peers in the emerging Europe region.
Fiscal Policy.21
Expect a Record Deficit In 2009
We expect Slovenia’s consolidated budget deficit to widen considerably to 7.7% of Gross Domestic Product in 2009.
table: FISCAL POLICY. 21
Balance Of Payments...........23
Current Account Deficit To Fall To 2.7% Of Gross Domestic Product
We hold to our core view that Slovenia’s current account deficit will narrow considerably in 2009.
table: BALANCE OF PAYMENTS (Euro)......... 23
Chapter 3: 10-Year Projection ......... 25
The Slovenian Economy To 2018.....25
Convergence To Continue But At A Much Slower Pace
We expect Slovenia’s real macroeconomic convergence with the Western European developed states to continue
through our 10-year projection period, though at a far reduced pace to the decade leading up to 2007.
table: Long-Term Macroeconomic Projections . 25
Chapter 4: Special Report. 27
The Outlook For World Banking......27
TABLE: LOAN -TO-DEPOSIT RATIOS, Selected St ates27
TABLE: LOAN GROWTH, Selected St ates..... 28
Environment Overview Rating Outlook.......30
TABLE: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATINGS, SELECTED STATES 30
Chapter 5: Business Environment 35
Industry SWOT Analysis ... 35
BMI Business Environment Risk Ratings........ 36
Environment Overview Outlook.......37
TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS... 38
Institutions ..39
TABLE: BMI LEGAL FRAMEWORK RATINGS.... 39
Infrastructure ..........41
Market Orientation ..42
Data : Europe, FDI Annual Inflows.......... 43
TABLE: BMI TRADE RATINGS... 44
Data : Top Export Destinations.... 45
Operational Risk ......46
Chapter 6: Key Segments ...... 47
Pharmaceuticals ......47
Data : Health Expenditure Indicators, Historical Data and Projections . 49
Chapter 7: BMI World Assumptions........ 51
World Assumptions.51
TABLE: GLO BAL ASSUMPTIONS........... 51
TABLE: GLO BAL & REGIONAL REAL Gross Domestic Product GROWTH..... 52
TABLE: EMERGING MARKETS.. 53
TABLE: COMMODITIES.. 54
