Slovenia Business Forecast Report Q3 2014

  • June 2014
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views

Political instability will remain elevated as the four-party coalition government attempts to push through harsh austerity measures that will likely prompt parliamentary tensions and social unrest. The short-term economic outlook has improved in light of accelerating regional economic activity and a slight rebound in domestic demand.
The corporate sector remains overleveraged and will remain a major risk to the banking sector unless some form of restructuring takes place, whether on the loans to reduce debt servicing costs, or through cost-cutting (shedding jobs/trimming investment).


Major Forecast Changes

We have adjusted our growth forecasts to take into account recent data and now expect that Slovenia will exit recession in 2014. Real GDP is now forecast to grow by 0.5%, against our previous forecast for a 0.5% contraction. We have adjusted our current account forecasts, and now expect the current account balance to come in at 7.0% in 2014, from a previous forecast of 3.7%.

Table Of Contents

Slovenia Business Forecast Report Q3 2014
Executive Summary. 5
Core Views..5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook. 7
SWOT Analysis.. 7
BMI Political Risk Ratings 7
Domestic Politics.. 8
Parliamentary Election Could Be Delayed Until Q314.8
It is looking increasingly unlikely that a parliamentary election will be called before the end of the summer. We do not expect to see a
major shift in policy direction from the main political parties ahead of the vote.
TABLE: Political Over view ..8
Long-Term Political Outlook 9
Economic Slump A Test For Stability...9
Although the EU will remain a policy anchor for Slovenia over the long term, massive economic pressure will be a major test for the
country's political institutions. A structural shift in policy and/or governing institutions is unlikely, though we caution that failure to develop
a long-term growth model will raise challenges to governance, potentially exacerbating political party divisions.
Chapter 2: Economic Outlook 11
SWOT Analysis 11
BMI Economic Risk Ratings... 11
Economic Activity... 12
Finally Emerging From Recession.12
We forecast Slovenia to emerge from recession in 2014, although the pace of growth will flatten in the second half of the year, primarily
due to base effects. Net exports will remain the mainstay of growth, although household consumption will increasingly contribute over
the coming years.
table: Economic Activity..12
Balance Of Payments.. 14
Stronger EU Demand Boosting Current Account Surplus14
We have substantially revised up our forecast for Slovenia's current account surplus, which we now expect to arrive at around 7.0% of
GDP in 2014, versus a previous forecast of 3.7%.
Table: Current Account...14
Fiscal Policy. 15
Concerns Over Long-Term Fiscal Sustainability..15
The collapse of the Slovenian government has generated elevated risks surrounding the sustainability of the country's finances.
While the immediate economic impact will be limited, the long-term risks surrounding a lame-duck administration will become more
prominent.
table: Fiscal Policy15
Chapter 3: 10-Year Forecast... 19
The Slovenian Economy To 2023... 19
Convergence To Slow Markedly.19
We expect Slovenia's real macroeconomic convergence with Western European developed states to continue through our 10-year
forecast period, though at a far more reduced pace compared with the decade leading up to 2007. While continued capital market and
trade integration with the eurozone following the adoption of the euro in 2007 will remain a core factor underpinning productivity gains,
we caution that reduced foreign capital flows resulting from the 2008-2009 financial crisis and domestic banking sector woes will stem
trend growth over the long term. This will result in reduced external asymmetries, and we forecast both the current account deficit to fall
steadily through to 2023.
TABLE: Long-Term Macroeconomic Forecasts19
Chapter 4: Business Environment. 21
SWOT Analysis 21
BMI Business Environment Risk Ratings.. 21
Business Environment Outlook. 22
Institutions... 22
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS22
TABLE: BMI LEGAL FRAMEWORK RATING.23
Infrastructure... 24
TABLE: LABOUR FORCE QUALITY..24
TABLE: EMERGING EUROPE - ANNUAL FDI INFLOWS.25
Market Orientation... 26
TABLE: TRADE AND INVESTMENT RATINGS.26
Operational Risk.. 27
Table: Top Export Destinations ...27
Chapter 5: Key Sectors.. 29
Freight Transport. 29
TABLE: Air Freight30
tABLE: Maritime Freight.30
TABLE: Rail Freight..30
TABLE: Road Freight30
Defence 32
TABLE: Defence Expenditure Data and Forecasts..33
Other Key Sectors... 37
Table: Oil and Gas Sector Key Indicators.37
Table: Autos Sector Key Indicators..37
Table: Pharma Sector Key Indicators...37
Table: Food and Drink Sector Key Indicators.38
Table: Infrastructure Sector Key Indicators..38
Table: Telecoms Sector Key Indicators...38
Chapter 6: BMI Global Assumptions. 39
Global Outlook. 39
Emerging Market Deceleration39
Table: Global Assumptions.39
Table : Devel oped States , Real GDP Growt H, %...40
Table : BMI VERSUS BLOO MBERG CONSENSUS REAL GDP GROWTH FORECASTS, %. 40
Table : Emerging Markets , Real GDP Growth , %..41

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