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Slovenia Business Forecast Report Q4 2014

  • September 2014
  • -
  • Business Monitor International
  • -
  • 40 pages

Core Views
Political instability will remain elevated as the four-party government coalition 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 ultimately some form of restructuring takes place, whether on the loans itself to reduce debt servicing costs, or through cost cutting (shedding jobs/trimming investment).

Major Forecast Changes
We have upgraded our forecasts for real GDP growth in 2014 and 2015 on the back of stronger-than-expected exports, and early indications that household consumption is finally recovering. We have adjusted our current account forecasts, and now expect a surplus of 7.0% in 2014, from a previous forecast of 3.7%.

Table Of Contents

Slovenia Business Forecast Report Q4 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
Major Post-Election Risks To Privatisation Programme.8
There are considerable risks to the future of Slovenia's privatisation programme following Miro Cerar's victory in the July parliamentary
election. In light of the precarious fiscal situation, we expect sovereign bond yields to remain sensitive to any indications that the
government will pursue a looser fiscal policy.
TABLE: Political Overview .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 pressures 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
Growth Upgraded On Export Strength...12
We have upgraded our forecasts for real GDP growth in 2014 and 2015 on the back of stronger-than-expected exports, and early
indications that household consumption is finally recovering. Nonetheless, a considerable corporate debt overhang and government
austerity plans will cap the overall pace of real GDP growth.
TABLE: Economic Acti vit y..12
Balance Of Payments . 13
Strong Surplus Lies Ahead.13
We forecast Slovenia to run a sizeable current account deficit for the foreseeable future due to ongoing deleveraging in the corporate
and banking sectors.
TABLE: Current Account...14
Fiscal Policy. 15
New Government Raises Fiscal Risks...15
We are increasingly cautious towards Slovenia's fiscal outlook following Miro Cerar's victory in the parliamentary election, as we see
growing risks that privatisation plans needed to narrow the deficit may be shelved.
TABLE: Fiscal Policy15
Monetary Policy... 16
Mild Deflation In H214..16
We have lowered our inflation forecasts for Slovenia and now expect a period of mild deflation in 2014, which should help to support
real wage growth and household purchasing power. Demand-side pressures will remain absent for the foreseeable future.
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 throughout our 10-year
forecast period, though at a far reduced pace to 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. That said, this should result in reduced external asymmetries and we forecast the current account deficit to fall steadily
through to 2023.
TABLE: Long -Term Mac roec onomic Forecasts 19
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 FRAMEWOR K RATING.23
Infrastructure... 24
TABLE: LABOUR FORCE QUALITY..24
TABLE: EMERGING EURO PE - ANNUAL FDI INFLOWS.25
Market Orientation... 26
TABLE: TRADE AND INVESTMENT RATINGS.26
Table: Top Export Destinations27
Operational Risk.. 27
Chapter 5: Key Sectors.. 29
Pharmaceuticals and Healthcare... 29
TABLE: Pharmaceutical Sales , Hist orical Data and Forecasts ..30
TABLE: Healt hca re Expenditu re Trends , Hist orical Data and Forecasts . 31
TABLE: Government Healt hca re Expenditu re Trends , Hist orical Data and Forecasts .. 31
TABLE: Private Healt hca re Expenditu re Trends , Hist orical Data and Forecasts . 31
Retail. 33
Other Key Sectors... 37
Table : Aut os Sect or Key Indicat ors...37
Table : Telec oms Sect or Key Indicat ors37
Table : Defence and Secu rit y Sect or Key Indicat ors37
Table : Inf rast ructu re Sect or Key Indicat ors...37
Table : Food and Drink Sect or Key Indicat ors..38
Table : Oil and Gas Sect or Key Indicat ors..38
Table : Freig ht Key Indicat ors38
Chapter 6: BMI Global Assumptions. 39
Global Outlook. 39
Eurozone Downgrade On Poor Q214..39
Table : Global Assumpti ons .39
Table: Developed States, Real GDP GrowtH, %...40
Table : BMI VERSUS BLOO MBERG CONSENSUS REAL GDP GRO WTH FOR ECASTS, %. 40
Table : Eme rging Markets , Real GDP Growt h, %..41

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