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Slovenia Business Forecast Report Q1 2015

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

Core Views

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 6.6% in 2015.

Table Of Contents

Slovenia Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Political Outlook Improving 8
Despite the new government being broadly left-leaning, the fiscal outlook seems better than we initially anticipated, and privatisation
plans appear to be on track.
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 Index 11
Economic Activity 12
Slow And Shaky Recovery Lies Ahead 12
Slovenia has exited recession but the outlook for real GDP growth will still remain quite low relative to historical levels. Household
consumption and fixed investment will increasingly drive growth due to pent up demand after several years of recession.
table: GDP By Expenditure 12
Balance Of Payments 14
Surplus To Remain Large 14
Slovenia's current account will remain in surplus as the economy continues along its path of deleveraging. While Slovenia's current
account deficit may narrow slightly as domestic demand improves, it will remain positive over 2014 and 2015 .
table: Current Account 14
Fiscal Policy 16
Improving Fiscal Outlook, But Downside Risks Remain 16
Slovenia's fiscal outlook has improved since last quarter, as uncertainties surrounding the government's privatisation plans have
disappeared. Nonetheless, Slovenia's public debt load is one of the highest in its peer group and potentially poses risks to growth
through excessive debt servicing burden and sovereign risks, during periods of financial volatility.
table: Fiscal Policy 16
Monetary Policy 17
Low Inflation A Boon 17
Consumer price growth will remain exceptionally low by historical standards, mirroring similar trends within the eurozone. Nonetheless,
low price growth is being driven by supply-side factors, and we do not believe Slovenia is at risk of entering a deflationary spiral. On the
contrary, we regard low inflation as a net positive for the country, boosting household purchasing power and stimulating discretionary
table: Monetary Policy 17
Business Monitor International Ltd www.businessmonitor.com 3
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 the Western European developed states to continue through 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 both the current account deficit to fall
steadily through to 2022.
table: Long-Term Macroeconomic Forecasts 19
Chapter 4: Operational Risk 21
SWOT Analysis 21
Operational Risk 22
table: Operational Risk 22
Transport Network 23
table: Emerging Europe - Transport Network Risks 24
Economic Openness 26
table: Europe - Economic Openness Risk 27
table: Top 5 Products Exported (USDmn) 28
table: Top 5 Trade Partners - Product Imports (USDmn) 29
Chapter 5: Key Sectors 31
Information Technology 31
tab le: IT Industr y - Historica l Data And Forecasts 32
Oil and Gas 34
table: Oil Production 35
table: Oil Production 35
table: Gas Production 35
table: Gas Production 35
Other Key Sectors 37
Tab le: Phar ma Sector Key Indicators 37
table: Telecoms Sector Key Indicators 37
table: Food and Drink Sector Key Indicators 37
table: Infrastructure Sector Key Indicators 38
table: Defence and Security Sector Key Indicators 38
table: Autos Sector Key Indicators 38
tab le: Freight Key Indicators 38
Chapter 6: BMI Global Assumptions 39
Global Outlook 39
Warning Signs Growing 39
Table: Global Assumptions 39
Tab le: Developed States , Rea l GDP Growt H, % 40
Tab le: Emerging Markets , Rea l GDP Growth , % 41

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