Slovenia

Politics:

• Analysis

  Slovenia politics: Quick View - Parliament approves new government

  Event

  On March 20th parliament approved a new government led by Alenka Bratusek.

  Analysis

  The 14-member government, which replaces the outgoing conservative cabinet of Janez Jansa (whose government was voted out of office in late February), was approved in parliament by 52 votes to 35. This means that Ms Bratusek won all 49 votes of the coalition parties as well as those of three independent MPs. The coalition comprises Ms Bratusek's centre-left Positive Slovenia (PS), the centre-left Social Democrats, the centre-right Civic List and the Democratic Party of Slovenian Pensioners.

  Ms Bratusek-Slovenia's first female prime minister-has promised to help the ailing banking sector, revive the economy, create new jobs, improve Slovenia's competitiveness and ensure that the country will not need an international bail-out. These are ambitious pledges, which will be assessed in a confidence vote in parliament one year hence, in line with a coalition agreement. If the government passes the confidence vote, it could rule until the next scheduled election in late 2015; if not, the country would face early elections.

  Also on March 20th, the mayor of Ljubljana, Zoran Jankovic, resigned from his post as PS president. The PS's coalition partners had demanded his resignation since January, when the anti-corruption commission said that he had been unable to account for a large part of his income in recent years. The commission's findings in relation to Mr Jansa had caused the collapse of his conservative government. Ms Bratusek is now the official leader of the PS and Mr Jankovic, who remains mayor of the capital city, is no longer expected to play a leading role in national politics.

  The most pressing issue facing the government is how to address the problem of bad loans that is threatening to destabilise the banking sector. The new finance minister, economist Uros Cufer, who used to work at Slovenia's largest bank NLB and at the Bank of Slovenia (the country's central bank), said that the government would proceed with the establishment of a "bad bank"-a holding company to manage banks' bad loans-as envisaged by the previous government, but with some modifications. Mr Cufer did not specify what these will be, but it is expected that troubled banks will establish special departments to deal with bad loans.

  March 21, 2013

• Background

  Slovenia: Key figures

  Janez Jansa

  The leader of the centre-right Slovenian Democratic Party (SDS), Mr Jansa became prime minister for the second time in February 2012, after his party came second in the December 2011 snap election. During his first term as prime minister (2004-08), he steered Slovenia into the euro zone in 2007 and his government proved broadly competent in its handling of the EU presidency in the first half of 2008. By contrast, his pledge to reduce the state's hold on key economic assets through radical reforms went largely unfulfilled. In early 2012 Mr Jansa outmanoeuvred the winner of the snap election, Zoran Jankovic of the centre-left Positive Slovenia (PS), by forming a five-party centre-right government. However, his position would be undermined if he were found guilty of corruption in a trial, under way since September 2011, relating to the purchase of Finnish-made armoured vehicles by his previous government in 2006. If he is cleared of the charges-which he strenuously denies-Mr Jansa's relative youth (he turned 54 in September 2012) should ensure that he continues to play an influential role in Slovenian politics in the coming years.

  Danilo Tuerk

  Mr Tuerk has risen to the top of the polls in terms of personal popularity since he was elected president, with the support of the centre-left parties, in November 2007, heavily defeating Alojz Peterle, the candidate backed by the centre-right government of the time. His standing has benefited from the diplomatic skills that he honed during his time as a high-level UN official. He is running for re-election in November 2011; opinion polls indicate that he is the favourite to win in the second round, where his challenger is likely to be the previous centre-left prime minister and former SD leader, Borut Pahor. Mr Tuerk has shown no interest in party politics and is running, once again, as an independent candidate, albeit with the support of the PS. The expected second term would be Mr Tuerk's last, because presidents are limited to two mandates, and in the future he may seek an international appointment.

  Zoran Jankovic

  The popular mayor of the capital, Ljubljana, formed the PS only a few weeks before the December 2011 election, but it won the most votes in the poll. However, Mr Jankovic failed to garner sufficient support to form a ruling coalition, and he left parliament to be re-elected as the mayor of Ljubljana in March 2012. Mr Jankovic remains the leader of the opposition and has sufficient time to strengthen the PS ahead of the next election. On the other hand, his effectiveness as the leader of the opposition will be weakened by his absence from parliament and by corruption allegations involving himself and his two sons. Formerly a successful chief executive of food retailer Mercator, one of Slovenia's largest companies, Mr Jankovic, now aged 59, was elected mayor of the capital with big majorities in 2006 and 2010. These victories and his subsequent electoral successes appeared to be the rewards for his ability to manage major projects, such as the construction of a new sports stadium, despite the economic crisis. Mr Jankovic's rivalry with Mr Jansa, which is reflected in their unwillingness to agree on important decisions, presents a key obstacle to reforms.

  Borut Pahor

  Mr Pahor became prime minister at the age of 45, in November 2008, having led the SD since 1997, steering the party towards the centre ground of Slovenian politics. His term in office, which was cut short by defeat in a parliamentary vote of confidence in 2011, was punctuated by repeated failures to maintain unity within the centre-left ruling coalition and to reach an agreement with trade unions on major reforms, including pensions and labour regulation. His record was further marked by repeated defeats in referendums, leading to the collapse of his coalition. The SD was routed in the December 2011 poll-the first pre-term election in independent Slovenia-and Mr Pahor's bid to become the speaker of the new parliament was also rebuffed. Mr Pahor stepped down as SD leader in June 2012 and he is now set to be eclipsed by other politicians, unless-contrary to the indications of opinion polls-he wins the November 2012 presidential contest.

  September 27, 2012

• Structure

  Slovenia: Political structure

  Official name

  Republic of Slovenia

  Form of state

  Democratic parliamentary republic

  Legal system

  Based on the constitution of 1991

  National legislature

  The main legislative body is the National Assembly, with 90 members directly elected for a four-year term. A National Council, elected for five years with the power only to delay legislation, has 40 members: 22 representing local interests; 12 evenly divided between employers, employees and the self-employed; and six representing not-for-profit activities in areas such as education and culture

  National elections

  December 2nd 2012 (presidential); December 4th 2011 (National Assembly). Next presidential election due in 2017; next parliamentary election due in 2015

  Head of state

  President, currently Borut Pahor, sworn in on December 22nd 2012

  National government

  The prime minister and the government are elected by the National Assembly. The government, a caretaker administration approved by parliament on March 20th 2013 following the collapse of the Janez Jansa government, is a four-party coalition, led by Positive Slovenia (PS) and including the Social Democrats (SD), the Civic List (DL) and the Democratic Party of Slovenian Pensioners (DeSUS)

  Main political parties

  Social Democrats (SD); Slovenian Democratic Party (SDS); For Real-New Politics (Zares); Democratic Party of Slovenian Pensioners (DeSUS); Liberal Democracy of Slovenia (LDS); Slovenian People's Party (SLS); Slovenian National Party (SNS); New Slovenia (NSi); Positive Slovenia (PS); Civic List (DL); Civic List of Gregor Virant (DLGV)

  Key ministers

  Prime minister: Alenka Bratusek (PS)

  Agriculture & environment: Dejan Zidan (SD)

  Defence: Roman Jakic (PS)

  Culture: Uros Grlic (PS)

  Economic Development & Technology: Stanko Stepisnik (PS)

  Education, Science, Culture & Sport: Jernej Pikalo (SD)

  Finance: Uros Cufer (PS)

  Foreign affairs: Karl Erjavec (DeSUS)

  Health: Tomaz Gantar (DeSUS)

  Infrastructure: Igor Maher (DL)

  Interior: Gregor Virant (DLGV

  Justice & Public Administration: Senko Plicanic (DLGV)

  Without portfolio (for Slovenes abroad): Tina Komel (PS)

  Parliamentary speaker

  Gregor Virant (DLGV)

  Central bank governor

  Marko Kranjec

  March 28, 2013

• Outlook

  Slovenia: Key developments

  Outlook for 2013-17

  • Slovenia has entered a period of political uncertainty following the fall of the five-party centre-right coalition-led by the Slovenian Democratic Party (SDS) of the prime minister, Janez Jansa-in a confidence vote in February 2013.
  • The four-party caretaker government led by Alenka Bratusek will face a confidence vote in one year and, provided that it survives this, may serve until the next scheduled election in 2015.
  • The cohesion of the ruling coalition will be tested by personality and policy differences, and resistance to reforms by the trade unions and the public.
  • A deal with Croatia over the disputed Ljubljanska Banka is an important breakthrough, but the border dispute will remain a thorn in bilateral relations.
  • There is likely to be some relaxation of fiscal policies in favour of policies that create jobs and promote growth, making it less likely that the budget deficit will fall below 3% of GDP in 2013, as required by the EU.
  • We forecast that real GDP will shrink by about 1% in 2013, after a contraction of 2.3% in 2012, as external and domestic demand remains weak. We forecast a return to annual real GDP growth in 2014 as demand rebounds.
  • The current account returned to a surplus in 2012, equivalent to 2.3% of GDP. We forecast that it will remain in surplus in 2013-17 as weak domestic demand constrains import growth.

  Review

  • On February 27th parliament voted out of office the centre-right coalition government, appointing Alenka Bratusek as prime minister-designate in place of Mr Jansa.
  • On March 20th parliament approved a new 14-member, four-party government to serve provisionally until a confidence vote one year hence.
  • On March 11th Slovenia and Croatia agreed that Slovenia will ratify Croatia's EU accession agreement in return for Croatia suspending its legal suits against Slovenia in the case of the now defunct Ljubljanska Banka.
  • In two important policy moves the caretaker government has said that it would pass a supplementary budget in 2013 and amend two laws on bad banks passed earlier this year.
  • Real GDP shrank by 3.3% year on year in the third quarter of 2012, as the economy returned to recession for the first time since 2009.
  • The current account recorded a surplus of EUR1.05bn in 2012, equivalent to 2.3% of annual GDP.

  March 28, 2013

Economy:

• Background

  Slovenia: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	2.1b	Population growth	0.3
  GDP (US$ bn; market exchange rate)	45.6	Real GDP growth	-1.1
  GDP (US$ bn; purchasing power parity)	57.9	Real domestic demand growth	-1.7
  GDP per head (US$; market exchange rate)	22,209	Inflation	2.5
  GDP per head (US$; purchasing power parity)	28,204	Current-account balance (% of GDP)	-1.0
  Exchange rate (av) US$:€	1.29	FDI inflows (% of GDP)	1.3
  a Actual. b Economist Intelligence Unit estimates.

  Download the numbers in Excel

  Background: Slovenia gained independence from Yugoslavia after a brief war in 1991. Politics was dominated by the centre-left Liberal Democracy of Slovenia (LDS) from independence until 2004, when a centre-right coalition led by the Slovenian Democratic Party (SDS) took power. Slovenia was already economically advanced by regional standards when it gained independence, so it has experienced slow growth relative to other central European economies, and has adopted a more complacent attitude towards privatisation and economic reform. The Social Democrats (SD) won the election in 2008, forming a centre-left government, which disintegrated in 2011, leading to an early election in December. The election results were inconclusive, but the SDS emerged at the head of a five-party centre-right coalition. The SDS-led government fell in a confidence vote in February 2013 and was replaced by a caretaker government led by Positive Slovenia (PS).

  Political structure: Slovenia has a bicameral parliament, but only the Drzavni zbor (National Assembly, the lower house) has legislative authority. Its 90 members are chosen in direct elections by proportional representation, with two seats reserved for the ethnic Hungarian and Italian minorities. Most government powers reside with parliament. The president, currently Borut Pahor, is elected directly by universal suffrage and is restricted to a maximum of two consecutive five-year terms. The next presidential election is due at end-2017 and the next parliamentary election is due at end-2015.

  Policy issues: Slovenia adopted the euro in January 2007. The main economic policy issues-beyond the immediate need to narrow the budget deficit and deal with the impact of the euro zone debt crisis-include privatisation and improvement of the business environment. Progress on both is made difficult by the consensus-based nature of policymaking.

  Taxation: Corporate income is taxed at a flat rate of 18% (cut from 20% in 2012). Personal income is taxed progressively, with tax brackets ranging from 16% to 41%. The social security contribution rate is 22.1% for employees and 16.1% for employers. Standard value-added tax (VAT) is levied at 20%, although a reduced rate of 8.5% is applied on certain goods and services.

  Foreign trade: Slovenia has a small, open economy, with trade in goods and services equal to around 135% of GDP. In 2012 goods exports totalled US$27.6bn and imports totalled US$28bn. The current account recorded a surplus of US$1.05bn in 2012, equivalent to 2.3% GDP in 2010, as export growth outperformed import growth.

  Major exports 2010	% of total	Major imports 2010	% of total
  Machinery & transport equipment	38.4	Machinery & transport equipment	29.0
  Manufactures, classified	22.0	Manufactures, classified	19.1
  Miscellaneous articles	10.7	Chemicals	13.5
  Chemicals	16.1	Manufactures, miscellaneous	9.8
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Germany	24.0	Germany	18.5
  Italy	14.4	Italy	18.0
  Austria	9.2	Austria	11.5
  Croatia	7.6	Croatia	5.1

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  March 28, 2013

• Structure

  Slovenia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 28, 2013

• Outlook

  Slovenia: Country outlook

  Slovenia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: Slovenia's government became the latest in the region, following that in Bulgaria, to be toppled as a result of growing public dissatisfaction with political corruption and economic stagnation. The five-party centre-right coalition government led by Janez Jansa, which had been in power for only a year, fell in a confidence vote just like its centre-left predecessor. Responding to this sentiment, the prime minister-designate, Alenka Bratusek, promised a break with austerity in favour of policies to encourage growth. Ms Bratusek belongs to the relatively new centre-left party, Positive Slovenia (PS), which had beaten Mr Jansa's Slovenian Democratic Party (SDS) in the 2012 election but proved unable to form a coalition.

  ELECTION WATCH: The appointment of a caretaker government means that Slovenia has been able to avoid, for the time being at least, having to hold another early election scarcely a year after the pre-term poll of December 2011. However, politics are set to remain volatile in coming months, given deep party political disagreement on fiscal policy, measures to tackle the problem of bad loans and the future of privatisation. There is a risk that the coalition could break down if it cannot reach a consensus on these or other issues, which would probably trigger an early election. However, if it manages to survive in the short term and survives the planned confidence vote in 12 months' time, it could rule until the next scheduled election in late 2015.

  INTERNATIONAL RELATIONS: Slovenia's small size and consequent lack of international weight mean that it is likely to remain a small player in EU affairs. Disputes with Croatia concerning the border have eased since the Slovenian electorate's endorsement, in a referendum in June 2010, of the border arbitration agreement signed by the two countries in late 2009. In the past the SDS has suggested that it might seek to renegotiate the agreement--to secure a guarantee of Slovenia's access to the open sea--before the Slovenian parliament votes on the ratification of Croatia's EU accession treaty. More recently, the SDS has abandoned that plan. A resolution of the bilateral dispute came a step closer in mid-January 2013 with the appointment of the members of the international arbitration panel. Also, on March 11th Slovenia and Croatia signed a memorandum according to which Slovenia will ratify Croatia's EU accession agreement as soon as possible to enable its neighbour to join the EU on July 1st as planned. In return, Croatia will suspend its legal suits against Slovenia in the case of the now defunct Ljubljanska Banka. However, relations with Croatia may remain difficult, because several other issues related to the Yugoslav succession remain unresolved. These include the financing of radioactive waste disposal from the jointly owned nuclear-power plant at Krsko in Slovenia.

  POLICY TRENDS: The caretaker government has outlined three economic priorities: kick-starting growth, balancing the public finances without hampering growth, and protecting and developing the public sector. Ms Bratusek has announced a supplementary budget for 2013--for which the outgoing government had targeted a deficit of less than 3% of GDP (on the EU harmonised ESA 95 methodology)--in order to meet the deadline set by the European Commission's excessive deficit procedure. The budget deficit ballooned in 2009-11 following the deep recession of 2009. The 2013 target was always going to be difficult to achieve, because the recession of 2012 (when growth contracted by 2.3%) is forecast to continue in 2013. It is now likely to be missed.

  ECONOMIC GROWTH: After the deep recession of 2009 the economic recovery in 2010-11 was anaemic, with real GDP growing by only 0.6% in 2011. The economy fell back into recession in 2012, when real GDP contracted by 2.3%. Until early 2011 the recovery had been driven by an upturn in external demand, particularly in the EU and Balkan markets. However, this has faltered since then as the escalating euro zone crisis has undermined business confidence. Domestic demand has remained sluggish, and in 2012 household consumption was weakened by cuts to public-service wages, high unemployment and the debt-servicing requirements facing many consumers after years of high borrowing.

  INFLATION: Average inflation according to the EU's harmonised index of consumer prices (HICP) accelerated to 2.8% in 2012, from 2.1% in 2011. Despite weak domestic demand stemming from cuts to public-sector pay and continuing high unemployment, HICP inflation accelerated owing to increases in excise duties and in administered utility prices. Inflation is forecast to dip to an average of 2.3% in 2013, reflecting lower international oil prices and weak household consumption following cuts in social transfers. We expect that in subsequent years rising domestic demand will bring increased inflationary pressures. These will be mitigated until 2016 by largely stable international commodity prices. We forecast that annual HICP inflation will average 2.7% in 2014-17.

  EXCHANGE RATES: The euro depreciated against the US dollar in 2012, to an average of US$1.29:EUR1, from US$1.39:EUR1 in 2011. We expect that the euro will continue to weaken against the US dollar in 2013-14, owing to concerns about public finances in the euro area and the potential for the bloc to fragment. The US dollar should also benefit from an end to the bond-buying programme (quantitative easing) of the Federal Reserve (Fed, the US central bank) and from stronger economic growth in the US than in the euro zone. We forecast that from 2015 the euro will begin to rebound modestly against the US dollar and will average US$1.27:EUR1 in that year, as fears about public finances in the euro zone are allayed and as the ECB and the Fed continue to raise interest rates, normalising monetary policy, before strenthening to an average of US$1.26:EUR1 in 2016-17,

  EXTERNAL SECTOR: Following a deficit of 0.6% of GDP in 2010 the current account was in balance in 2011, in line with growing surpluses on the services and current transfers accounts. The current account registered an increased surplus of US$1.05bn in 2012, equivalent to 2.3% of GDP. We forecast that it will remain in surplus in 2013-17, as exports grow faster than imports in most years and the services surplus remains robust. We forecast that the current-account surpluses will begin to decline from 2015 onwards as a result of rising international oil and raw material prices, as well as increased imports stemming from higher domestic demand.

  March 28, 2013

• Forecast

  Slovenia: Country forecast summary

  Country forecast overview: Highlights

  • Slovenia has entered a period of political and policy uncertainty with the appointment of a caretaker government led by Alenka Bratusek, following the collapse of the five-party centre-right coalition—led by the Slovenian Democratic Party (SDS) of the prime minister, Janez Jansa—which had served only a year in office after an early election in December 2011. We expect continued political volatility, and there is a risk that the four-party caretaker coalition will not survive for more than a year, precipitating another pre-term poll.
  • The government is likely to be tested by personality and policy differences. The prime minister has promised to shift the economic policy focus away from fiscal austerity and towards creating jobs and encouraging growth, without however jeopardising budget rectitude. We assume that this policy shift will result in larger than planned budget deficits.
  • Slovenia breached EU-mandated budget rules by a wide margin in 2012., with the budget deficit on a national measure reaching 4% of GDP. We do not envisage that the budget deficit will return to within the 3% of GDP limit required by the EU's Stability and Growth Pact (SGP) in 2013 or thereafter. However, deficits will moderate slowly over the forecast period.
  • Slovenia will gradually adopt a more open stance towards foreign investment in the coming years. The caretaker coalition may be divided over whether to relaunch the privatisations of banks and telecommunications companies that were frozen in recent years. Slovenia will continue to build economic and trade links outside the EU.
  • Real GDP is forecast to contract by around 1% in 2013, following negative growth of 2.3% in 2012, before modest growth of 0.5% returns in 2014. Real GDP growth is forecast to accelerate to an average of 2.5% in 2015-17, well below the annual average of 5.1% in the pre-crisis years of 2004-08. Lower international commodity prices and weak domestic demand should help to dampen annual average inflation, which will be 2.3% per year in 2013-14, before it accelerates to an annual average of 2.7% in 2015-17.
  • The current account recorded a surplus of 2.3% of GDP in 2012 as the trade deficit narrowed. We forecast that the current account will be in surplus in 2013-17 as exports rise faster on average than imports. This trend will be helped by a sizeable services surplus and an improvement in the current transfers balance as Slovenia's ability to absorb EU funds improves.

  

  March 28, 2013

View detailed map

Country Briefing

Land area

20,273 sq km, of which 66% wooded areas, 28% agricultural areas and 3% built-up areas

Population

2.05m (January 2011 census)

Main urban centres

Population in '000 (2011)

Ljubljana (capital): 280.1

Maribor: 111.7

Kranj: 55.0

Celje: 48.6

Climate

Mediterranean on the coast, continental inland

Weather in Ljubljana (altitude 295 metres)

Hottest month: July, 21°C; coldest month: January, -1°C (average daily maximum and minimum); driest months: January and February, 75 mm average rainfall; wettest month: June, 183 mm average rainfall

Language

Slovene

Weights and measures

Metric system

Currency

The euro (€), which replaced the Slovenian tolar (SIT) on January 1st 2007 at a fixed exchange rate of SIT239.64:€1

Time

One hour ahead of GMT; two hours ahead in summer

Fiscal year

Calendar year

Public holidays

January 1st-2nd; February 8th; Easter Monday; April 13th; Ascension Day; May 1st-2nd; Whit Sunday; June 25th (National Day); August 15th; October 31st; November 1st; December 25th-26th

March 01, 2012