The Slovenia Times

IMF: Slovenia's growth could be higher and more sustainable


It pointed to several priorities, including resolving bad loans and indebtedness of small companies, structural reforms and privatisation of companies and state banks.

If Slovenia wants to keep the growth level from 2014-2015 (3% and 2.9%), it should focus on private investments because of the expected decline in public investments, the IMF Executive Board said in a press release on Monday.

In order to encourage private investments and reduce risks, the board said there were four key priorities, including moving non-performing loans off state-owned banks books and encouraging balance sheets repair of small and medium-sized companies.

The other priorities are divesting state-owned banks and changing their business models, putting in place a comprehensive fiscal adjustment package coupled with structural measures, and reforming and privatising more state-owned companies.

"It is time to decisively deal with bank non-performing loans and SME debt," the press release says, adding that a privately-funded entity should be established with the state's support to collect and sell non-performing SME loans.

"Continued state control of banks creates risks of interference in their lending decisions," the board said, reiterating that the authorities should reconsider their plan to limit the stakes of potential investors.

Given the prolonged period of low interest rates, banks have been called to rethink their business models, and the state has been called to respect the operational independence of the Bank Asset Management Company (BAMC).

"The narrowing of the budget deficit over the last two years is only the first step to putting the fiscal house in order," the release says, welcoming the planned adjustment in 2016 while warning that deficit and debt will start rising again in 2017 under current policies.

The IMF recommends Slovenia to reduce its structural deficit by 0.6 percent of GDP at an annual level until the overall structural balance reaches zero. It should be held at zero until debt falls below 60% of GDP.

The organisation has also called for a comprehensive package of structural reforms. "A key element in such a strategy would be a multi-year agreement with labour unions that keeps the wage bill affordable."

Among potential reforms, the IMF pointed to a pension reform, such as further extending the retirement age and indexing pensions to consumer price inflation, the introduction of a real estate tax, and a revenue-neutral reduction in labour taxes.

The IMF has projected 1.9% GDP growth for Slovenia this year and 2% growth in 2017.

Finance Minister DuĊĦan Mramor told the STA that the proposals from the IMF had been expected, adding that a majority of the ideas had already been written and adopted in the National Reform Programme and the Stability Programme.

There are some proposals that require an economy of scale to be realised, such as for example a private company for restructuring and bad loans, where sufficient interest of banks is needed, he added.

The minister agrees that a new social pact would be welcome in which the social partners would agree on main issues until 2002, where Slovenia is expected to eliminate structural deficit.

The pact would agree on key elements, which would increase the competitiveness of the Slovenian economy on the one hand and tie social transfers, wages and pensions to GDP growth on the other.


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