EU and Slovenia need to tackle vulnerabilities
Economist Mojmir Mrak discussed the challenges of the increasingly multi-polar world bearing on smaller players such as the EU in his address to the FDI Summit on 28 February. If the EU wants to keep pace with major global players, it needs to act fast as time is running out.
Over the last decade, geopolitical risks have entered strongly into the corporate sector's decision-making process. Supply chains are getting shorter, and companies are looking for alternatives, Mrak, professor at the Ljubljana School of Economics and Business, told the event in Ljubljana.
The changed geopolitical situation has exposed major vulnerabilities of the EU, including high dependence on energy imports and imports of some strategic inputs, such as chips, inadequate defence capacities, and uncompleted reform of the euro area's economic governance.
"We're living in a kind of Wild West of fiscal policy without fiscal policy rules and this will have to end because otherwise the markets will end this in an uncontrolled way, which would not be very good," Mrak warned.
As a small and very open economy, with exports representing 80% of GDP, Slovenia is "extremely dependent" on external developments and geopolitical risks. Due to its vulnerability, a stable and well-functioning EU is in Slovenia's strategic interests.
The key challenges that Slovenia should address in Mrak's opinion is to look for opportunities within the fixed macroeconomic frameworks, review the existing development priorities, implement structural reforms, and continue strong internationalisation of its economy.
The Slovenian economy's position in light of the escalating geopolitical risks was also discussed at a panel debate. Matjaž Han, minister of the economy, tourism and sport, said Slovenia needed a solid social pact more than ever. "We definitely need reforms, but a precondition for their effective implementation is a suitable environment," he said.
The issues faced by the Slovenian economy have been the same for many years. "A key one is wage taxation, where a step forward must be made," the minister said. He rejected the belief that the current government is not business-friendly, but said it "can make a difference between healthy ambition and excessive ambition".
Janez Škrabec, the founder and CEO at Riko, and president of the Alumni Association at the School of Economics and Business, believes the Slovenian economy has all the potential to succeed even in the strained geopolitical situation. "As we have heard before, it's not just about the economy but about society as a whole."
He agreed with other speakers that attracting the right talent will be the key factor of success in the future. "We compete against powerful competition, but we can be confident," he said.
A major event focusing on development issues and ways to improve the Slovenian investment environment, the FDI Summit is organised by the Ljubljana School of Economics and Business, the Slovenian-German Chamber of Commerce and The Slovenia Times.