The Slovenia Times

Economist - The Economist Intelligence Unit's view of Slovenia's investment climate



With GDP at purchasing power parity (PPP) at 83% of the EU average in 2014, Slovenia's economy is the second most developed out of the east European EU members states (the Czech Republic is first). However, this is down from 91% of the EU average in 2008. Private consumption returned to growth in 2014, following two consecutive years of contraction. Private consumption will pick up moderately over the forecast period, increasing market opportunities. Nonetheless constraints on lending, owing to the negative fallout from the 2008/09 financial crisis and the relatively small size of the market, will constrain opportunities in 2015-19.

Slovenia's score in The Economist Intelligence Unit's business environment rankings improves in 2015-19 and the country rises one place in both our regional and global rankings, to fifth (out of 16) and 34th (out of 82) place, respectively. Slovenia's ranking reflects a positive historical inheritance of political effectiveness, compliance with international trade and exchange controls-helped by EU and euro zone membership-and solid investment in infrastructure. Slovenia's relatively poor score for policy towards foreign investment remains unchanged for the forecast period. The score is weighed down by the government's favouritism towards domestic ownership, especially of companies deemed strategically important.

Macroeconomic stability was badly hit during the global economic downturn, but it is set to improve as bank restructuring is completed and debt levels gradually decline. Improvements in the categories covering the macroeconomic environment, market opportunities, the labour market, the tax regime and infrastructure will more than compensate for a fall in the scores for the categories for financing and political effectiveness. Slovenia remains a strong democracy, but the country's once fabled political stability has evaporated in recent years and problems with corruption have become more apparent.

The economic recovery strengthened in 2014. Real GDP grew by 2.8%, following two consecutive years of economic contraction. We forecast annual average real GDP growth of 2.3% in 2015-19, supported by strong net exports and the continued recovery in private consumption. This is much slower than the growth rates registered in the period before the financial crisis. Inflationary pressures will remain subdued through the forecast period, helped by lower global oil and food prices. Fiscal consolidation will continue, and the risk of further bank recapitalisation has receded. The current account returned to surplus in 2011, and will remain in surplus throughout the forecast period as external demand picks up and imports are more sluggish owing to lagging domestic demand.


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