Companies in better shape than expected, some soft spots

Ljubljana – Slovenia has spent billions to help companies weather the coronavirus crisis and keep unemployment low. Business associations say companies are currently in good shape overall, but they highlight pockets of problems, especially among SMEs and in industries that were shut down for a long time.

The state has put in place measures such as forlough payments, subsidised short-time work, coverage of fixed costs, new lending facilities, loan guarantees and a 12-month loan moratorium.

The Chamber of Commerce and Industry (GZS) says the current liquidity of the corporate sector is “relatively good” thanks in particular to loan deferrals, which GZS’s chief economist Staš Ivanc estimates are worth a combined EUR 2.1 billion.

“Companies and banks will probably be able to agree a continuation of loan payments, but it is of course possible that this will not be viable in all cases,” Ivanc says.

Loans that are more than 90 days overdue have in fact declined year-on-year and in December accounted for just 1.3% of all loans, show GZS data.

And a full 85% of companies polled by the GZS said they had a positive EBITDA last year despite the epidemic.

Another metric that indicates the economy is in good shape is the number of bankruptcies.

Last year a total of 1,125 bankruptcies were initiated, according to the Agency for Public Legal Records (AJPES), down significantly from the year before and the lowest figure since 2015.

In the first two months of this year there were 187, fewer than in the same period last year.

And central bank data show non-performing loans up only slightly last year, by 0.1 percentage points to 1.9% of total loan portfolio at the level of the entire sector.

Nevertheless, the central bank data also show a significant increase in the share of non-performing loans to the restaurant industry, which account for a tenth of all non-performing loans.

The Chamber of Trade Crafts and Small Business (OZS) says the epidemic has been hard on specialised stores as well as services activities such as restaurants and bars, which were either shut down or were severely constrained during the epidemic.

The OZS says the majority of SMEs had decided to retain staff on state subsidies rather than making layoffs, but despite the subsidies and the gradual reopening of all industries, it estimates it will take long before business is back to pre-pandemic levels.

“We expect the recovery to last long, two to three years. This is why we are appealing to the government to spend the bulk of EU economic recovery funds on industries that have been hit hardest,” the OZS says.

The GZS’s Ivanc notes that most of the measures which have propped up liquidity will be phased out this year. The coming months, when loan deferrals made last spring will expire, will be “a test of the resilience of companies and banks”.

The country’s largest banks are bullish.

“The situation in the economy is significantly better than we had dared to expect when the first wave of the epidemic hit… We do not expect major problems with loan payments,” says Andrej Lasič, executive director at NLB responsible for large corporate and institutional investors clients.

Both NLB, the market leader, and NKBM, the runner-up, say they will work with closely with companies in industries such as tourism to find the best solutions on an individual basis.

“We’re aware of the important role we’re playing in mitigating the consequences of the economic crisis caused by the Covid-19 epidemic, which is why we are a responsible partner to our clients,” NKBM said.