Ljubljana – Banka Slovenije and the European Investment Bank (EIB) discussed investment priorities in the wake of the coronavirus crisis. Investment success will translate into effective crisis exit strategies, said Boštjan Vasle, the governor of Slovenia’s central bank.
“The countries that will, apart from infrastructure needs, also address long-term challenges such as digitalisation, population ageing and the green transition could boost long-term growth potential on top of making recovery,” he said.
A slow rise in investments has been halted by the crisis, however investments are even more vital now, Vasle noted, adding that they also played a role in tackling one of Slovenia’s key challenges – relatively low workforce productivity.
“The figure is lagging behind EU average by almost a fifth, while at the same time there has been no apparent convergence in relation to more developed EU countries in more than a decade.”
Maja Bednaš, the director of IMAD, the government’s macroeconomic think tank, said that “without stepping up productivity, there will be plenty of challenges regarding financing social security systems and ensuring higher income as well as demographic changes”.
The current slowing down of productivity growth is cause for concern, Vasle said, adding that a reduced level of investments compared to EU average had aggravated the situation.
“In Slovenia, the share of investments per GDP was lover than in the EU in the last period of economic growth, whereas between 1995 and 2008 investments were down by some eight percentage points across the board, particularly business and other private investments,” Vasle said.
The EIB also stressed the role of investments and all of its available instruments. In recent years, Slovenia saw an upward trend in investment growth, however the crisis put a stop to that, said EIB vice-president Lilyana Pavlova.
Investments have been reduced by some 40% compared to the situation prior to the 2008 financial and economic crisis, she added.
Investment gaps are on the rise in Slovenia as the sum of investments in the second quarter of 2020 dropped by 13% compared to the pre-Covid period, Pavlova noted.
A study by the EIB shows that the greatest obstacle to business investments in Slovenia is a shortage of trained workers with appropriate skills.
Vasle does not find this surprising as Slovenia lags behind the EU mostly due to lower investments in intellectual property.
The study included 12,000 companies, including some 400 from Slovenia. “Half of the Slovenian companies said that their investments would be reduced due to Covid-19,” said EIB chief economist Debora Revoltella.
A lot of them said that digitalisation had to be stepped up post-Covid and that supply chains would have to amended, she pointed out, adding that, on the brighter side, Covid-19 had given the impetus to investments in development, digitalisation and green technologies.
Revoltella also noted that Slovenian companies were modest when investing in their employees. Bednaš agreed, adding that the rate of employee lifelong learning had been declining since 2013 and that employee motivation was extremely low in Slovenia.
Slovenian companies are mostly funding their investments using own sources and bank loans. Compared to other European countries, they do not capitalise enough on foreign direct investment.
There have been some improvements, but it is debatable whether the situation has been improving swiftly enough. Apart from a drop in investments this could also lead to a wasted opportunity regarding the influx of knowledge and skills that follows foreign direct investments, Vasle warned.
The head of the SID development bank Sibil Svilan meanwhile said that in recent months the bank had approved loans worth some EUR 580 million for roughly 1,200 companies, some EUR 1.5 billion in insurance policies, and guarantees worth about EUR 100 million.
Last year showed us that we should react fast, he said, finding it key that strong state investment growth continues and that business investments follow suit.
“This crisis will be symmetric, it is key we find the right investments,” Svilan said.
The winners will be those who will have implemented digital solutions relatively quickly and are able to use teleworking, Bednaš said. Another key factor will also be the ability to capitalise on changes to global value chains, she added.