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slovenia

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SLOVENIA


 

REPUBLICAN REFERENCE

Area (sq.km) 
20,300

Population 
1,930,132

Capital 
Ljubljana 

Currency 
Tolar 

President 
Janos Drnovsek

Private sector 
% of GDP 
40% 

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Background:
In 1918 the Slovenes joined the Serbs and Croats in forming a new nation, renamed Yugoslavia in 1929. After World War II, Slovenia became a republic of the renewed Yugoslavia, which though communist, distanced itself from Moscow's rule. Dissatisfied with the exercise of power of the majority Serbs, the Slovenes succeeded in establishing their independence in 1991. Historical ties to Western Europe, a strong economy, and a stable democracy make Slovenia a leading candidate for future membership in the EU and NATO. 

Update No: 073 - (27/05/03)

The one success story
The Slovenians are the best-off among former communist peoples. Of course the population at large were never voluntarily communist. They had a largely successful economy in former times, which Tito did not overmuch interfere with. He allowed market mechanisms to prevail, especially from the 1960s. Slovenians are five times better-off than the Macedonians, who occupy the southernmost former Yugoslav republic.
There is a huge irony here. Macedonia is the very origin of the West; Philip of Macedon and his son, Alexander the Great created the world of Hellenism in the fourth century BC, transmitting the culture of Greece to untold countries and centuries. Today, it is a backwater. Slovenia, a mountainous redoubt in those days, is now in the forefront of advance.
The Slovenians are the Swiss of the ex-communist world, multilingual, gifted at finance and attuned to the ways of the West; they are supreme at intermediation and diplomacy, because they can understand everyone else's point of view.

Economy grows steadily
The Slovenian economy is growing at a steady pace, rising from 3% GDP growth in 2002 to 3.4% in 2003. Inflation is falling from 7.5% in 2002 to 6% this year, still too high for entry into Euroland, but well in the right direction. Predictions are for GDP to grow by 3.7% in 2004, while inflation falls to 5.5%.
Among the 10 countries in accession in 2004 to the EU, the average GDP growth is 3.1%. But Slovenia has the highest per capita income and output, so that its above-average performance is the more exemplary.
The Commission also expects Slovenia to perform strongly in trade this year. The trade gap is closing, down from 3.3 per cent in 2001 to 1.3 per cent in 2002, the report said, which also anticipates foreign direct investments (FDI) to remain flowing in. Last year, Slovenia received 1.8bn Euro of FDI, up from 400m Euro the year before.
Unemployment is expected to edge down gradually, from 6.4 per cent in 2002 to 6.3 per cent this year and 6.1 per cent in 2004. Wages are also expected to grow only slightly thus remaining well below GDP and productivity growth.

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BANKING

NKBM-PBS merger vital for further developments

"It is essential for the development of Slovenian second largest bank Nova Kreditna banka Maribor (NKBM) that it acquires Postna banka Slovenije (PBS)," NKBM Chairman, Crt Mesaric, stated during a recent interview for the local business daily Finance. Although NKBM could purchase PBS, Mesaric is not convinced whether it would make sense to do this as both banks are state-owned. The government is studying plans and should be aware that NKBM couldn't wait another year. "We have set a deadline that a decision must be made by the end of June," the chairman clarified, SBW reported. 
"While the realisation of the plan is merely a technicality, there is no step forward being made," he added. Mesaric added that the idea was ready, the project drafted, presented to the Finance Ministry, and now the government only had to take the appropriate decision, which, considering the public stances of the prime minister and the finance minister should not be too difficult. Insinuations that NKBM is weak were commented on by Mesaric with data from the 2002 balance sheet. The capital adequacy of the bank is at 11.34%, while the whole group has capital adequacy of 12.26%. "At the moment we can scrape together at least €60.2m or up to €129m with some extra effort," the chairman noted. "If the state as the bank's owner wants NKBM to be good, it should make a move forward and grant access to PBS, since NKBM is the biggest bank in Slovenian ownership," he pointed out, among other key points. 
"The merger between PBS and NKBM is not only important for these two banks, but also for the state, as an important banking network would remain in Slovenian ownership."

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FINANCIAL NEWS

EC spring report forecasts Slovenia's economy growth

Slovenia's economic growth will increase from last year's 3.0 per cent to 3.4 per cent this year, according to the spring economic forecast recently published by the European Commission. The Commission also believes that the country's inflation will be about 6.0 per cent in 2003, down from 7.5 per cent a year earlier, SBW reported recently.
Figures have been changed compared to the Commission's autumn report. GDP growth has been slightly downgraded from 3.6 per cent as forecast in the autumn. According to the latest report, GDP growth is to top 3.7 per cent in 2004, while inflation is expected to fall to about 5.5 per cent.
In terms of the anticipated GDP growth, Slovenia is placed around the middle among acceding countries. The candidates' average GDP growth is to stand at 3.1 per cent, with Latvia expected to record the highest growth.
Slovenia has so far been placed last among the acceding countries in price growth. This year it is expected to escape the last place, as the European Commission expect Slovakia to have an 8.8 per cent inflation rate, while Hungary is to come very close to Slovenia with about 5 per cent.
Still, the Commission notes that now all price-growth pressures have been eliminated, and that the government's ambitious goal of curbing inflation to 4 per cent in 2004 lacks a basis in concrete measures. This is especially true of the entry into the exchange rate mechanism 2 (ERM2), which Slovenia plans in 2005 and is necessary for the introduction of the Euro.
The Commission is pleased with Slovenia's growth, as exports to markets outside the EU increased markedly last year, and domestic investments were up. The trend is expected to continue this year through better domestic demand, a result of a growth in domestic investments (set at 4 per cent this year) and growing exports to markets outside the EU (between 5 and 6 per cent).
The Commission also expects Slovenia to perform strongly in trade this year. The trade gap is closing, down from 3.3 per cent in 2001 to 1.3 per cent in 2002, the report said, which also anticipates foreign direct investment (FDI) to continue flowing in. Last year Slovenia received €1.8bn of FDI, up from €400m the year before.
Unemployment is expected to edge down gradually, from 6.4 per cent in 2002 to 6.3 per cent this year and 6.1 per cent in 2004. Wages are also expected to grow only slightly thus remaining well below GDP and productivity growth. 

US unblocks former Yugoslav funds, Slovenia gets US$38m 

Washington has unblocked the funds of the former National Bank of Yugoslavia in the USA totalling US$225m, Television Slovenia teletext web site has reported.
Slovenia is to get an expected US$36m plus a further US$2m of interest, the Slovene high representative for succession issues Rudolf Gabrovec has confirmed. The funds are in line with the framework succession agreement.
The USA urged some time ago the successors to the former Yugoslavia to let it know whether they agreed with the unblocking of the funds of the former National Bank of Yugoslavia, which were frozen in banks in the USA. All the countries, apart from Croatia, agreed.

International Monetary Fund calls upon Slovenia to lower inflation

The executive committee of the International Monetary Fund (IMF) called on Slovenia to lower inflation and strengthen the tolar rate without negative impacts on the economy. The committee as part of the regular annual check-up of Slovenia's economic situation stressed that these measures are necessary for greater credibility of the Slovene government and central bank. Slovenia's planned inflation for 2003 is 5.3 per cent and 3.5 per cent for 2004. IMF's projection for 2004 is slightly higher, namely at 4.8 per cent, STA News Agency has reported. 
The IMF report, published on the IMF web site, alerts Slovenia to the imperative lowering of wages in the public sector and underlines that the country will have to abolish indexation of wages in this sector. The two measures are essential to attain inflation goals. 
The IMF executive committee has also adopted the medium-term fiscal plan of the Slovene government as part of the preparations to join the European exchange rate mechanism ERM 2. The IMF warns though, that the budget deficit this year could exceed anticipation. It stresses that in 2004, when Slovenia is to join the EU in May, it will have to lower the budget deficit. 
The report grants that Slovenia has made substantial progress in structural reforms in the recent years. It called on the country to speed up privatisation and hailed the initiatives to decrease state-owned stakes in the steel industry and the energy sector. 
Slovenia's banking system is good, assessed the IMF. Competition of banks has grown since foreign investors entered the market. The fund appeals to the government to preserve competition also in privatization of the country's second largest bank owned by the state, Nova Kreditna Banka Maribor. 
The IMF also approved of the banks' initiative to change to nominal interest rates and called on Slovene authorities to abolish indexation of all financial instruments as soon as possible. 
The report congratulated Slovenia for the recently signed social agreement for 2003-2005, which finally wrapped up after over a year of negotiations between the social partners. The IMF appealed to the social partners to maintain the costs of the new wage model within the budget limits for 2004. 
IMF representatives came to Slovenia for regular annual consultations last December. Then they stressed that Slovenia's main challenge is to get ready to join the ERM 2 and consequently drop inflation.

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PHARMACEUTICALS

Krka Group scores higher sales in 2002

Leading Slovenian pharmaceutical maker Krka Group recorded €380.5m in sales revenues last year, of which 23% came from the domestic market and 77% from abroad, SBW reported recently. The group's net profit totalled €47.7m, a rise of 29% over the previous year.
The sale of the company's products represented 94.4% (€359.2m) of the income in sales, while the tourism services of the spa company, Krka Zdravilisca, contributed 5.6% or (€21.1m) to the sales total.
Last year a large share of funds was invested in drug-making technology and in development of production of distribution facilities abroad. In Croatia and in the Russian Federation storage facilities are already in operation, while a factory functions in Poland. This year Krka's Polish subsidiary, Krka Polska, is to sell its own products as well as those made in Slovenia.
The majority of subsidiaries of the Krka Group are part of a sales network through which Krka sells its products abroad.

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