Books on Slovenia
% of GDP
Update No: 088 - (27/08/04)
The Slovenes gave their ruling party for twelve years, the Liberal
Democratic Party (LDS) a rude jolt in elections to the European Parliament on
June 13th. They fared poorly, while a new party altogether, the New Slovenia
Party (NSi) scored 23.2% of the vote. This put them ahead of the DS and its
coalition partner, the Pensioners' Party, on 22.2%.
Elections to parliament are coming up this autumn so that the issue is not
without consequence. Nevertheless, observers are confident that the success of
the NSi was no guide to general elections. Voters just wanted to give LDS a
warning shot across its bows.
After twelve years in office it would be surprising if it had not become rather
complacent and even corrupt. There is need for renewal of policies and
personalities, so many feel.
The silver lining for Premier Anton Rop and his LDS government is that his true
rival, the Slovenian Democratic Party (SDS), came in third on 17.2%. Turnover
was especially low at 28%. There is a strong suspicion that LDS votes stayed at
home. They will doubtless re-appear at the general elections.
The economy has been faring well in the last decade or more, GDP growing by 4%
per annum and inflation being contained to low single figures. This gives little
scope for criticism, it might be thought.
This is not the view of the head of the SDS, Janez Jansa, who is castigating the
government at every turn. He may not succeed this time round. But he is building
himself up as the opposition champion.
European commission worries over convergence programme
The European Commission (EC) was rather critical in assessing Slovenia's first
convergence programme on June 24th, eleven days after the electoral upset. A
warning was signalled to Slovenia that its budget situation could turn out worse
than anticipated, particularly as this year's macroeconomic risks could lead to
higher spending than has occurred in the past.
According to the EC report, the plans to balance the budget are slow and the
programme is rather apathetic in setting budget goals. The same report noted
that the strategy is targeted towards healthy public finance and a balanced
budget, whereby Slovenia plans a reduction of the budget deficit from 1.9% this
year to 0.9% in 2007.
Although the deficit is below the prescribed ceiling of 3%, the Commission is
not pleased. According to the report, with the planned deficit, Slovenia is only
approaching a balance towards the end of the planning period, which is not in
line with the mid-term goal of the stability and growth pact.
This year the state of the budget can be worse than anticipated as macroeconomic
risk can lead to increased consumption. According to the Commission, the
programme only briefly reviews the structural reform agenda.
It also announces further measures to sustain economic growth, for example by
promoting job creation oriented investment and removing structural rigidities in
the labour market. However, the programme does not dwell upon the specifics of
the restructuring process; policy goals seem fairly general and are only
unusually accompanied by well-elaborated measures, the report incites.
The commission says that Slovenia faces risks of budgetary imbalances in meeting
the costs of an ageing population. Implementing thoroughly the pension reform
and putting in place a stable health care system, together with securing an
adequate primary surplus, are essential for placing public finances on a
sustainable footing. Macroeconomic plans to bring annual economic growth close
to 4% until 2007 are rather optimistic, according to the Commission. This is
particularly the case for this year, when the state expects a 3.6% growth, while
the Commission expects it to stand at 3.2%.
For the rest of the period covered, the evolution of growth is "broadly in
line" with the Commission projections. A similar assessment was given for
inflation, which is to stand at 3.3% this year and is to drop under 3% next year
according to government plans.
"The long-term sustainability of lowering inflation still relatively high
at 4.7% on a 12-month moving average basis - needs to be strengthened. A good
coordination of economic policies is regarded as key in bringing down inflation
durably," according to the Commission.
The Commission points out that the year-on-year consumer price inflation rate
was 3.9% in May, although acknowledging that the country managed to bring down
inflation 7.5% in 2001 to 4.6%.
More FDI required
Slovenia's parliamentary committee for the economy recently amended and
confirmed the government proposed act on the promotion of foreign direct
investments (FDI) and the internationalisation of companies.
According to Economics Minister, Matej Lahovnik, a newly promoted 32-year old
youngster, the main purpose of the act is to create an institutional basis for
an efficient promotion of FDI and accelerated internationalisation of Slovenian
companies, in particular small- and medium-sized enterprises.
Among measures to promote FDI, the act introduces measures to offer free
information, counselling and other services to foreign investors, as well as the
promotion of the country as an investment destination and financial incentives
Under the act the government must adopt a five-year programme for the promotion
of investment. Funds for financial incentives are provided by the national
budget and other domestic and foreign sources.
Adria Airways purchases new plane to make it 9
Slovenian national airline Adria Airways recently purchased a new plane to
expand its aircraft fleet to 9. The new Canadair Regional Jet 200 can transport
50 passengers, the Slovene press agency reported.
The purchase deal was signed on July 21st, the Chairman of Adria Airways, Branko
Lucovnik, and Steve Ridolphy, president of the Bombardier Regional Aircraft were
present during the signing ceremony. The price of the plane, to arrive in
January, was favourable, as Adria has been successfully working with Bombardier
for a long time, the Slovenian air carrier said in a press release. A CRJ 200
usually costs around US$20m. Adria has been successfully cooperating with
Bombardier in servicing Bombardier jets, as it was in 2002 chosen as the first
and only authorised maintenance service centre in Europe. Adria also announced
its plans to buy another plane from the Canadian manufacturer by the end of the
FOREIGN ECONOMIC RELATIONS
Slovene, Swedish finance ministers discuss EU's financial perspective
The EU's next financial perspective, tax harmonization and economic cooperation
topped the agenda of a meeting between Slovenia's Finance Minister, Dusan Mramor,
and his Swedish counterpart, Bosse Ringholm, STA News Agency reported.
A recent meeting, part of Mramor's working visit to Stockholm, has shown that
the Slovene and Swedish governments share stances on the next EU budget, the
Slovene Finance Ministry said. Mramor and Ringhold identified the similarities
particularly in that budget money should be used with a view of achieving Lisbon
Strategy goals. The common agricultural policy should moreover be reconsidered
and a proposal to introduce European tax scrutinized from the budgetary point of
According to the same source, the proposals to harmonize taxes in the European
Union are problematic for both Slovenia and Sweden, and should be re-examined
from the aspect of tax autonomy.
One of the engagements on Mramor's agenda was also a conference of economists
associated in a group discussing alternative perspective on finance.
Slovenia to receive EU funding for acquis implementation
Slovenia is expected to receive 8.68m from the European Union budget this
year in order to boost the country's administration capacity in implementing the
acquis, the government stated after its weekly session on July 29th, STA
According to the government's press release, the money is to be spent on 19
projects in agriculture, statistics and financial supervision, environment and
internal market, and judiciary and financial supervision among other areas.
Istrabenz Tourism Sector to develop further
The Portoroz-based hotel group controlled by the tourism and energy group
Istrabenz, plans to buy two or three more hotels, and over the next five years
manage a further 2,000 hotel rooms, the chairman of Hoteli Morje Holding told
the daily Dnevnik on July 17.
According to Niko Trost, who is also a member of the Istrabenz management board,
the hotel chain is interested in hotels in Lipica, a village in western Slovenia
that is home to the famed Lippizzaner horse, as well as the centre of Ljubljana
and the capitals of the former Yugoslavia. Moreover, the group is interested in
the tourist areas on the Istrian peninsula, Kvarner and Dalmatia in Croatia as
well as Montenegro. "We have already offers on the table for investment in
Italy and Austria," Trost told the paper.
The company is more interested in managing other companies than buying ownership
stakes, the official said. He refuted the allegation that the tourism sector got
part of the funds Istarbenz acquired by selling out its 50 percent share in OMV
Istrabenz (that is some SIT 23 billion / 96 million Euro).
"The tourism holding does not count on those funds as we can attain our
goals without the parent's money," he said. He believes that investment in
tourism is attractive because it is stable, although expected earnings are not
Istrabenz set up the Hoteli Morje holding in April this year. Apart from Hoteli
Morje, it also includes Palace Hotels and the Koper Marina on the coast, the
company managing the Postojna Cave and the hotels there, the Kras tourism
company and a hotel in Opatija on the Croatian cost. In all those companies
Istrabanz hold an average ownership stake of 90 percent.
Tourist board happy with H1 statistics
The Slovenian Tourist Board is said to be satisfied with the half-yearly tourist
figures, which indicate that the number of foreign visitors rose by 7%
year-on-year, STA reported recently.
The statistics also show that the number of overnight stays generated by foreign
tourists went up by 2%. "The goal is to see 4% growth in the number of
overnight stays by foreigners this year. Judging by the half-yearly figures,
this is likely to be achieved," Meteja Tomin Vuckovic of the Slovenian
Tourist Board told STA. A remarkable growth of around 30% in the number of
overnight stays by French, British, American, Scandinavian and Israeli tourists
was reported. The growth in the number of British guests is attributed to the
commencement of low-fare flights between London and Ljubljana, while that of
other tourists is said to be the result of successful marketing campaigns.
According to Tomin Vuckovic, Slovenia is not an exception to global tourism
trends in that the number of foreign visitors is growing at a faster pace than
the number of foreign overnight stays. On the basis of the half-yearly
statistics, a good season can be predicted Tomin Vuckovic said. Revenues from
tourist stays in Slovenia grew by 6% to 461.44m in the first 6 months of this
Transport infrastructure on track for expansion
Slovenian Railways on July 29th signed a contract worth 77.8m with Siemens on
the delivery of 20 multi-purpose electric engines for freight transport, with
the engines scheduled for delivery between mid-2006 and beginning of 2008, STA
In the first half of this year, Slovenian Railways posted revenues of 33.4bn
tolars (139.3m) and a net profit of 613m tolars (2.56m), which is in stark
opposition to high losses posted in the previous years.
Slovenian Railways general manager, Blaz Miklavcic, and Gottfried Schuster, the
head of the Austrian subsidiary of Siemens signed the contract. Miklavcic stated
that the purchase of new engines is crucial for the company to achieve its
Presently, the state-owned Slovenian Railways uses engines that have been in use
for an average of 30 years, which means they are less reliable and quite
expensive to maintain, the report said.
Miklavcic is highly grateful to the government for responding quickly to the
company's proposal to purchase new engines, which will also make it possible to
fund the project. The new engines are expected to enable the rail operator to
better supply bigger customers, make freight transport operations more flexible
and eliminate difficulties stemming from the lack of engines abroad. In addition
to Slovenia, the new engines will be able to operate in Austria, Germany, Italy,
Hungary and Croatia.
As a result, the Slovenian railways will be able to operate joint trains on
longer international routes. A good performance of the company's freight
transport division is one of the main reasons behind the company's first
positive results in years.
In another major transport improvement project the government decided on July
29th to speed up the construction of the Maribor-Lendava motorway in southeast
Slovenia, after the locals threatened to block the regional road if the
government failed to take any measures to alleviate the situation.
STA reported that Prime Minister Anton Rop visited the region promising that the
motorway would be constructed by 2008 at the latest. The premier, who was
accompanied by Transport and Environment Ministers, Marko Pavliha and Janez
Kopac, respectively, and parliament speaker Feri Horvat on his working visit,
said that the government had not yielded to the demands but that it assessed the
arguments as justified.
The cabinet announced that the heavy goods vehicle traffic at the Dolga vas
border crossing soared by 86% after May 1st and on the Lendava ring by as much
as 105%, according to the roads directorate.
However, the transport and interior ministries were assigned to change the
decree the restriction of heavy goods freight and prohibit the traffic of
lorries on the Lendava-Pocehova main road between 6am and 1pm on Saturdays.
The government will provide 140m tolars for the short-term measures this year. A
total of 791m tolars will be provided for the measures in 2005 and another 430m
tolars in 2006.
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