Books on Slovenia
% of GDP
Update No: 093 - (28/01/05)
Slovenia has the highest reputation for economic stability and
performance among the former communist countries. So it does also for political
stability and democratic legitimacy. But recent reports by both international
and domestic observers of the Slovene scene give mixed verdicts.
IMF Annual Report About Slovenia
The International Monetary Fund (IMF) has published the World Economic Outlook,
the most recent report on world economic trends. In referring to Slovenia, the
report stated that it is well positioned for joining the ERM II exchange rate
mechanism (ERM 11), despite having a substantially higher inflation rate than
the European average. Slovenia, Lithuania and Estonia have been members of ERM
II since June of this year, which is a precondition for entry into the European
economic and monetary union, i.e. adopting the Euro.
The IMF estimated economic growth for Slovenia last year at 3.9%, while
forecasting 4.1% growth for 2005. Inflation was at 5.6% in 2003, while according
to the IMF it dropped to 3.7% in 2004, and is forecast to be 3.2% in 2005. While
the balance of payments was still positive in 2003, this year a deficit of 0.6%
is expected, and a 1.4% deficit in 2005.
In this year's IMF report Slovenia was ranked in the category of countries of
"Emerging Europe", which includes the new EU member states and
countries of south-eastern Europe. Economic growth in this group was estimated
at 5.5% in 2004, forecast to be 4.8% in 2005. Inflation was 7.1% in 2004,
forecast to be around 5.9% in 2005. The balance of payments deficit was 4.3%
last year, and will be around 4.1% in 2005.
Slovenia will not catch up until 2025
Growth statistics depend overwhelmingly on the base from which you start off.
Slovenia's base line is high, indeed the highest in the former communist world.
Nevertheless, a leading Slovenian economic institute has concluded that Slovenia
is unlikely to catch up to the average GDP per person in the European Union
before the year 2025. This is 12 years later than predicted in the current
national development strategy.
At the moment, Slovenia's GDP amounts to around 76 per cent of the EU average,
which means that the country's economy would have to grow annually by 4.9 per
cent between 2002 and 2013 if it is to catch up to the average EU GDP by 2013.
However, the Institute for Macroeconomic Analysis and Development (IMAD)
predicts that economic growth in Slovenia until 2013 is to amount to around 3.6
per cent annually. This means that Slovenia will need at least 12 additional
years to catch up to the average GDP in the EU.
According to IMAD's Economic Mirror publication, Slovenia's economy grew at an
average pace of 4.1 per cent annually between 1993 and 2002. Contributing most
to growth was a rise in physical capital, whereas human capital contributed
Human capital is expected to continue to make only a minor contribution to GDP
growth until 2013, IMAD believes, while the effect of the rise in physical
capital is expected to fall in this period.
The study also points out that differences between the trends in human and
physical capital in Slovenia and the rest of the EU are not such as to warrant a
24 per cent developmental gap. The main reason for the difference lies in
technological progress, IMAD says.
Ljubljana targets more FDI and less red tape
The new Slovenian government has decided to reduce the involvement of state in
the economy and promotion of foreign direct investments (FDI) - two of its
economic priorities - for the next term, Slovene press agency reported.
In the coalition's programme on the economy, the four coalition partners have
set down the withdrawal of the state as an owner of companies as one of the main
priorities. The withdrawal will involve the sell-off of assets owned by the
state-run Restitution Fund and Pension Management Fund, as well as the sale of
state-held stakes in companies such as the national telecom, Telekom Slovenije.
The privatisation of Telekom is dealt with in detail in the programme, with the
government aiming to establish competition on the telecommunications market
before launching the gradual sale of Telekom and its subsidiaries. The
government also hopes to make Slovenia one of the most developed countries in
terms of information technology.
Under the coalition's agreement, information technology is a crucial field for
the future development of Slovenia. Another economic priority of the new
government is the promotion of entrepreneurship. Measures will be undertaken
that will facilitate the establishment of companies by cutting red tape and
costs associated with this.
The coalition intends to promote foreign direct investment, with one of the
objectives being the establishment of a level playing field for local and
foreign investors. The coalition also reaffirms Slovenia's commitment to adopt
the Euro in 2007. According to the programme, the adoption of the Euro is
associated with a number of benefits. However, in the opinion of the coalition
the adoption of the single currency also brings with it a number of challenges,
which require that the Slovenian economy becomes more competitive in the future.
The new government also hopes to increase discipline in the payment of taxes,
while promising to offer tax breaks to companies, which invest in research and
development. It also aims to improve the current tax system, among others by
adopting changes to the already adopted income tax act. The basic tax policy
goal will be to reduce the income tax burden. In the area of banking, the
government intends to promote "healthy competition" that will benefit
consumers. The government also intends to promote mortgages as a form of
As regards the privatisation of state-owned banks, the coalition intends to
select strategic partners, which will promise to promote entrepreneurship in the
country. One of the priorities of the new government in transport policies will
be to reduce the burden on the environment as well as reinstating the status of
the fifth and tenth pan-European routes as the priorities of transport policy in
HSE, Talum, Verbund partner up
Slovenia's largest power company Holding Slovenske elektrarne (HSE), aluminium
producer Talum and Austria's largest power company, Verbund, signed an agreement
on the establishment of a joint venture that will plan the construction of a
large gas power plant in Slovenia, Slovene Press Agency reported.
The agreement on the establishment of Plinsko parna elektrana was signed on
December 3rd. Under the ownership structure of the company, HSE will hold the
largest stake (45 per cent), while Verbund will control 40 per cent and Talum 15
per cent of the new Kidricevo-based company, northeastern Slovenia. Brane Kozuh
was appointed its manager, HSE said in a statement. The plant, located 25
kilometres southeast of Maribor, is to have an installed power of 800 megawatts.
If constructed, it will have the latest equipment that will guarantee low
nitrogen oxide emissions.
FOOD & DRINK
Radenska sees revenues drop
Beverages producer Radenska is expected to post sales revenues of 7.8bn tolars
(€32.5m) and profits of 350m (€1.45m) last year, which is far below 2003's
figures, the company revealed recently, cited by Slovene press agency. This year
the Radenci-based company will generate only 77% of the revenues reported in
2003, as the volume of sales dropped by one quarter. The management believes
that the poor performance was prompted by tough trade conditions after
Slovenia's European Union entry, with the increased prices of raw materials,
notably sugar and packaging. Radenska Director General Zlatko Hohnjec told at a
news conference that 2004 represented a serious test of the company's aptitude.
Istrabenz owner of 93 Per cent of Kolinska
Istrabenz, the tourism and energy group, has acquired 73 per cent of Ljubljana-based
food company Kolinska through its official takeover bid, raising its total stake
in the company to 93.22 per cent.
According to a press release from Istrabenz, 2,181 shareholders of Kolinska
accepted the takeover offer, selling it 73.35 per cent of the shares.
All major Kolinska shareholders accepted the offer to sell at SIT 6,500 (27.11
euro) per share, which values the food company at SIT 20.6bn (85.91m euro).
The last major owners to sell were the state-owned Pension Fund Management (KAD)
and Restitution Fund (SOD), which held 11.56 and 10.59 per cent, respectively.
The takeover had previously been given approval by the management board of
Kolinska. Moreover, its members are among the many small shareholders who have
already sold their shares to Istrabenz.
Istrabenz CEO, Igor Bavcar, has said that the takeover will be a step forward in
the company's bid to consolidate Slovenia's food-processing industry.
Slovene company bids for takeover of Serbian beverage producer
Slovene energy and tourism group, Istrabenz, intends to buy the Serbian company,
Rubin, which deals in production of wine and alcoholic beverages. Krusevac-based
Rubin, a very well known company in former Yugoslavia, is today a leading
company in the production and sale of alcoholic beverages. An attempt to sell it
last year was unsuccessful, Radio Slovenia reported.
Three would-be buyers have made a bid in response to last year's repeated
tenders, and one of them was the Koper-based Istrabenz. It was not possible to
find out from the Serbian Agency for Privatisation who the other two bidders
were. Istrabenz did not say either how much they offered or who their
competitors are. They are however hopeful that their bid will be successful.
Before submitting the bid, Istrabenz made an agreement on professional advice
with [Koper-based wine company] Vinakoper. The latter offered Istrabenz support
in drafting a professional programme which will be needed in the event of buying
Rubin. Experience in the area of winemaking is also one of the tenders'
FOREIGN ECONOMIC COOPERATION
Slovene, Serbia-Montenegro foreign ministers discuss economic ties, Kosovo
The foreign ministers of Slovenia and Serbia-Montenegro, Dimitrij Rupel and Vuk
Draskovic, said there had been progress in the economic cooperation between the
two countries despite certain imbalances, particularly to the detriment of
Serbia-Montenegro. The ministers, who met at Bled on Sunday [9 January], agreed
that Slovenian direct investment in Serbia-Montenegro could somewhat reduce the
imbalance, STA news agency reported.
The pair told a news conference that the chambers of commerce of both countries
would agree on a meeting of company heads from Slovenia and Serbia-Montenegro,
at which potential cooperation on third markets, such as China and the former
non-aligned states, could be discussed.
Rupel and Draskovic also backed the signing of a contract between the two
countries' air carriers, Adria Airways and JAT, on a permanent route between
Ljubljana and Belgrade.
Touching on Kosovo, the ministers said the best solution would be one in a
European context. Rupel said that both Serbia and Montenegro, as well as the
province of Kosovo should be assured accession to the EU as soon as possible.
Draskovic proposed to Rupel that Slovenia assist Serbia-Montenegro in training
personnel that will deal with the implementation of European legislation. Rupel
accepted the proposal. He told the press that the training would take place
either in Slovenia or in Serbia-Montenegro.
Draskovic said this year was of key importance for Kosovo and welcomed the fact
that Slovenia chairs the OSCE at a time when talks will be launched about the
future status of the province. He said Slovenia knew what had been happening in
the area in the past.
Rupel briefed Draskovic on the priorities of the Slovenian chairmanship of the
OSCE, which include the stabilisation of SE Europe and Kosovo.
The two ministers agreed to continue a dialogue on the matter and to make
efforts for a dialogue between Belgrade and Pristina to get under way.
Rupel said that Slovenia would also back Serbia-Montenegro's efforts to enter
the Partnership for Peace, although he admitted that Belgrade must first settle
its issues with the international war crimes tribunal in The Hague.
UnitedGlobalCom buys Telemach
US broadband communications provider UnitedGlobalCom on December 24th acquired
Slovenia's leading cable company, Telemach, in a deal worth €71m. The
agreement, approved by the UGC supervisory board, was signed on Christmas Eve.
Telemach is Slovenia's largest broadband communications provider with over
105,000 cable TV subscribers and 13,000 broadband Internet customers. The
company has grown significantly since 1999, with revenues up over 10-fold. UGC
acquired the Slovenian cable provider from EMP Europe, a leading private equity
firm dedicated to Central and Eastern Europe, and several Slovenian
shareholders, including the Slovenian Railways and the Meglic family, which
helped to found the company in 1999. The deal must still get the go-ahead from
the Slovenian Competition Protection Office. Telemach Managing Director Vojko
Rovere told the Slovene press agency that the company is delighted with the new
owner as this opens new possibilities for the company's development. "We
expect this to alter the development of competition on the telecommunications
market in Slovenia," Rovere said. According to Rovere, Telemach wishes to
remain the leading cable provider in Slovenia, offering a full range of
broadband telecommunications services.
Higher revenues at Aerodrom
Aerodrom Ljubljana, the company managing the Ljubljana Airport of Brnik, expects
to record 41,064 arrivals and departures in 2005, 14% more than the current
year, the company told Slovene press agency on December 15th. The company's
supervisory board discussed the 2005 basic business policy and financial plan as
well as the plan for the company's development for the year 2005. Aerodrom
expects the number of passengers to increase by 15% to 1.2m, while no major
changes are expected in cargo transport, according to the company's forecasts
published on the web site of the Ljubljana Stock Exchange. The company expects
to increase its revenues by 12% to 6.013bn tolars (€25m).