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Slovenia

Author(s):
International Monetary Fund
Published Date:
April 1998
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I. Introduction

1. Since independence in 1991 Slovenia has made major strides in stabilizing and transforming its economy: inflation has been lowered to single digits, output has returned to its pre-independence level, and the international reserves position has become very comfortable, as early current account surpluses were followed by progressively stronger net capital inflows. These favorable developments, brought about by tight macroeconomic policies and early—but still incomplete—structural reforms, have allowed the country to maintain its lead among the transition economies in their race for early EU membership. The highest per capita income and credit ratings among transition economies underpin Slovenia’s bid. Its success, however, will depend crucially on continued efforts at stabilization and vigorous implementation of structural reforms.

2. Economic developments in Slovenia from independence until about mid-1995 have been reviewed in SM/96/120. The present paper reviews developments since then as well as the status of discussions on reforms with important implications for the future in the areas of taxation, pensions, and labor and financial markets. A companion paper—SM/97/292—presents staff analysis on selected policy areas such as privatization and corporate governance, external competitiveness, inflation inertia and its principal causes, and the economic impact of EU membership.

II. real sector

A. Overview

3. After a steep decline following the dissolution of the Socialist Federal Republic of Yugoslavia (SFRY), output began to recover in 1993, and by 1996, Slovenia’s GDP was back to its pre-independence level. Domestic demand was the main driving force, while the growth of exports fluctuated in line with the business cycle in western Europe and changes in competitiveness. A strong external contribution brought the GDP growth rate to a peak of 5.3 percent in 1994 but it subsequently slowed, reaching 3.1 percent in 1996. GDP growth picked up again in 1997, led by the strengthening recovery in Europe and improved competitiveness; GDP in the second quarter was 3.8 percent higher than a year earlier (Figure 1).

FIGURE 1SLOVENIA: Economic Activity

Sources: Bank of Slovenia; Institute of Macroeconomic Analysis and Development; Statistical Office.

1/ Bottom bars indicate socially owned or public enterprises.

4. Slovenia’s relatively robust GDP growth has not prevented employment from falling, as the restructuring of the economy has led to large gains in productivity and substantial labor shedding, in particular in the primary and manufacturing sectors. Total employment fell by about 5 percent from 1992 to 1996, with the falling trend extending into 1997. Registered unemployment increased to about 14 percent of the labor force in 1993 and has remained stuck at that level. There is, however, substantial uncertainty regarding the degree of slack in the labor market. The Labor Market Survey, which probably provides a more accurate picture of labor market conditions, indicates much lower unemployment, at a stable rate of about 7 percent during the last three years.

5. Inflation was quickly brought down to around 10 percent from the very high levels prevailing in the late 1980s and early 1990s, but it has proved resistant to any further lowering. In 1996, strong wage growth caused upward pressure on inflation while the increase in controlled prices was moderate. These pressures were reversed in 1997, and in the summer months noncontrolled prices increased at an annual rate of only 5-6 percent. However, large increases in controlled prices and, over the summer months, an effective depreciation of some 5 percent temporarily pushed overall inflation back to above 10 percent.

B. Demand Components

6. There have been substantial fluctuations in private consumption due to fluctuations in real income and spurts of purchases of consumer durables (see Appendix Table 9). After increasing by 9.2 percent in 1995, fueled by a jump of almost one third in new car registrations, the growth in private consumption slowed to 2.6 percent in 1996, because of slower growth in disposable income and because households rebuilt their savings. The household saving rate, which had fallen from 15.5 percent in 1994 to 12.8 percent in 1995, rose to 13.1 percent in 1996 and growth in real disposable income fell from 5 percent in 1995 to 2 percent in 1996. During the first months in 1997 the growth of real wages slowed, however, as income policies succeeded in containing wage growth (see Section II.E). It is difficult to assess the developments in private consumption in the first half of 1997 as the publication of the index of retail turnover has been discontinued and the quarterly national accounts contain no information on GDP by expenditure. However, a drop in imports of consumer goods suggests that private consumption was weak.

7. Growing on average in line with GDP since independence, public consumption has maintained its 20 percent share of GDP. After growth of 2.5 percent in 1995, public consumption was initially projected to remain unchanged in 1996. According to the latest estimates, however, slippages—also observed in public sector wages—resulted in real growth of 2.2 percent. The authorities expect a growth rate of 5 percent for this year.

8. The restructuring needs of the economy have resulted in brisk investment growth since independence and, mainly due to spending on infrastructure and modernization of small- and medium-sized private enterprises, fixed investment’s share of GDP climbed steadily from 18.6 percent in 1992 to 22.5 percent in 1996 (see Appendix Tables 15 and 16). From a high of 17.1 percent in 1995, real investment growth slowed to 6.9 percent in 1996. Housing and business fixed investment both experienced slower growth in 1996. Investment in machinery and equipment, which constitutes more than 50 percent of total investment, grew by only 5 percent, probably due to growing uncertainties regarding the future reform process and the prospect of EU and NATO membership. Infrastructure investment, on the other hand, gathered momentum in 1996 and its share of total investment increased to 22.7 percent, compared with 19.4 percent in 1995 and 12.9 percent in 1992. The construction of a new highway system and investment in telecommunications explain the bulk of the higher infrastructure investment, but in the energy and the railway sectors, investment also increased substantially.1 Growth in infrastructure investment is expected to slow down in 1997, but with the revival of foreign demand and improved prospects for integration with Western Europe, indications are that this will be about offset by higher business sector investment.

9. As exports felt the impact of deteriorating competitiveness and imports surged in association with the consumption boom, net exports of goods and nonfactor services had a strong negative impact on the economy in 1995. Export volume increased by only 1 percent in spite of market growth of more than 8 percent, as the real effective exchange rate (ULC-based) appreciated by some 10 percent. Import volume, on the other hand, jumped by 11.6 percent. In 1996, lower growth in domestic demand slowed import volume growth to only 1.3 percent. An improvement in competitiveness through an effective exchange rate depreciation of 5.2 percent lifted export growth to 2.5 percent in spite of slower growth in Slovenia’s major trading partners. Thus, net exports had a neutral impact on GDP growth in 1996.

10. Both exports and imports of goods increased rapidly, by 10.8 percent and 9.4 percent, respectively, in the first nine months of 1997 compared with the same period in 1996. Exports benefited from the lagged effects of the previous year’s depreciation and from stronger growth in Europe. As 50-60 percent of imports consist of intermediate goods that are largely used as inputs for the export-oriented manufacturing sector, a surge in exports could be expected to boost imports. However, the strong growth in imports might also indicate a more robust recovery in domestic demand than reflected in current projections.

C. GDP by Sector and Income Components

11. Given Slovenia’s gradual approach to transition, which has recently slowed even further, the changes in the sectoral composition of GDP have been modest (see Appendix Table 10). From 1992 to 1996, the heavily protected agriculture sector’s share in output fell from 5.2 percent to 4.2 percent, that of industry and construction from 35.9 percent to 31.5 percent, and that of services increased from 48.2 percent to 49.4 percent. The bulk of these changes took place from 1992 to 1993, indicating the slowing down of the reform process in recent years.

12. Manufacturing output (80 percent of industry and construction) increased moderately in both 1995 and 1996: by 2.5 percent and 1.4 percent, respectively. There were substantial differences across subsectors, with production of food, beverages and tobacco, and electrical appliances experiencing the strongest growth rates, in contrast to declines in output of traditional products like chemicals, wood manufacturing, textiles, leather, and footwear. The manufacturing sector as a whole experienced negative operating surpluses in both 1995 and 1996, primarily caused by huge losses in the large nonprivatized enterprises. Productivity in industry increased by 7.8 percent in 1995 and by 7.1 percent in 1996 (Table 1). Output from mining and quarrying, which has been on a declining trend since independence, dropped by an additional 1.3 percent in 1996. Production in the electricity, gas, and water supply sector increased in 1994 and 1995, but the growth came close to a standstill in 1996.

Table 1.Productivity Growth(Annual percentage change)
19931994199519961992-96
Agriculture, forestry and fishing6.516.237.68.914.2
Industry and construction6.810.48.47.07.8
Industry7.211.87.87.17.9
Construction3.9-0.614.27.96.8
Services4.37.02.82.94.0
Total economy4.37.14.33.44.9
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development

13. The strong investment growth, particularly in infrastructure, boosted activity in the construction sector by about 10 percent a year in 1995-96. Strong domestic demand and recession abroad reduced the traditionally large exports of construction services in 1996. Unregistered construction work is estimated to account for 30 percent of total construction work, which suggests that growth in the sector might have been even higher than indicated by official data.

14. Unlike construction, growth in industry was lackluster in the first nine months of 1997, with output rising by only 1.1 percent over the same period in 1996. In manufacturing, production increased by 1.3 percent in this period and mining output fell by 3.5 percent because of continued mine closures, while electricity output increased by 12.6 percent. However, a survey of business sentiment by the Chamber of Commerce showed that business leaders in manufacturing were more optimistic in September 1997 than in September 1996, a finding that seems to reflect stronger foreign demand and the depreciation of the tolar exchange rate during the summer months. There are few indicators of construction activity, but the continued strong investment growth would suggest a brisk pace of growth.

15. The service sectors experienced relatively robust growth in 1995 and 1996, with real estate, rental, and business services recording the highest growth rates: 6.1 percent in 1995 and 4.8 percent in 1996. Also, output of hotels and restaurants increased substantially, reflecting the continued recovery of tourism. In addition to a large influx of one-day tourists from Austria and Italy (attracted by lower gasoline prices and gambling casinos), overnight stays of foreigners rose by 14 percent in 1996; this trend continued in 1997, with overnight stays up by 22 percent in the first seven months compared with the same period in 1996. In spite of this rapid growth, the number of foreign tourists is still only half of what it was before independence.

16. In spite of the strong growth in real disposable household income, the share of labor income in GDP, measured by gross compensation of employees, continued to fall from 58 percent in 1994 to 54.8 percent in 1996 (see Appendix Table 11). In 1996, however, the decline was entirely due to the lowering of employers’ social security contribution as gross wages and salaries as a share of GDP increased for the first time since independence.2 Gross operating surplus and mixed income (that is, income from non-incorporated family businesses) have been broadly stable as a share of GDP over the last three years—but with a slight upward shift in the share of the latter, reflecting the stronger dynamism of this small enterprise segment. As a result of large depreciations of the capital in the traditional business sector, almost all of net profits in the economy stem from mixed income.

D. Labor Market

17. The decline in employment continued in 1995-96, with the cumulative drop between 1991 and 1996 exceeding 12 percent (see Appendix Table 26). Compared with its peak in 1987, employment in 1996 was more than 25 percent lower, a period over which Slovenia’s total population was broadly unchanged.3 A striking development since independence has been the strong employment growth in the small-scale private sector: from 1987 to 1996, its share of total employment increased from 12.7 percent to 21.9 percent. Employment in the remainder of the private sector (including the socially-owned enterprises), however, declined steeply, with strongly diverging trends across its various branches. The decline in employment was strongest in industry (5.5 percent a year in 1995-96), reflecting the massive layoffs and rapid productivity growth in the sector, but employment also declined substantially in agriculture, forestry, and fishing. At the same time, employment increased in construction and services, aided by stronger demand for products from these sectors and, in the case of services, lower productivity growth than elsewhere. The strong employment growth in the public administration—partly justified by the staffing needs of a newly independent state—continued in 1995 and 1996 at an average rate of 4.5 percent.

18. While these data are based on the monthly employment register (linked to the extension of benefits from health and other social insurance), a much more positive picture emerges from data based on the Labor Force Survey (which is based on ILO standards).4 According to this source, employment actually increased in 1994 and 1995, before falling in 1996. The Labor Force Survey, in contrast to the employment register, includes temporary, contract, and family workers—workers for which social insurance is not mandatory—and it might even capture workers on the black labor market. These segments of the labor market have grown in importance during the transition, and the Labor Force Survey may thus be the better measure of labor market conditions. See Box 1 for a discussion of the difference between the Labor Force Survey and other measures of labor market conditions.

19. After rising rapidly from below 2 percent before the transition, the registered unemployment rate has been stable at around 14 percent since 1993. The rise in unemployment was initially mitigated by widespread use of early retirement for redundant workers. The later stabilization of unemployment in the face of falling employment was due to the decline in the working age population and the extended length of education. In addition, an updating of the unemployment register helped to lower the unemployment rate from 14.4 percent in 1994 to 13.9 percent in both 1995 and 1996. It drifted slightly upward at the end of 1996 and into 1997 and was 14.4 percent in September 1997, compared with 13.7 percent in September 1996. Also, after having increased in both 1995 and 1996, the number of job vacancies was lower in the first part of 1997 compared with the same period in 1996. In accordance with its more favorable description of employment trends, the Labor Force Survey suggests significantly less slack in the labor market than the unemployment register. In 1994-97, the survey shows an unemployment rate slightly above 7 percent, down from more than 9 percent in 1992 and 1993 (see Box 1).

20. Structural indicators confirm a recent stabilization in the labor market; neither long-term unemployment nor regional differences in unemployment have changed much. The share of the long-term unemployed (unemployed for more than a year) in total unemployment actually dropped to 53.8 percent by the end of 1996, a decline of 5.8 percentage points from a year earlier. However, this drop must be seen in the context of the thorough updating of the unemployment register that took place in 1995-96. Also, exceptionally large regional differences in unemployment rates still prevail. In 1996, the unemployment rate in Ljubljana was 8.4 percent compared with 23.4 percent in the second largest city, Maribor, in spite of less than two hours’ commuting distance between the two cities. The improvement of the highway system should enhance the geographical mobility of the labor force.

Box 1.Two Different Measures of Labor Market Slack

While in most countries the unemployment rate based on the number of workers registered as unemployed is higher than the unemployment rate according to the labor force survey, this difference is unusually large in Slovenia. In recent years the registered unemployment rate has been double the labor force survey unemployment rate.

Unemployment Rates in Selected Central and Eastern European Countries, 1996 Second Quarter(In percent)
SloveniaCroatiaPolandHungarySlovak RepublicCzech Republic
Registered13.716.414.711.112.42.8
Labor force survey7.310.012.49.210.93.2
Sources: Statistical offices in the various countries.
Sources: Statistical offices in the various countries.

A comparison of the two sources for Slovenia shows that in May 1996 the unemployment register contained 19,000 people who would have been defined as employed according to the survey, most of them occupied under various forms of contract, temporary, and family work.1 Furthermore, 32,000 of the registered unemployed would not have been included in the labor force according to the survey, most of them because they were not actively searching for a job. On the other hand, 10,000 of those unemployed according to the survey had not registered. Only about 30 percent of the registered unemployed receive unemployment compensation. There are, however, certain incentives for remaining registered even for those not receiving unemployment benefits. First, redundancy legislation protects the jobs of workers whose spouse is registered as unemployed. Second, unemployed people can continue to contribute to the pension system if they remain in the unemployment register. Third, until this year a person had to be either employed or unemployed to qualify for adult education; this regulation was discontinued this year. For these reasons and for the international comparability of the labor force data, the Labor Force Survey should be considered the better measure of the slack in the labor market.

1/ National Employment Office, Annual Report 1996, p. 42.

E. Inflation and Wages5

21. After rapid disinflation from the very high inflation of the pre-independence years, it has proved difficult to bring inflation much below the 10 percent level, where it has remained since 1995 (Figure 2 and Appendix Table 32). Real wages continued to grow—and at a faster rate than agreed upon in the annual Social Agreements concluded among the social partners (see below)—in 1995 and 1996. Indexation remains an obstacle to further disinflation; however, the shift from quarterly to annual indexation with compensation for 85 percent of the increase in the consumer (rather than the retail) price index should pave the way for progress in this area.6

FIGURE 2SLOVENIA: Prices and Wages

Sources: Bank of Slovenia; Institute of Macroeconoimic Analysis and Development, Statistical Office.

1/ Quarterly data; productivity is real GDP per non-government worker deflated by the retail price index; real wage was calculated as average net wage for the economy plus other receipts from work, deflated by the retail price index.

22. The exchange rate and controlled prices have both played important and partly offsetting roles in the disinflation process since 1995. A slower nominal effective depreciation, which at times turned into an appreciation, helped bring inflation down to an annual rate of 10 percent in the second half of 1995. The inflationary impact from the depreciation in late 1995 was largely offset by very moderate increases in controlled prices, which cover 28 percent of the retail price index.7 A stable nominal effective exchange rate through most of 1996, on the other hand, helped to offset the more rapid wage growth in this period. At end-1996, annual inflation was 8.8 percent, which also was used by the authorities as the inflation objective for 1997. However, inflation picked up throughout 1997, mainly because of higher controlled prices and because of the effect from the depreciation of the currency during the summer months. Wages exerted a moderating impact on inflation in this period. About half of the annual inflation over the summer months of 1997 can be attributed to increases in controlled prices. Concurrently, the annual increase in market-based prices declined to 5-6 percent. The depreciation over the summer—in nominal effective terms by 4.7 percent from June to September—raised the twelve-month rate of increase in the RPI to 10.1 percent in September. Although the rate fell to 9.7 percent in October, the depreciation through the summer has all but precluded attainment of the goal of 8.8 percent annual inflation at end-1997.

23. Real wages generally grew faster than envisaged by the Social Agreement, which called for real wage growth lower than GDP growth, and 1996 represented a particular setback for income policies.8 Real wages and other remuneration increased by 7.9 percent in 1996, up from 7.6 percent in 1995, as large increases in wages set in individual contracts in the private sector along with strong growth in public sector wages contributed to an acceleration in real wage growth during 1996. Wages set by individual contracts represent only 11 percent of the total wage bill but very large increases in such wages in 1996 contributed to a considerable part of the overall wage growth. In particular, wages at the managerial level rose rapidly, with potentially dangerous spillover effects on other wages.

24. The acceleration in public sector wages in 1996 was triggered by members of parliament, who refused to abide by the general wage agreement and demanded higher wages. Judges followed suit. Later, medical doctors staged a strike. In the run-up to the election in November, the government increased all these wages, and raised the teachers’ wages as well, before they staged a strike. Consequently, public sector wages increased significantly faster than those in the private sector, widening the gap between the average wages paid in the public and the private sectors, which already was larger than in other transition countries (Table 2).9

Table 2.Wages Across Sectors in Selected Transition Economies in 1995(Average for all sectors=100)
TotalAgricultureManufacturingConstructionTrade and CateringFinancial ServicesPublic Admin.
Slovenia100968384100127131
Poland10091969389137118
Hungary10074968490137121
Czech Republic100849610888131118
Slovak Republic1008110010493130116
Source: OECD
Source: OECD

25. The income policy slippages in 1996 led both the government and the social partners to seek new ways to limit excessive wage growth in 1997. In September 1996, the employers canceled the Social Agreement negotiated in June 1996, demanding reductions in a wide range of allowances that, together with employers’ social security contributions, had brought total labor costs 50-60 percent above base wages (see Box 2). Because of disagreement on the general economic policy orientation (in particular, growth in government spending should, in their view, be lower than that of GDP), the employers refused to sign a new Social Agreement. However, in June 1997 the social partners agreed on the earnings-related aspects of the agreement. This agreement, which extends to the end of June 1999, was made mandatory by the passage of the Minimum Wage and Wage Adjustment Law, which increases minimum wages by 4.2 percent and replaces quarterly indexation with annual indexation to 85 percent of the CPI. Moreover, wage increases of persons covered by individual contracts (see paragraph 23) are now limited by the base wage adjustments contained in the law. As in previous agreements, higher wage increases at the branch or enterprise level are permitted, but they must be based on favorable business results. To stop the rapid rise in government wages, strong restrictions were put on the adjustment of wages and other remuneration for civil servants. To a large extent because of these measures, average real wages fell in the first seven months of 1997.

Box 2.Non-Wage Labor Costs

Numerous provisions for social and other purposes add significantly to already high earnings levels and create a substantial tax wedge.1 Employees pay social security contributions equal to 22.1 percent of gross wages. Employers pay 15.9 percent of gross wages for social contributions (8.85 percent pension insurance, 6.89 percent health insurance, 0.06 percent unemployment insurance, and 0.10 percent maternity leave). A progressive payroll tax, with an average rate of 3.4 percent of gross wages—but with a top rate of 15 percent—was introduced in 1996 (and amended in 1997) to compensate for the reduction in employers’ social contributions from 19.9 percent to 15.9 percent of gross wages. Employers also pay sick leave for the first 30 calendar days of illness at 80 percent of the base wage (the wage negotiated at the central level). The actual replacement rate is thus lower.

There are several special payments:

  • An annual holiday bonus, equal to SIT 102,000 or the actual monthly wage. This bonus has been frozen for 1998 and 1999.
  • Reimbursement of traveling expenses to and from work, calculated as 60 percent of public travel expenses.
  • Reimbursement of meal expenses, equal to SIT 500 per day at work, which compares with an average hourly wage of SIT 599 for manual workers.
  • At retirement, the employer pays an amount equal to two months’ wages.
  • A severance payment (only in the case of redundancy for economic reasons) is calculated as half a month’s wage for every year of service.

The workers have several statutory rights specified as minimum thresholds:

  • The statutory minimum annual leave is 18 days but additional days can be agreed upon; there are presently on average 25 days of paid annual leave per employee. In addition, there are 13 national holidays.
  • Employees have the right to 7 paid days a year of leave for personal reasons (birth or death in close family, marriage, moving to a different place, etc.).
  • There are 2 paid days a year of leave for blood donors.
  • Employees have the right to paid days of leave for education in the interest of the employer (for instance, 15 days for a master’s degree, final exam).
1 OECD, Economic Survey, 1997, Slovenia.

III. fiscal sector

A. Overview

26. Slovenia’s fiscal policy during the 1992-95 period was oriented toward maintaining overall fiscal balance. The general government budget was roughly in balance each year, deviating from zero by no more than ¼ percent of GDP. By compensating for or adjusting the automatic stabilizers, balance was achieved against the background of large macroeconomic fluctuations. For example, during the same period, the GDP growth rate fluctuated between -5½ percent and 5¼ percent, the unemployment rate10 declined from 9 percent to 7½ percent, and the external current account shifted from a surplus of 7½ percent of GDP to a roughly balanced position.

27. During this period of economic restructuring, many expenditure components swelled, as new infrastructure and a comprehensive safety net were developed. Unlike in many other transition economies, their impact on the balance of the budget was, however, offset by lower subsidies and by tax increases. By 1995, general government expenditure and revenue each accounted for 45.7 percent of GDP.

28. In 1996, the fiscal balance was maintained but concurrently the seeds for a future deficit were planted. To reduce the tax wedge, the employers’ social security contribution rate was lowered twice. The full impact of this change would be felt only in 1997. In addition, the customs duties were lowered in accordance with agreements with the European Union (EU) and the Central European Free Trade Agreement (CEFTA), again with most of the impact falling on the 1997 budget. A payroll tax was established to compensate for part of the revenue loss. Public wages were allowed to increase significantly as a result of strikes. This increased the wage bill in the 1996 budget, but its effect on the 1997 budget—even with a subsequent wage freeze—was even larger.

29. These trends as well as further expenditure pressures have led to the adoption of a budget that may produce a deficit of as much as 1½ percent of GDP in the 1997 general government accounts. Lower pension fund contributions and customs duties are expected to lower revenue; increased expenditure on education, higher wages, and larger social transfers are expected to increase expenditure. These are expected to be only partially compensated by the payroll tax, increases in other taxes, and lower expenditure on other items.

30. Meanwhile, two important reform packages are in the making: introduction of the VAT, with coordinated changes in income taxes, and pension reform that is intended to put the pension system on a sustainable path.

B. Fiscal Developments in 1996

31. The 1996 central government budget was approved by parliament with a small surplus. This was consistent with the slightly positive outcomes of the previous two years (including the transfers). Total revenue was virtually unchanged with respect to GDP from the 1995 outcome, and added up to 23½ percent of GDP. Taxes on goods and services contributed to more than half of the total, and taxes on personal income and customs duties formed most of the remainder. Total budgeted expenditure was slightly lower, leading to a budget surplus of ¼ percent of GDP. Within total expenditure, wages, social transfers, and transfers to the pension fund constituted 26, 16, and 8 percent, respectively.

32. The outcome of 1996 was more favorable than budgeted. Total revenue was higher, with higher taxes from corporations more than compensating for the losses in customs duties. Total expenditure also was higher: during the year, the transfers to the pension fund had increased further, by close to 1 percent of GDP, to 2¾ percent of GDP. Nevertheless, with a stronger increase in revenue, the state budget surplus climbed to ¾ percent of GDP.

33. The surplus in the state budget, which amounted to 4½ percent of GDP once the transfers to the other government sectors are netted out, helped maintain the slightly positive general government fiscal balance. Excluding the transfers from the state budget, local governments’ expenditures exceeded their own revenues by ¾ percent of GDP; for the pension fund, this overrun was 3½ percent of GDP. With the health insurance fund roughly in balance, the general government had a surplus of ¼ percent of GDP, compared with a balanced position in 1995.

34. While the balance of the general government did not change substantially from 1995, several structural changes paved the way for a shift in the composition of revenue and expenditure. On the revenue side, in order to reduce the cost of labor, the employers’ contribution rates for pension and disability insurance were reduced twice (while keeping the employees’ contribution rates constant), first in January from 15.5 percent of gross wages to 12.85 percent, and then in July to 8.85 percent. With further adjustments to obligatory health insurance and unemployment insurance contribution rates, the total contribution rate thus fell from 44.7 percent of gross wages in 1995 to 38 percent by July 1996. These rate adjustments reduced the general government revenue by almost 2 percent of GDP in 1996. In addition, in January 1996, new customs legislation came into force, which, among other things, reduced tariffs by the equivalent of ½ percent of GDP in 1996, with further reductions planned for the coming years. The reductions in the social security contributions and customs tariffs were mostly offset by the introduction of a progressive payroll tax and by an increase in other tax revenue.

35. To improve tax collection, a new Tax Administration Office was established. Tax collection responsibilities were formerly split between the Agency for Payments, Supervision and Information (APPNI), an independent body reporting to parliament and responsible for dealing with the legal entities, and the Republic Bureau of Public Revenue in the Ministry of Finance, which administered taxes borne by natural persons. In mid-1996, the new Tax Administration Office began to operate with full responsibility for overall tax collection.

36. On the expenditure side, the growth of two components, public sector wages and transfers to the pension fund, was particularly problematic. Public sector wages increased beyond what could have been expected on the basis of continuing net hiring, as the government had granted large concessions as a result of strikes (in particular by the health sector employees in March). The phased wage concessions affected the 1996 budget mainly in the last quarter. In addition, the transfers to the pension fund rose by almost 1 percent of GDP, as the employers’ contributions were reduced. To compensate their effect, subsidies to the enterprises were reduced by ½ percent of GDP, and public investment was curbed.

C. Fiscal Developments in 1997

The budget and its outcome to date

37. Owing to political difficulties after the elections, the presentation of the 1997 budget to parliament was delayed until the end of July. An amended version of this budget was finally approved in December 1997. A temporary budget had been passed in December 1996 to maintain uninterrupted financing for the first six months of 1997, guided by the budget laws that set the general rules for temporary budgets. One important general rule for temporary financing is to contain spending in each month to 1/12 of total spending in the previous year. The rule is not specific about whether this ratio is to be applied in real or in nominal terms, but in practice nominal amounts were applied in 1997.

38. There were several exceptions to the general rule, which were due mostly to laws that mandated specific expenditure (for example, entitlements or other pre-existing contractual obligations). More specifically, wages, interest payments, payments on guarantees, social transfers, and transfers to the pension fund were not bound by this rule. To accommodate the additional demand generated by these laws and obligations, a Law on Additional Financing of Government Expenditure in the First Half of the Year was passed in May.

39. As parliamentary approval of the 1997 budget was delayed further, two more temporary budgets were passed, the first in July to cover the first 9 months of 1997, and the second in October for the “first 12 months” of 1997. With restrictive spending rules, the outcome during the first 8 months of the year was a small surplus for the general government. During this period general government expenditure increased by 6½ percent in real terms relative to the same period in 1996, led by increases in wages, social transfers, and expenditure of the pension fund, while growth in spending for other purchases, subsidies and other transfers to the business sector, and investment outlays was limited under the provisional financing rules. As a result, the central government deficit amounted to SIT 11 billion, but with the surpluses of the health fund and the local governments, the general government recorded a small surplus of SIT 1 billion.

40. The 1997 central government budget was passed in early December with a deficit of 1¼ percent of GDP. Central government revenue is projected to increase by 6 percent in real terms in relation to 1996. The largest increases in 1997 are projected in corporate and personal income tax revenue, while the largest drops are projected in customs duties and social security contributions, as the reductions in customs duties continue and those of the contribution rates show their full effect. The increase in the excise tax on oil products and a new environment tax on carbon dioxide emissions that was introduced at the beginning of 1997 are also expected to contribute to revenue. Revenue from the sales tax, on the other hand, is expected to increase only slightly in real terms.

41. Central government expenditure is projected to increase sharply (by 13½ percent in real terms) in 1997. The wage bill, social transfers, and transfers to the pension fund are expected to show large growth. In spite of the wage freeze in the public administration that took effect in midyear, the wage bill is projected to increase by 8 percent in real terms, because of the continued effect of wage concessions made in 1996 and further hiring. Social transfers—including unemployment benefits, child care, benefits for war veterans, social care, and scholarships—will increase by 20¼ percent in real terms; transfers to the pension fund are slated to increase by 53 percent. Certain other components—interest payments, capital expenditure, and transfers to local communities—are expected to grow much more slowly.

42. The late passage of the budget is expected to create a strong case of “December fever,” once the year-long constraints stemming from the provisional financing rules are lifted. Nevertheless, because of the brevity of this period, and notwithstanding a planned extension of the budget year to January 1998, total expenditure for the whole year may be slightly less than budgeted.

43. These developments may push the general government deficit to 1½ percent of GDP. The incremental deficit over that of the central government is mostly due to the deficit in the pension fund that is not financed by the central government. This large deficit in the general government accounts is a clear break from the rough fiscal balance that had been maintained since 1992. In addition, since the deficit is mostly due to non-cyclical factors, unless new austerity measures are taken, this break is unlikely to be reversed.

44. The general government accounts do not include close to 20 extrabudgetary funds.11 However, since most of their financing comes from the central government, their activities are reflected in the budget. Total payments from the central government budget to these funds amounted to 0.9 percent of GDP in 1996. With additional payments of 0.2 percent of GDP earmarked from the privatization revenue, which is included in the general government, the funds’ total expenditure was equivalent to 1.1 percent of GDP. The Highways Company receives 67 percent of the privatization revenue; the next largest fund, the Fund for Regional Development, receives only 8 percent.

45. These funds are expected to shrink in size and number in the coming years. There was already a slight decrease in their resources in 1996. Also, with the imminent completion of the first wave of privatization, the revenue from their earmarked privatization receipts is not expected to be significant. Finally, following the adoption of the public sector accounting law, the government plans to pull the funds’ operations under the umbrella for the general government.

Debt issues

46. Although the central government accounts were in small surplus in 1996 and had registered a small surplus in the first half of 1997, central government debt, which is roughly the same as general government debt, increased significantly as a result of the conclusion of agreements with Paris and London Club creditors (Table 3).12 In addition, there was a switch from domestic to foreign bonds. The authorities’ main reasons for borrowing more in the foreign markets were the relatively small size of the domestic market, lower interest rates abroad, and an opportunity to build a foreign investor base. The government guarantees also increased, from 3¼ percent of GDP in 1993 to 5 percent of GDP at the end of 1996.

Table 3.Central Government Debt and Debt Guarantees(In millions of US$)
Dec. 31, 1993Dec. 31, 1994Dec. 31, 1995Dec. 31, 1996June 30, 1997
Total debt outstanding2,2982,7123,2884,1044,015
Domestic2,0012,3012,7152,5132,308
Foreign2984115731,5911,706
Total guarantees413446560931962
Domestic197223272542542
Foreign216223288389421
Source: Ministry of Finance
Source: Ministry of Finance

D. Tax and Pension Reforms

47. While the fiscal accounts were broadly in balance up to the second half of 1997, substantial reforms in many different areas of the public sector were still needed. In particular, reforms in taxation, pensions, health care, the civil service, and the land registry remained to be implemented. Of these, reforms in taxation and pension are discussed below. Reforms in health care and the civil service were under preliminary discussions, and a quick introduction of laws in these fields was not expected. Reforming the civil service law is under discussion. The Law on Land Register is in parliament, expected to be passed in 1998. The law calls for the improvement and the computerization of the registers as a precondition for new municipal property taxes.

Tax reform

48. Currently, taxes are collected from sales, personal income, corporate profits, imports, real estate, inheritances and gifts, carbon dioxide emission, and water pollution. In addition, four social contributions are defined: pension and disability insurance, health insurance, unemployment insurance, and maternity leave.

49. The necessity of a tax reform has been acknowledged for some time by the authorities. There are several problems with the current system. First, the tax wedge is considered high relative to the trading partners. Second, under the EU Accession Agreement, the sales tax must be replaced by a value added tax (VAT) and other taxes need to be harmonized. Third, real estate and corporate profit taxation are inadequate. Fourth, there is high tax evasion, partially stimulated by high tax rates. Fifth, certain enterprises are treated unequally.

50. The proposed reform package revolves around the personal income tax (PIT), corporate income tax (CIT), and VAT (with excises) triangle; however, to facilitate EU accession, the government is giving priority to the introduction of the VAT and the revision of the excise tax law. Currently, Slovenia has a sales tax enforced according to the Sales Tax Law of 1991. It is a single-phase tax on sales of goods and services in final consumption, leading to distortions. To remedy this, two laws (the Law on the VAT and the Law on Excise Duties) were prepared by the previous government, but they could not be approved by parliament before the elections in November 1996. These laws have been resubmitted to parliament, with the expectation that they would be approved by mid-1998 and be effective at the beginning of 1999. The Tax Administration Office has begun preparations for their introduction at the start of 1999.

51. As for the VAT, the working assumption is to have two rates. There will be one basic rate of around 20 percent. In addition, there may have to be a lower rate for social reasons, for example, for food and children’s wear. Currently, total revenue from the sales tax (20 percent on most goods; 5 percent on food and other social goods; 10 percent for construction materials, clothes, footwear, etc.; and 32 percent for luxury goods), the excise tax, and the customs duties amounts to 16.5 percent of GDP. The new taxes are expected to yield a similar level of revenues, with the VAT producing 11.3 percent of GDP and the excise taxes 5.1 percent of GDP, while revenues from customs duties are assumed to become insignificant.

52. With the introduction of the VAT, the payroll tax, which was established to mitigate the impact of lowering the social contribution rates, is expected to be abolished. The limit on exemptions has already been raised in 1997, but the rates have been raised and made more progressive.

53. There are also discussions on changing the PIT and CIT laws. On the PIT, a new law that redefines the tax base may be introduced in a couple of years. Among the possible changes are increasing the allowable deductions and lowering the highest tax rate from 50 to perhaps 45 percent. On the CIT, an amendment to the existing law is to be prepared by the end of 1997. Currently, the receipts from the corporate tax constitute only 0.9 percent of GDP, which is low by international comparison. One reason is that the deductible costs are very broadly defined (for example, travel costs—even to areas where there is no business connection—are deductible). An audit by the Tax Administration Office showed wide abuse of the system and estimated the loss in taxes to be SIT 3 billion a year. For tax purposes, the costs will be defined more precisely and will be monitored. Moreover, tax collection during bankruptcy or takeovers will be better defined and monitored. In certain cases, the depreciation and investment allowances add up to more than 100 percent; these will be curtailed. The tax rate, 25 percent, is expected to be left unchanged.

Pension reform

54. Slovenia’s pay-as-you-go (PAYG) pension system is unsustainable.13 The pension benefits are very generous (13½ percent of GDP—one of the highest ratios in the OECD), and the eligibility age is low. Already, revenue from contributions falls short of expenditure because of the recently lowered contribution rate and the expansion of the noncontributing informal sector. In addition, many enterprises have lowered their contributions by switching to non-wage compensation of employees, or by deferring payments due to financial distress. The financing gap is expected to increase to 4 percent of GDP in 1997. Demographic changes are projected to worsen the situation, because the elderly dependency ratio (the ratio of population above the retirement age to those of working age) is expected to double to around 100 percent in 40 years. If the current pension system is maintained, the contribution rate will have to be increased constantly, reaching 35 percent by 2030.

55. To ease the pressure, the pension system has been amended several times this decade. The first reform occurred in 1992, when the Law on the Pension and Disability System was introduced, transforming the previous system, whose roots extended to the Bismarckian reforms of the last century. The law included a phased increase in the statutory retirement age for men and women and measures to reduce early retirement. In 1996, the method for determining the pension base for the self-employed was tightened to increase the contributions of the self-employed so as to eliminate the deficit of their insurance system. Also, the indexation of pensions was changed to include in calculations those periods when wages decline (before, monthly adjustments were made to pensions whenever average wages increased, even after a previous decline).14

56. These measures were ineffective for several reasons. First, although the legal retirement age was increasing, average retirement age was actually decreasing, as a result of criteria that enabled early retirement. Second, the deficit of the insurance of the self-employed increased, contrary to expectations, because of higher tax avoidance as the self-employed chose to drop out of the revised system. Third, the indexation still relies on wage increases instead of price increases, therefore the change in indexation has produced only marginal savings.

57. Further changes are under discussion. These include: gradual equalization of retirement age to the average EU level for both genders, changes in the calculation of pension base, lower accrual rate, indexation of benefits to prices, stimulation of later retirement, broadening the base of contributors, more equal treatment of the dependently employed and the self-employed, and improvement of contribution collection.

58. In addition, the government has proposed a three-pillar system, laid out in a white book that was submitted to parliament in November 1997. The first pillar would be a slimmed down version of the existing PAYG system, with an improved balance between contributions and benefits as a result of the incremental measures mentioned above. The second pillar would be a mandatory individual saving scheme with benefits strictly limited to contributions and managed by mutual, public or other forms of funds. The third pillar would consist of a voluntary supplementary insurance.

IV. monetary sector

A. Overview

59. Since independence the Bank of Slovenia (BoS) has focused on a reserve money-based anchor to achieve its overall goal of price stability. In general, this process has continued during the 1995-97 period, although without further progress in reducing inflation since the second half of 1995 when the annual rate fell below 10 percent for the first time. Throughout this period, recurrent concerns regarding a deterioration in external competitiveness in the context of large capital inflows have caused the authorities at various points to pursue both exchange rate and monetary targets simultaneously.15 This has resulted in sustained periods of tolar stability against the Deutsche mark until real appreciation forced the authorities to maneuver a depreciation of the nominal rate through aggressive intervention. Sustained intervention has also created inevitable tensions between monetary and exchange rate policy, and has resulted in the adoption of an increasingly complex array of monetary instruments and capital controls to limit the effect of these inflows on the financial system.16

60. Given the small size of the economy and lack of development of the banking system, large inflows of foreign capital have been a major complicating factor in achieving any policy objective throughout this period. With the absence of a credible incomes policy, persistent structural rigidities in labor and capital markets, and pervasive indexation mechanisms, sterilized intervention was considered necessary to achieve price and overall financial system stability. As this policy became increasingly costly,17 the BoS resorted to additional capital restrictions to limit the impact of these inflows on the domestic economy and to achieve its monetary targets. With a preference for gradual market reforms and in the pursuit of financial system cohesion, the BoS also used interest rate caps in an attempt to reduce interest rates and limit the volatility of the banking system’s deposit flows. While these interest rate ceilings may have tempered the increase in deposit rates in a relatively non-competitive banking environment, they have also prevented a decline in interest rates as monetary conditions have eased.18 Coupled with heavy capital controls and sterilization measures that have delayed the gradual remonetization process observed in transition economies, real interest rates have remained high—providing additional pressure for inflows. Moreover, this policy response has tended to retard the development of domestic money markets and hampered financial innovation.

B. Monetary and Exchange Rate Developments

61. After extensive use of direct foreign exchange intervention and only partial sterilization of repurchase agreements resulted in a sharp increase in reserve money in 1994, the BoS continued to relax monetary conditions through mid-1995. Throughout the first eight months of 1995, reserve money growth accelerated as the BoS continually exceeded its monthly base money targets. Also, real credit to the household and enterprise sectors grew rapidly as the central bank cut interest rates on BoS bills and short-term liquidity loans in what was seen as an effort to stem the inflow of foreign capital (Figures 3 and 4). However, the combination of a stable tolar/deutsche mark exchange rate with an appreciating tolar/U.S. dollar rate and positive inflation differentials resulted in a 4.7 percent real effective appreciation over the first eight months of 1995 (see Figures 5 and 6).19 As current account surpluses started to disappear, slowing the expansion in net foreign assets, the BoS took advantage of this reduced inflow pressure to depreciate the tolar by approximately 11 percent through active intervention in the last four months of the year. To offset the inflationary effects of this depreciation, the BoS slowed the growth of base money for the rest of 1995, to an end-of-period growth rate of 25.2 percent. This policy response reduced inflation from a 19.8 percent period average in 1994 to 12.6 percent in 1995. Broad money growth continued on its downward path for all of 1995.

FIGURE 3SLOVENIA: Monetary Developments

Source: Bank of Slovenia.

1/ Foreign exchange deposits as percent of broad money including foreign exchange deposits.

2/ Differential between 31-90 day deposit rates in Slovenia and Germany, adjusted for actual, annualized one-month ahead changes in the Tolar/DM exchange rate.

FIGURE 4SLOVENIA: Interest Rates 1/

(Percent per annum)

Source: Bank of Slovenia.

1/ All interest rates on financial assets with maturities in excess of one-month are indexed. An inflation adjustment is applied to the real component to arrive at the nominal rate.

2/ The real components of 31-90 day deposits and short-term working capital loans, respectively.

3/ Indexed through April 1995, deindexed thereafter.

FIGURE 5SLOVENIA: Exchange Rate Developments

Sources: Bank of Slovenia; and Bloomberg.

1/ An increase is an appreciation.

2/ Premiurn(+)/discount(-) of the exchange rate in the foreign exchange bureau market with respect to the Bank of Slovenia rate in the interbank market.

FIGURE 6SLOVENIA: Exchange Rate Targeting Through BOS Sterilization

Sources: Bank of Slovenia Bulletin; and Information Notice System, IMF.

1/ Data does not include domestic assets and other government liabilities.

Box 3.Monetary Conditions Index

The Monetary Conditions Index (MCI) is defined as a weighted average of the percentage point change in the real short-term interest rate (interbank) and the percentage change in the real effective exchange rate (RPI based) from the base period (1/1995). The weights used reflect the estimated relative impacts of interest rates and exchange rates on aggregate demand. In the calculation of Slovenia’s MCI, a 3 to 1 ratio was used, indicating that a 1 percentage point change in the real short-term interest rate has about the same effect on aggregate demand as a 3 percent change in the real effective exchange rate. The ratio chosen reflects the high degree of openness of the Slovenian economy. A decline in the index signifies an easing of monetary conditions.

62. With the nominal tolar/deutsche mark exchange rate safely tucked inside an unannounced narrow band and steady strengthening of the dollar occurring in European markets, the real effective exchange rate depreciated by some 3.7 percent from late 1995 through mid-1997. Base money and broad money growth continued on their downward trends, as real lending and deposit interest rates (and spreads) remained stubbornly high in the face of sharp declines in the real interbank rates. These high real rates continued to attract capital inflows, which the BoS was forced to sterilize in keeping with its exchange rate and base money targets.20

63. By the second half of 1996 and into the early part of 1997, real credit growth to the private sector slowed, as viable enterprises were able to obtain cheaper foreign currency loans in external markets. In addition, credit activity was disrupted by the liquidation of Triglav Bank in June 1996. The BoS responded by introducing the “liquidity ladder” prudential regulation, which required the matching of banks’ short-term assets and liabilities. Meanwhile, inflation continued in the 8-10 percent range, owing to sporadic increases in controlled prices, high wage growth, and the pervasive use of indexation mechanisms.

64. Believing that there was a closer relationship between its final objective of price stability and broader monetary aggregates and hoping to increase the transparency of monetary policy, the BoS announced the implementation of a new monetary framework in May 1997, which employed M3 as an intermediate target. Under this program, M3 was projected to grow by 18 percent in 1997 with an error band of 8 percentage points.21 The BoS has viewed this year as a year of learning, especially given the weaker relationship between its operating target of reserve money and the intermediate M3 target.

C. Changes in Monetary Policy Instruments

65. As in the past, the monetary authorities adjusted their existing set of refinancing and other monetary instruments as conditions warranted to achieve multiple policy goals. While the primary objective of implementation of the reserve money program remained intact, secondary goals of stabilizing the exchange rate, providing liquidity support to banks under rehabilitation, and moderating the movement of interest rates continued to be pursued. To some degree, the BoS started to utilize interest rates to ration access to its financing facilities and determine the volume of its sales of bills. However, the BoS continued to establish conditional access to refinancing facilities by requiring BoS bills as collateral and created new facilities that attempted to influence the movement of the exchange rate.

66. Adjustments to existing facilities and instruments during 1995-97 included the creation of: (i) new liquidity loan facilities, (ii) a new thirty-day tolar bill, (iii) foreign exchange sales for BoS foreign exchange bills, (iv) the “triple offer,” and (v) the purchase of foreign exchange with a right-to-sell option.22 Most refinancing activity and foreign exchange purchases in 1995 and 1996 were in support of banks under rehabilitation (Table 4). This support gradually tapered off as the rehabilitation process was completed in early 1997.

Table 4.Slovenia: Monetary Instruments 1/
199519961997
I.II.III.IV.I.II.III.IV.III.III.
(In millions of tolars; unless otherwise stated)
Loans to Banks16,89211,79513,29630,19516,86015,50318,72311,2002,2115,4194,481
Lombard loans18111-51285265243265310536516
Short-term liquidity loans2,1897803,20521,1768,89210,07715,42010,2791,5744,8113,947
Liquidity loans14,52211,00410,0918,9687,6835,1613,0606563287318
Repurchase of bills3,4005,0957,84814,23117,74315,27217,06316,56112,78711,7468,341
Repurchase of foreign exchange821----2,2252,315-903
Bank of Slovenia Bills99,166104,372103,848117,470121,975103,565121,426161,775209,876251,233318,208
Tolar bills11,03410,4045,0151,6265142181,4952,4219,36714,72225,621
Twin bills1,6261,2043,2505,3333,856105434429738674,124
Bills with warrants9,0827,5254,3153,2785,3566,3886,3387,70614,05817,01019,657
Foreign currency bills77,42485,23991,268107,233112,24996,854113,159151,219185,713219,435268,806
Government deposits--1,17615,7401,9345,87414,31610,3042,3576,2596,065
Reserve requirements31,78535,62737,32937,27439,19741,19942,93543,87045,95048,37451,479
Foreign exchange minimum 2/1,2171,3051,4771,5791,6841,7591,8181,8701,9181,9132,041
Purchase of foreign exchange 3/16,2683,2092,5479634,48615,73013,58723,52216,62725,58439,234
From banks in rehabilitation22,2008,100
Triple offer (spot and swap)26,6003,050
Purchase with right to sale22,90076,553
Other purchases100
Payments for the government2,60013,0001,843
Sale of foreign exchange 3/2,0581,8336,83512,6242,3383,1242,1212,0811,2642,4585,880
From right to sale2001004,214
For purchase of foreign currency bills10,800400184
From triple offer13,500746
Payments for the government14,1009,2004,459
Memorandum item:
Banking system foreign exchange reserves 4/3,1403,2993,3583,4263,3783,5594,1794,1303,9263,9334,185
Source: Bank of Slovenia.

Quarterly average daily balances.

In million of ECUs.

During the period for years 1995 and 1997; for 1996 figures reflect quarterly average daily balances. Numbers in italics are estimates for the total year for each instrument.

In millions of U.S. dollars at end of period.

Source: Bank of Slovenia.

Quarterly average daily balances.

In million of ECUs.

During the period for years 1995 and 1997; for 1996 figures reflect quarterly average daily balances. Numbers in italics are estimates for the total year for each instrument.

In millions of U.S. dollars at end of period.

67. In 1996, the BoS increasingly relied on the use of repurchase agreements to fine tune base money as well as the new triple offer and purchase-with-the-right-to-sell instruments to affect liquidity conditions in the market. All three instruments were used to affect the exchange rate, either by requiring the purchase of a certain amount of foreign exchange from enterprises by participating banks or through the determination of the future rate at which the BoS would purchase set quantities of foreign exchange. As the capital inflow pressure persisted throughout this period, the use of BoS foreign currency bills grew sharply.23 As Table 4 reveals, the average daily balance of these bills outstanding, which grew by 41 percent in 1996, surged by 78 percent in the first 3 quarters of 1997. In mid-1997, the BoS intervened heavily in the foreign exchange market with a slightly modified purchase-with-the-right-to-sell instrument to clear what it viewed as an excess of foreign exchange in the bank/bureau market.24 In addition, this effectively eliminated the segmentation between the bank/enterprise and bank/bureau market as evidenced by the convergence of rates between the two markets, (Figure 5, bottom panel).

68. The BoS has not changed the reserve requirements on tolar deposits since April 1995, and there have been only slight revisions to the existing set of foreign exchange cover regulations, which include a monthly foreign exchange minimum and net daily foreign exchange position.25 However, the authorities added a new foreign exchange regulation in July 1996, requiring banks to balance any additional liability to nonresidents beyond their position on July 31, 1996 with a corresponding increase in their claims against nonresidents. Also, the BoS introduced an obligatory non-interest-bearing tolar deposit requirement on drawdowns under nontrade related loans obtained abroad.26 By reducing liquidity on the foreign exchange market, these two new measures were seen as effective capital controls and prudential regulations.

D. Inflation Persistence and Monetary and Exchange Rate Policy

69. The sharp drop in inflation rates that occurred as stabilization took hold came to an end during 1995-97 as inflation remained in the range of 7-11 percent. During 1992-94, monthly inflation fell each year, averaging some 2.9 percent over the entire period. In 1995 and 1996 these rates stayed at approximately 0.7 percent—rising to 0.8 percent through the first three quarters of 1997. While much of the movement in prices over the last 2½ years can be traced to excessive wage growth (plus 20 percent in real terms), the 15 percent nominal effective depreciation of the tolar, and increases in controlled prices for petroleum products and electricity, other factors were at work as well.

70. Inflation inertia is a common experience in transition economies.27 The source of this inertia has been linked to traditional causes, such as excessive money and wage growth, but also to an underlying pressure for the real exchange rate to appreciate in the context of nominal stability, and to relative price adjustments coupled with downward price rigidities. This tendency toward real appreciation in transition economies has been tied to an initial undervaluation as well as to differential productivity growth between tradable and nontradable sectors (the Balassa effect). In Slovenia, this natural tendency for real appreciation was suppressed through exchange market intervention, which built up inflationary pressures in the economy. In this regard, Bole28 linked the rapid growth in nontradable prices to increases in controlled prices and to a “demonstration effect” that caused higher (productivity-induced) wages in the manufacturing sector to filter into service sector wages. Indeed, nontradable prices have risen by 33 percent over the last 2½ years, some 12 percentage points faster than tradable prices. Pervasive indexation mechanisms and aggressive wage-setting behavior also played a role in keeping inflation high. The degree of indexation was such that movements in the price indices quickly affected wages, pensions and monetary aggregates, which in turn fed back into inflation.

Box 4.Financial Deepening

Table 5 provides some basic indicators of financial deepening, including movements in velocity, various ratios of money stocks to GDP, and commercial bank interest rate spreads. While the slowdown in velocity and the growth in money to GDP ratios indicate some growth in money demand, these movements have been erratic. Also, during the last two years the growth of money demand has moderated, at least as evidenced by changes in velocity. Another indicator of financial deepening is the movement in the money multiplier, which shows the extent to which money instruments have replaced cash, and its relationship to inflation and commercial bank interest rates. Table 6 shows some basic regression results for measures of the money multiplier regressed against inflation and real commercial bank loan and deposit rates. Theory would suggest that deep financial systems with large money multipliers are correlated with low inflation, low real lending interest rates, and high real deposit rates. The regression results indicate that multipliers in Slovenia did move as expected with regard to interest rate spreads; however, higher inflation was associated with higher money multipliers. To some extent, the unexpected positive sign on inflation may be due to the TOM inflation indexation clause, which could provide a positive correlation between money and inflation. However, given the short time span and inherent time series difficulties of the data, these indicative results should be viewed carefully.

Table 5.Slovenia: Indicators of Financial Deepening
19921993199419951996
Monetary aggregates (in percent of GDP)
M1/GDP7.77.98.99.19.2
M2/GDP18.020.926.027.229.7
M3/ GDP30.635.639.241.844.9
Changes in velocity (in percent)
M1 based-1.6-11.1-2.2-1.8
M2 based-13.8-19.5-4.5-8.3
M3 based-13.9-9.3-6.3-6.9
Money multipliers (end of period)
M12.22.32.12.02.0
M25.16.06.16.16.5
M38.610.29.29.49.9
Real commercial bank interest rates
Deposit rates6.07.67.66.54.8
Lending rates23.720.416.913.911.7
Source: Bank of Slovenia and staff estimates.
Source: Bank of Slovenia and staff estimates.
Table 6.Slovenia: Financial Deepening Regressions 1/
Dependent VariableObservationsConstantInflationReal Interest Rates on Bank
LoansDepositsAdj. R2
Log M2 multiplier672.070.490.24-0.250.48
(47.7)(2.08)(1.99)(-4.96)
Log M3 multiplier672.360.500.19-0.120.38
(52.7)(2.03)(1.52)(2.57)
Source: Staff estimates.

OLS regressions using monthly data, 1992.1 to 1997.8; t-statistics are in parentheses.

Source: Staff estimates.

OLS regressions using monthly data, 1992.1 to 1997.8; t-statistics are in parentheses.

71. With growth in monetary aggregates fluctuating around a declining trend and velocity falling as the demand for money balances increased, it is not easy to ascertain the extent to which monetary influences are responsible for the stickiness of inflation. This is especially true, given the high degree of foreign currency substitution and high speed with which indexation causes changes in prices to affect monetary aggregates. However, as shown by Ross (1997)1 in his unrestricted vector autoregression study of Slovenian inflation, broader monetary aggregates were important determinants of inflation. Variance decompositions revealed that a majority of forecast error variance in inflation could be attributed to monetary innovations. Moreover, an examination of the impulse response functions showed that a one standard deviation shock to monetary aggregates affected inflation within two months. The study also found that changes in the exchange rate were an important determinant of inflation, reflecting a robust pass-through effect.

E. Capital Inflows and Sterilization

5. By 1995 the current account surpluses that had provided difficulties for monetary policy implementation in the early post-independence period had disappeared, as sluggish growth in Europe and real exchange rate appreciation pushed the current account into a small deficit. Foreign direct investment remained steady at approximately 1 percent of GDP, and borrowing by banks, enterprises, and households of some 3.2 percent of GDP provided a stream of capital inflows. The overall increase in official reserves was only 1.3 percent of GDP (US$235 million), as the uncovered interest rate differential turned negative late in the year owing to substantial cuts in the BoS refinancing rates and to the imposition of non-interest bearing deposit requirements on short- and medium-term external borrowing. With reduced pressure on the exchange rate, sterilization diminished, as seen by the slower growth of BoS bills and the slowdown in net foreign asset growth in broad money.

6. In 1996, a US$325 million Eurobond flotation in August pushed portfolio flows sharply upward.2 In addition, with progressive privatization, Slovenian equity shares became attractive to foreign investors; nonresidents purchased US$79 million of securities in 1996, of which US$68 million occurred in the last four months. As the uncovered interest rate differential turned positive again, encouraging further foreign borrowing by domestic enterprises and residents, the BoS tightened capital controls by strengthening the non-interest bearing deposit requirement on external borrowing and by introducing the balancing requirement on banks’ new foreign liabilities incurred after end-July 1996. Still, the BoS policy of resisting exchange rate appreciation through sterilized intervention by issuing foreign currency bills and purchasing foreign exchange with right-to-sell warrants increased official reserves by some US$587 million. The pressure on the exchange rate—as well as the use of sterilization instruments—was especially heavy in the fourth quarter, as foreign direct investment increased by over US$75 million and nonbank borrowing rose by US$144 million. Use of foreign exchange bills grew by one third in the fourth quarter alone and the purchase of foreign exchange rose substantially.

74. In an attempt to reduce capital inflows, the BoS required in February 1997 that nonresident portfolio transactions be channeled through custodial accounts with fully licensed domestic banks. With these accounts subjected to the balancing requirement for increases in liabilities to nonresidents, this restriction effectively raised the price of nonresident portfolio investments to the cost of a tolar loan.31 However, during the first seven months of 1997, the sharp increase in foreign direct investment and nonbank borrowing continued, rising by US$206 and US$197 million, respectively, as the uncovered interest rate differential remained positive for most of the year and political uncertainties receded with the formation of a new coalition government.32 While continued sterilized intervention allowed the exchange rate to remain inside of its unannounced narrow band, the stock of BoS bills soared by about 75 percent in the first seven months of the year. By late September, large sales of foreign exchange by holders of right-to-sell warrants, originally issued by the BoS to defend the tolar, caused the tolar-deutsche mark rate to depreciate.

F. Interest Rates and Indexation

75. The level of deposit and lending interest rates of commercial banks has remained high in real terms. These high real interest rates have fallen by a small margin despite substantial reductions in interest rates in the interbank market—highlighting the weakness of the monetary transmission mechanism. One of the main factors behind the high rates of return on tolar instruments has been the continued indexation of virtually all commercial bank financial contracts, which has tended to focus attention on the real component. Generally, commercial bank tolar instruments have been indexed to either of two revaluation clauses, based upon past inflation (TOM clause) or changes in the exchange rate (D clause).33

76. Since 1995 there have been two important changes in the application and calculation of these indexation clauses. First, in April 1995 the BoS de-indexed all instruments with less than one-month maturity, and began to offer such contracts in nominal terms. This policy was applied to commercial bank demand deposits in September of that year, providing an important signal that lower levels of inflation should allow nominal financial contracting at longer maturities. Second, the period employed in the calculation of the inflation revaluation clause, used to index bank time deposits in tolars, has been gradually extended backward so that by May 1997 an average of the preceding 12 months’ inflation was utilized, essentially smoothing out the month-to-month volatility in nominal rates and steadying the public’s inflation expectations.34 However, depositors have remained mostly in short-term instruments, quickly moving into foreign currency assets at the hint of financial instability.

77. An additional factor behind high domestic interest rates may be found in the uncompetitive banking environment, in which direct competition between banks for deposits has been limited by an officially sanctioned cartel agreement that has placed a cap on deposit rates. This agreement has been in effect since June 1995 and is modified yearly. The most recent amendment to the agreement in April 1997 reduced the underlying real component, to which the TOM and D clauses are added, and staggered the rate for various maturities of time deposits.35 While the net effect of the cartel agreement has been a gradual reduction in commercial bank interest rates, the agreement and indexation mechanisms have weakened the linkage between liquidity conditions in the interbank market and financial conditions faced by nonbanks. For example, real interbank rates fell by 9 percentage points from mid-1996 to mid-1997, but real lending and deposit rates of banks in dealings with their customers declined by only 1 percentage point. In addition, the interest rate agreement and the enactment of various prudential regulations that have promoted very high capitalization ratios, have slowed the reduction in spreads, which have remained in the 6-8 percent range since the beginning of 1995.36

V. external sector

A. Overview

78. Slovenia’s external sector has developed favorably during the transition period, with a current account surplus recorded in all years but 1995. The small deficit in 1995 reverted to a surplus in 1996 and the most recent developments suggest a balanced current account in 1997 (Figure 7). The current account surpluses and direct foreign investment reduced the need for foreign borrowing. Nonetheless, external debt increased as high domestic interest rates encouraged external borrowing and as the government assumed its share of the SFRY’s foreign debt. These events are reflected in an international investment position which was negative by some US$1.0 billion, or less than 6 percent of GDP, at the end of 1996 (see Appendix Table 54). Relatively high public saving—the general government budget has been kept broadly balanced—and a smaller real exchange rate appreciation than in other transition economies are the major reasons for the low debt ratio.

FIGURE 7SLOVENIA: Current Account, Trade, and Industrial Production

Source: Bank of Slovenia.

79. High domestic interest rates have attracted international capital throughout the 1990s and restrictions on capital movements have been imposed to prevent the appreciation of the exchange rate. Nevertheless, there has been sizable capital inflow pressure, which to a large extent has been met with interventions by the BoS. As a result the gross official foreign exchange reserves rose to some 17 percent of GDP (almost four months of import coverage) by the end of September 1997.

B. Current Account

80. The current account moved from a large surplus in 1994 into a small deficit in 1995, as the real appreciation that had taken place since late 1993 and the onset of recession in Europe took their toll on exports while imports were fueled by the rapid growth in private consumption. The surpluses in the services and income accounts—although increasing—were no longer sufficient to offset the growing trade deficit in 1995. Despite continued weak foreign demand, the trade balance, which had deteriorated every year since independence, improved for the first time in 1996, thanks to lower growth in domestic demand and real depreciation. With broadly unchanged balances in the services and income accounts, these developments were sufficient to bring the current account back into a small surplus.

Trade balance

81. The 1 percent growth in export volume in 1995 implied a considerable loss of export market shares as Slovenia’s trading partners’ import volume increased by more than 8 percent. Export market shares have fallen every year since independence, a development that was fostered by a modest erosion of competitiveness.37 A real effective depreciation (with unit labor costs in manufacturing used as deflator) of 3.3 percent from 1995 to 1996 could not reverse the market share loss, but it helped to raise export volume growth to 2.5 percent in spite of weaker foreign demand.38 Exports accelerated further in 1997: their volume was 10.7 percent higher in the first nine months of 1997 compared with the same period in 1996, reflecting mainly stronger growth abroad and the delayed effects of the 1996 depreciation. Very modest export price increases also suggest that exporters exercised restraint in an effort to regain lost market shares.

82. The strong growth in exports in 1997 contrasts with a very modest increase in manufacturing production (Figure 7). Manufacturing production, which constitutes the bulk of exports, increased by only 1.3 percent in the first nine months of 1997 compared with the same period in 1996. An explanation for this inconsistency would be weakened coverage of the industrial production index; it covers only enterprises with three or more employees and might thus miss the strong growth in the non-incorporated sector. However, other factors might explain some of the discrepancy, notably destocking and re-exports of imported goods to the successor countries of the former SFRY.

83. Regarding the direction and composition of merchandise exports, there were only small changes in 1995 and 1996 compared with the years immediately following independence, when the war in the former SFRY necessitated a redirection of trade flows (see Appendix Table 46). The share of exports to the EU increased to 67 percent in 1995 from 65.6 percent in 1994, an increase that was counterbalanced by a further decline in exports to the former SFRY. These changes were reversed in 1996 with the cyclical weakening in the EU while exports to the SFRY gathered pace with an easing of tensions in the region.39 Exports of machinery and transport equipment have remained the largest components of exports, with their share in the total being close to 35 percent in 1997. Exports of agricultural products have continued to slide, and there have been only small changes for other goods.

84. Import volume increased significantly faster than aggregate demand in the first years of independence, implying a demand elasticity for imports of more than 1.5 in 1993-95. When the boom in purchases of consumer durables cooled off in 1996, however, import growth slowed to the same pace as aggregate demand. The stronger export growth in 1997 also lifted import growth, since almost 60 percent of imports are intermediate goods.

85. In line with the strong growth in consumption of consumer durables, the import of machinery and transport equipment increased its share in total imports from 26.4 percent in 1992 to 33 percent in 1995, before stabilizing in 1996. Regarding the geographical origin of imports, there were only small changes, with the EU remaining the dominant supplier (about 67 percent of the total).

Services, income, and transfers

86. Tourism, which accounts for close to 60 percent of total services exports, has been the most dynamic part of services exports, as evidenced by an increase of some 62 percent in overnight stays of visitors from outside the former SFRY between 1992 and 1996.40 However, the number of tourists declined temporarily in 1995 in connection with the deterioration in competitiveness. In addition to overnight stays, the so-called shuttle trade (one-day tourists to Slovenia from neighboring countries attracted by lower prices, mainly on gasoline, cigarettes and gambling casinos) has gained in importance.41 To reduce this trade leakage, Austria introduced restrictions on cigarette imports by Austrian tourists abroad, while Italy allowed gas stations in the region close to Slovenia to lower their prices. Italy is considering further measures aimed at reducing tourism attracted by the Slovenian casinos.

87. Tourism is also the main item on the debit side of the services account and the one with the most rapid increase. Visits to Croatia, which had nearly ceased following the conflict in the early 1990s, increased by 35 percent in 1996. Still, they were only half of their level in 1990.

88. Positive income from labor has more than offset negative net investment income resulting from the net external debt, and the overall income balance has been in surplus since 1994. The surplus reached US$210 million in 1995 before falling to US$155 billion in 1996. Net transfers from abroad have shown a surplus since independence; since 1994 the surplus has been about half the size of the income surplus.

C. Capital Account42

89. With a successful record of stabilization and liberalization, and basic—albeit as yet incomplete—structural reforms, Slovenia has provided ample incentives for investors to supply substantial amounts of foreign capital for investment purposes. Given advantageous initial conditions, the historical outward orientation of the Slovenian economy, and the speed with which exporters reoriented the direction of their trade after the dissolution of the former SFRY, capital inflow pressures built up quite rapidly after independence in late 1991. From 1995 onward, this trend became particularly strong as the previously recorded large current account surpluses vanished and normalization of relations with external creditors enhanced credit ratings to the highest level among transition economies,43 providing an avenue for private external finance.44 A constant factor during this period has been high interest rate differentials that have continued to place pressure on the capital account as international capital flows, in search of high risk-adjusted rates of return, have been attracted to Slovenia. Over the last few years these capital inflow pressures have grown to such a degree that increasingly the authorities have resorted to capital controls, prudential regulations, and sterilized intervention to protect the macroeconomy and the financial system. These restrictions were aimed at reducing the vulnerability of Slovenia to quick reversals in short-term portfolio flows and avoiding dependence on short-term financing.

90. As shown in Table 7, in 1996 net capital flows increased to some 3.0 percent of GDP from -0.1 percent of GDP in 1992. Moreover, in the first seven months of 1997, these inflows surged to US$1,113 million or 6.0 percent of estimated annual GDP. While to a considerable extent these inflows can be attributed to an increase in foreign direct investment (FDI) and to the placement of government bonds in the Eurobond market, continued high domestic interest rates have induced many creditworthy enterprises and domestic banks to borrow in external markets. Restricted by BoS regulations which reduce the attractiveness of short-term loans, the majority of these borrowings have been conducted at longer maturities.45

Table 7.Financial Account Components
199219931994199519961997

Jan.-July
(In millions of US dollars)
Financial account, (incl. e/o)-294-85472765531,055
Financial account-13-95-904245571,113
Direct investment 1/113111131170180206
Portfolio investment 1/2/-93-33-14638226
Other investment-117-209-189267-261681
Assets-157-314-354-349-402501
Of which: Currency and deposits-139-384-231-182-388559
Of which: Banks-149-451-324-195-341535
Of which: Other sectors9679213-4724
Of which: Other assets 3/6-35-110-152161-15
Liabilities41104165615141180
Of which: Loans33161333572-12153
Of which: Banks 4/-92100208-178-30
Of which: Other sectors 5/5995157237241197
Of which: Other liabilities21-44-1574714024
(In percent of GDP)
Financial account, (incl. e/o)-2.3-0.70.31.53.05.7
Financial account-0.1-0.7-0.62.33.06.0
Direct investment 1/0.90.90.90.91.01.1
Portfolio investment 1/2/-0.10.0-0.2-0.13.41.2
Other investment-0.9-1.7-1.31.4-1.43.7
Assets-1.3-2.5-2.5-1.9-2.22.7
Of which: Currency and deposits-1.1-3.0-1.6-1.0-2.13.0
Of which: Banks-1.2-3.6-2.3-1.0-1.82.9
Of which: Other sectors0.10.50.60.1-0.30.1
Of which: Other assets 3/0.0-0.3-0.8-0.80.9-0.1
Liabilities0.30.81.13.30.81.0
Of which: Loans0.31.32.33.1-0.10.8
Of which: Banks 4/-0.10.00.71.1-1.0-0.2
Of which: Other sectors 5/0.50.71.11.31.31.1
Of which: Other liabilities0.2-0.3-1.10.30.80.1
Source: Bank of Slovenia and staff estimates.

Foreign direct investment and portfolio flows are mixed.

In June 1996 government bonds were issued in exchange for part of the NFA debt in the amount of US$465.4 million. Banks’ liabilities were decreased by the same amount. The data for 1996 includes Eurobond issue of US$325 million in July and about US$150 million in funds transferred in June 1996 from a fiduciary account in Luxemburg. In addition, 1997 includes a June Eurobond issue of approximately US$200 million.

Data in 1996 reflects release of fiduciary account funds related to NFA agreement.

Data in 1996 is substantially affected by the US$465 million reduction in banks’ liabilities.

Includes enterprise and household sectors.

Source: Bank of Slovenia and staff estimates.

Foreign direct investment and portfolio flows are mixed.

In June 1996 government bonds were issued in exchange for part of the NFA debt in the amount of US$465.4 million. Banks’ liabilities were decreased by the same amount. The data for 1996 includes Eurobond issue of US$325 million in July and about US$150 million in funds transferred in June 1996 from a fiduciary account in Luxemburg. In addition, 1997 includes a June Eurobond issue of approximately US$200 million.

Data in 1996 reflects release of fiduciary account funds related to NFA agreement.

Data in 1996 is substantially affected by the US$465 million reduction in banks’ liabilities.

Includes enterprise and household sectors.

Table 8.Debt Agreements
CreditorRatificationOriginal AmountOutstanding
Paris ClubUS$73.0 million
BelgiumAugust 22, 1997BEF 80.7 millionUS$0.5 million
SwedenMarch 14, 1997SEK 40.2 millionUS$2.0 million
FranceJuly 23, 1996FRF 158.1 millionUS$11.7 million
GermanySeptember 9, 1996DM209.3 millionUS$58.8 million
London ClubUS$602.6 million
NFA US$-1November 6, 1996US$426.3 millionUS$387.5 million
NFA DEM-2 1/November 6, 1996DM 93.8 millionUS$49.3 million
NFA US$-2 1/November 6, 1996US$219.9 millionUS$80.9 million
NFA DEM-1November 6, 1996DM161.7 millionUS$85.0 million
Source: Ministry of Finance

Prepaid by Slovenia in December 1996.

Source: Ministry of Finance

Prepaid by Slovenia in December 1996.

91. FDI net flows have shown steady improvement, growing from US$ 113 million in 1992 to US$180 million in 1996. In the first seven months of 1997, FDI flows already exceeded US$205 million or some 1.1 percent of GDP. On a cumulative basis from 1992 to mid-1997, FDI flows amounted to over US$910 million or some US$455 per capita—well above the average for most transition economies, but still low in relation to GDP. Despite the small domestic market, these flows have been linked to Slovenia’s political stability, comparatively advanced stage of development, and good prospects for EU membership. However, without the slow implementation of the privatization process, which relied on vouchers or employee-management buyouts with little foreign participation, FDI performance could have been significantly better.

92. Portfolio investment flows46 since 1995 have been dominated by the settlement of the New Financing Arrangement (NFA) restructuring agreement in June 1996 and by the floatation of two Eurobonds in 1996 and 1997. In addition, the listing of one large company on the Ljubljana Stock Exchange in late 1996 revitalized interest in the domestic equity market, especially from foreign investors. However, new capital controls and prudential regulations implemented by the BoS restrained both recorded portfolio flows and other inward flows. After Slovenia agreed in June 1995 that its share of the NFA debt would be 18 percent and formal agreement on the NFA restructuring agreement was reached in mid-1996, some US$465 million in government bonds (denominated in both U.S. dollars and deutsche marks) were issued for the portion of the NFA debt assumed by Slovenia.47

93. The main reasons for the issuance of Eurobonds were an absence of a sovereign risk benchmark in foreign currencies at any maturity, attractive interest rate differentials, and the small size of the domestic market. Therefore, the government issued its first Eurobond, denominated in U.S. dollars, in August 1996 for US$325 million. The second floatation, denominated in deutsche marks, occurred in June 1997 for approximately US$230 million (DM 400 million). Both issues where well received by the investing public, as evidenced by the strong oversubscription and the narrow spread over government bonds with equivalent maturities in the U.S. and Germany. Coupled with the NFA bond issue, portfolio flows in 1996 ballooned to US$638 million or some 3.4 percent of GDP. However, portfolio inflows in first half of 1997, which amounted to US$226 million, were curbed by the imposition of a requirement that nonresident portfolio transactions be channeled through custodial accounts with fully licensed domestic banks (see paragraph 74).

94. From a virtually nonexistent base in 1992, capital inflows in the form of bank loans have grown rapidly. Even after abstracting from an accounting adjustment on bank liabilities stemming from the NFA restructuring, new bank loans rose to US$251 million in 1996, from US$208 million in 1995. However, the growth in these liabilities in the second half of 1996 and through the first part of 1997 has been subdued by the imposition of the balancing requirement which froze banks’ net foreign positions as of July 31, 1996. Still, creditworthy enterprises have continued to tap the external loan market as seen by the steady flow of “other sector” loans of some US$240 million a year in 1995-96. These enterprise loans reached US$197 million in the first part of 1997. Finally, the capital account has been strongly affected by the sale of foreign exchange by commercial banks to the BoS. As a result, foreign currency assets of banks declined by US$535 million in the first seven months of 1997, reversing a long buildup of banks’ foreign currency reserves. This is due in large part to the direct intervention by the BoS in the foreign exchange market, both outright and as a result of issuing foreign exchange put options.

D. External Debt

95. Unsurprisingly for a newly independent country, Slovenia’s external indebtedness is moderate.48 Early current account surpluses and direct foreign investment inflows made recourse to foreign borrowing unnecessary. Nonetheless, highly positive uncovered interest rate differentials and government borrowing in the Euromarkets have led to a more rapid buildup of external debt since 1995. This buildup has been compounded as Slovenia normalized relations with the external creditors of the SFRY by reaching agreements on its share of the SFRY’s debt to bilateral official and commercial bank creditors.49 As a result, external debt, which had remained around 15 percent of GDP before 1995, rose from 15.8 percent of GDP in 1995 to 21.3 percent of GDP in 1996 (Statistical Appendix Table 55). The total debt outstanding at the end of 1996 amounted to just over US$4 billion and was owed in about equal parts by the public and private sectors. Less than US$50 million (1.2 percent of total debt) was short term. About 80 percent of total debt was owed to private creditors, more than half of it without Slovenian government guarantee. The remaining 20 percent was owed to multilateral (13.5 percent of total) and official bilateral creditors (5.7 percent of total). Reflecting the buildup of debt and the fact that all the assumed debt remained on its previously agreed amortization schedules, the debt service ratio has increased from 5 percent of exports of goods and nonfactor services in 1993-94 to 7 percent in 1995 and 9 percent in 1996 (Statistical Appendix Table 56). As amortization of assumed debt continues at a rapid clip—Slovenia did not renegotiate the terms of its SFRY debt—and only small amounts of former SFRY debt remain to be regularized, debt and debt service are not expected to increase substantially in 1997 and beyond.

Official bilateral creditors

96. Slovenia negotiated guidelines for the allocation of Paris Club debt in 1993, assuming responsibility for all of the debt of identified final beneficiaries located in Slovenia and 16.39 percent of the unallocated debt based on the IMF quota formula.50 Since then, bilateral negotiations have been concluded with most creditor countries (Austria, Belgium, France, Germany, Netherlands, Sweden, and the United States). Much of the delay in finalizing the bilateral agreements resulted from the Slovenian parliament’s insistence on a full accounting of all Paris Club-type debt of the SFRY before ratifying individual agreements. Seven agreements have been finalized (Belgium, Canada, France, Germany, Sweden, United States, and Spain),51 including ratification by the Slovenian parliament, as of October 1997. Data reconciliation was still in progress with Italy and Norway; bilateral agreements with Japan and Kuwait were completed but still needed parliamentary ratification. In the cases of Denmark, Switzerland, and the United Kingdom, there were debts that involved final beneficiaries located outside Slovenia. Slovenia proposed a solution whereby the Slovenian (bank) guarantor would “assist” in servicing such debt to the three countries concerned.

Commercial bank creditors

97. In June 1995, after protracted negotiations with the International Coordinating Committee (ICC), it was agreed that Slovenia’s share of the NFA debt would be 18 percent and that the “connected persons” would be excluded from the agreement.52 Two conditions had to be met to implement the agreement: (i) creditors holding at least two thirds of the outstanding NFA debt had to agree in principle and consent to the release of the obligors from the NFA’s joint and several clause, and (ii) the agreement had to be ratified by the Slovenian parliament. The parliament ratified the agreement in early 1996 and Slovenia was able to obtain the agreement of creditors holding more than two-thirds of the outstanding NFA debt. On June 11, 1996 the NFA restructuring agreement became effective.

98. After final agreement was reached in June, Slovenia issued Series 1 bonds to cover the unmatured debt obligations it had accepted from the NFA agreement and Series 2 bonds to cover obligations for past due amounts of principal and interest.53 The Series 2 bonds carried more onerous conditions, and Slovenia had the option to buy back at face value the Series 2 bonds at three call dates, the first of them on December 11, 1996. With the issuance of the bonds, the amount in the fiduciary account became freely usable again. Internally, one half of the debt has been allocated and will be serviced by its original beneficiaries. To that extent, there will be no budgetary cost.

99. Under the TDF agreement with the London Club, Slovenia assumed responsibility for some 9.9 percent of the US$300 million in liabilities (US$26.4 million) of commercial banks of the SFRY. This amount, which had fallen due in 1993, was paid in full by the Slovenian commercial banks in June 1996. Finally, the third agreement (API) pertained to an agreement by the National Bank of Yugoslavia (NBY) with commercial bank creditors for exit bonds which mature in 2008 and which amount to approximately US$80 million. Chemical Bank, as the agent of the ICC, notified the bondholders in March 1996, after Slovenia had made its binding offer to the NFA creditors. Negotiations with representatives of the bondholders under the API agreement have been slowed by Slovenia’s inability to obtain full disclosure of the bondholders’ identity so as to ensure that “connected persons” can be excluded from any agreement.

E. Trade System

100. Slovenia has a relatively liberal trade regime. It became a founding member of the World Trade Organization (WTO) on December 3, 1994 and has implemented all associated tariff and other obligations, with the exception of those related to agricultural products. In 1996, 98 percent of imports were free from quantitative restrictions compared to 78 percent in 1990. To comply with the provisions in the GATT, the General Agreement of Trade and Services (GATS), and the WTO, and to facilitate and streamline the tariff regime and bring it closer to EU legislation, a new Customs Law and Law on Customs Tariff became effective on January 1, 1996. The average tariff was set at 10.7 percent, down from 11.7 percent, with an effective rate of protection estimated at 7.09 in 1997.54

101. International integration, in particular with Europe, has been a main objective of Slovenia’s trade and foreign policy. The European Free Trade Agreement (EFTA) was signed in June 1995 and the country joined the Central European Free Trade Association (CEFTA) in January 1996. The EFTA agreement is asymmetric in favor of Slovenia but it is of minor importance as trade with EFTA countries constitutes only 1.7 percent of Slovenia’s trade in goods. The CEFTA countries cover a larger share of Slovenia’s trade (4.9 percent of total exports and 6.7 percent of total imports).55 The agreement encourages intra-regional trade, with the objective of achieving a free trade area by 2001. Trade in industrial products is almost free with the Czech Republic and Slovakia, while there are some remaining restrictions on steel and cars with Poland and Hungary. In September 1997, Slovenia accepted to gradually liberalize agricultural trade with other CEFTA countries by the year 2000, after originally seeking a more gradual liberalization extending until 2001.

102. The EFTA agreement and CEFTA participation are steps in a process with EU membership as the ultimate target. An association agreement (Europe Agreement) with the EU was signed in June 1996, but ratification by the Slovenian parliament was held up until July 1997 due to resistance against granting foreigners the right to buy land. The Europe Agreement still awaits approval from all the EU countries’ parliaments. Pending this ratification, an interim agreement, which covers all trade and trade related fields, entered into force in January 1997. In July 1997 the European Commission recommended that the EU should begin membership negotiations with Slovenia and four other applicant countries early in 1998.56 This recommendation was accepted by the European Council at its December meeting in Luxemburg. An assessment of the economic impact of EU membership is provided in Chapter IV of the accompanying selected issues paper.

103. Slovenia has also sought bilateral trade agreements with a number of other countries in order to diversify its trade. Slovenia now has interim free trade agreements with Estonia, Latvia, and Croatia and expects to complete similar arrangements with Lithuania and Bulgaria in the near future. Trade with FYR Macedonia is not yet fully open. Trade agreements with Israel and Turkey are being prepared as well.

VI. structural reforms

A. Labor Market Reform

104. New laws, which address the structural rigidities of the labor market and bring Slovenian legislation closer to the EU norms, were presented to the parliament in October 1997 and are expected to enter into force in mid-1998. In general, the new laws would improve the flexibility of the Slovenian labor market through lowering hiring and firing costs and increasing job-search incentives for the unemployed. Difficult discussions were held with the social partners, in particular on the issue of unemployment insurance; neither side supported the present text. In the end, the authorities yielded to the demands from unions and accepted a normal parliamentary procedure (three readings and hearings with outside groups between each reading) instead of the fast-track procedure they had originally sought.

105. The new Labor Law defines the minimum rights and contractual agreements between the employee and the employer.57 Collective agreements will hereafter be optional, but if more than a critical proportion of the eligible labor force agrees to a collective agreement, the government has the option to declare it generally valid. The notice period for dismissals will be shortened (to 1-5 months, depending on the work history of the employee; shorter notice periods can be agreed in smaller enterprises) and severance pay will be lowered.

106. Regarding unemployment compensation, the draft Law on Employment and Insurance in Cases of Unemployment leaves replacement rates unchanged both for unemployment benefits and for unemployment assistance (that is, means-tested compensation received after the unemployment benefits have been exhausted). Unemployment benefits are paid for the first three months at 70 percent of the average monthly wage in the three months prior to unemployment and at 60 percent thereafter. Unemployment assistance amounts to 80 percent of the guaranteed wage.58 The new law proposes a reduction in the maximum duration of benefits from 24 months to 12 months, but an increase in the maximum duration of assistance from 6 months to 12 months. The length of payment periods is dependent on many factors, including the employment history. To be eligible for unemployment compensation under the new law, a person must have worked 9 of the last 12 months, compared with 9 consecutive months or 12 out of 18 months with interruptions under the current regulations. With regard to changes in means testing, it has still not been decided what types of income and wealth would be included. The requirements regarding the unemployed person’s availability for work will be strengthened in the new law and this will be followed up by stricter monitoring of the unemployed and the enterprises, for instance, through tax control.

107. The new law will be accompanied by more active labor market policies. Young people will, to a larger extent than before, be forced into adult education while public work for the unemployed will be increased by 200-300 percent (partly in the form of public infrastructure work). These jobs will be combined with training to improve the participants’ employment chances after termination of the public works projects. A thousand new jobs will be earmarked for youths, 16-21 years old. Subsidies in the form of lower employers’ social security contributions will be given to those who employ first-time job seekers, the unemployed who are older than 50 years, and the long-term unemployed. Employers’ contributions will be reduced by one half in the first two years and by one quarter thereafter.

B. Enterprise Privatization and Restructuring

108. While ownership transformation of the socially-owned enterprises is almost complete, the privatization of state assets has hardly begun. At the beginning of September 1997 1,350 privatization programs—out of a total of 1,415 socially-owned enterprises—had been approved while 56 more where under consideration. As a result, the private sector accounted for about 55 percent of output and employment in 1996.59 According to a new law on the completion of ownership transformation, which was expected to be approved by end-1997, remaining firms will be transferred to the Slovene Development Corporation (the successor to the Slovene Development Fund) within six months of the entering into force of the new legislation. The Slovene Development Corporation will manage the privatization of the firms. Depending on the condition of the firm, privatization might take several years, but the new law implies that socially-owned enterprises will cease to exist by mid-1998. The privatization of state assets is less advanced and the approval of a planned general law on privatization of state assets has been delayed—mainly because of procedural reasons. Meanwhile, the government has proceeded with separate laws regulating the privatization of the casinos, the steel mill, and the insurance companies. The privatization of the two state-owned banks is under preparation and next in line would be the government’s shares in the port, the airport and the petroleum company. The government is considering to provide state assets to cover the so-called privatization gap, estimated at about SIT 130 billion or about 5 percent of GDP.60

109. Regarding corporate governance, the main changes seem to be the result of ownership concentration. A recent poll suggests that the number of shareholders had dropped by 12 percent from its peak value. In addition, changes in the top management of some of the largest privatized companies also suggest that shareholders have become more assertive. The exemption of privatization shares from capital gains taxation should promote further ownership concentration but there are still restrictions in place limiting the sales of shares. Shares purchased on credit cannot be sold until the credit is repaid for a period of up to five years, a restriction that was introduced out of concern that a large amount of shares might be dumped on the secondary market at an early stage of the privatization process. A more detailed description and analysis of the restructuring and privatization process is provided in Chapter I: “Privatization and Corporate Governance in Slovenia: The Shift from Comrade to Shareholder” in the accompanying selected issues paper.

C. Financial Sector Reform

Overview

110. The financial system consists of 28 banks (12 with some foreign participation, 4 with majority foreign ownership and 3 state-owned banks), 7 savings banks, 71 savings cooperatives, 10 insurance companies, 2 re-insurance companies, and a number of pension funds, mutual funds (including the privatization investment funds), foreign exchange bureaus, stock brokerage firms, the Ljubljana stock exchange, and the Ljubljana commodity exchange.61 The BoS is the supervisor of banks, while many nonbank financial institutions are supervised by the Ministry of Finance.62 Banking activity is dominated by a few big banks, with the top three holding over 50 percent of all banks’ assets. While there have been a couple of mergers and one bank failure in 1996-97, the number of banks has remained relatively stable as overall profitability has improved. The financial rehabilitation of two large state-owned banks was completed in 1997, and cooperation among banks has become closer with the formation of four banking groups which may be the precursors of future mergers.

The payments system

111. A carryover from the former SFRY, the payments agency (APPNI) continues to execute domestic payments between legal entities, and between legal entities and natural persons.63 Banks handle domestic transactions between natural persons and all international payments for both legal entities and natural persons. Through a broad network of units throughout the country, the APPNI manages accounts for approximately 65,000 legal entities and performs, on average, around 600,000 transactions a day. The APPNI also provides a statistical function in collecting data on the financial performance of individual legal entities and plays a significant role in the payment and distribution of tax revenue. Noncash payments conducted by APPNI through giro accounts form the lion’s share of all payments in value terms.64

112. Since 1992, the financial authorities have been trying to reform the payments system to conform to EU standards. The main objectives of this reform are to: (i) modernize the clearing of payments through the implementation of a real time gross settlement (RTGS) system and (ii) replace the antiquated APPNI with a clearing house owned by the commercial banks. While there have been many delays in implementing this reform, it appears that progress has finally been made in four areas within the last two years. First, the tax collection function of the payments agency was transferred, effective July 1, 1996, to the newly established Tax Administration Office in the Ministry of Finance (see Section III.B). Second, in early August 1996, the audit function for the ownership transformation of socially-owned enterprises was transferred to the new Agency for the Audit of Ownership Transformation of Companies. Third, banks’ minimum reserve management was transferred to the BoS in March 1997. Finally, the bidding for the RTGS system was completed in late 1996 and both hardware and software have recently been installed.65

Bank profitability and bank soundness

113. The profitability of Slovenian banks has been increasing in the last few years. This is particularly true of two of the three largest banks, Nova Ljubljanska Banka (NLB) and Nova Kreditna Banka Maribor (NKBM), which until recently had been undergoing rehabilitation. In 1996, banks in Slovenia realized a pretax profit of almost SIT 18.3 billion, a gain of 33.3 percent from 1995. This was on top of a threefold increase in pretax profits in 1995. In addition, only two banks experienced a loss in 1996. The average return on assets (RoA) steadily increased from 0.4 percent in 1995 to 1.1 percent in 1996 and to 1.5 percent by mid-1997, with some banks recording a RoA as high as 2.4 percent. Moreover, despite high capitalization, the average return on equity (RoE) improved to 13.9 percent in mid-1997, up from 9.1 percent in 1995.66

114. In general, higher profitability has stemmed from a combination of improved earnings from higher interest rate margins and restraint on operating expenditures. The interest rate margin67 has risen steadily over the last few years, from 3.7 percent in 1994 to 4.9 percent in 1995 and to 5.6 percent in 1996. The main factors behind this increase are; (i) a considerable increase in both short- and long-term loans (especially to consumers), (ii) an increase in sight deposits, whose interest costs fell with the introduction of nominal contracts, (iii) a slight increase in short-term deposits as real deposit rates fell under successive interest rate cartel agreements, and (iv) an increase in foreign currency liabilities as the tolar exchange rate remained relatively stable.68 Even though operating costs fell by 0.2 percent in 1996 to 3.6 percent of average assets, they are still high in relative terms. Labor costs account for slightly more than half of these costs.

115. Along with better profitability, the quality and soundness of bank assets continued to improve. Assets classified in the A-category (with on-time payments) have increased and reached almost 90 percent of total loans in 1995, up from some 80 percent in 1993, whereas the shares of all other credit categories have decreased.69 Moreover, the number of bad loans as a percentage of total assets has decreased over the last two years. In the first half of 1997, four banking groups were formed, in what may be the first step towards a complete merger.70 These banking groups contain a special provision that stipulates attainment of a minimum return on equity (RoE) as a condition for the smaller banks in the group to remain separate; if the minimum RoE threshold is not achieved, the smaller bank will be fully merged into the larger bank.

Bank supervision

116. The BoS has taken a value at risk (VAR) approach to commercial banking supervision and has attempted to come as close as possible to the Basle Accords, except for home/host supervision of foreign banks.71 The authorities believe that banking supervision has improved in the last few years through the VAR approach, which has allowed them to identify—and focus on—the riskier operations of banks. As part of its four-year strategic plan to strengthen bank supervision, the BoS has finished full-scope on-site supervision of nearly all banks and is now familiar with the various risks faced by different banks.72 In spite of the recorded improvement in the quality of banks’ assets, the BoS believes that banks have continued to be too optimistic about the quality of their assets and may need to raise their provisions against loans, which represent 90 percent of bank portfolios. Also, as banks have begun to use more sophisticated derivative instruments, the supervision department of the BoS has attempted to upgrade its expertise in these areas.

117. In order to improve the classification of assets in bank portfolios, the supervision department of the BoS has changed the treatment of mortgage collateral. Until end-1996, loans collateralized with mortgages had been considered class A assets that did not require provisioning. Since early 1997, however, banks have been allowed to classify their mortgage-backed loans only one class above the credit risk evaluation of the borrower. To qualify for this treatment, the mortgage has to be both registered and insured. Banks were given until the end of 1997 to comply with the tightened requirement. Overall, this new provision has tended to slow down the reduction of lending rates and the growth of bank profits this year.

118. Banks continue to be overcapitalized, with the average capital adequacy ratio (CAR) at end-1995 at some 22 percent, well above the 8 percent minimum requirement. To some degree, this overcapitalization stems from the high capital requirements set by the BoS for banking licenses. Slovenian banks, on average, appear to be well provisioned against non-performing loans and assets, with actual provisions above those required under international standards.73 In addition, the BoS has started to move toward EU standards on banks’ open foreign exchange positions. The goal is a limit on open foreign exchange positions of 20 percent of capital (including off-balance sheet items). The banks will be allowed to reduce their open foreign exchange position gradually, quarter by quarter, over a five-year period. Currently, limits are imposed only on actual positions; off-balance sheet items will be included later. At present, only two banks are outside the 20 percent limit.

Bank rehabilitation

119. Bank rehabilitation under the auspices of the Bank Rehabilitation Agency (BRA) was successfully completed in 1997. The BRA was originally set up by governmental decree in October 1991 to restructure three banks, Ljubljanska Banka (LB), Kreditna Banka Maribor (KBM), and Komercialna Banka Nova Gorica (KBNG), which held over 65 percent of banking sector assets.74 These banks became distressed because of non-performing loans to Slovenian and other ex-SFRY enterprises and because of the loss of foreign currency assets deposited at the NBY. After the initial step of exchanging non-performing assets and contingent liabilities of these banks for bonds issued by the BRA, the two remaining banks75 (LB and KBM) were split into two, with the old banks retaining all claims and liabilities to the former SFRY; the new banks were renamed Nova Ljubljanska Banka (NLB) and Nova Kreditna Banka Maribor (NKBM).

120. In November 1995, with growing concerns over serious currency and maturity mismatches in the two banks’ balance sheets, the original 30-year deutsche mark-denominated BRA bonds were exchanged for tolar denominated government bonds of shorter, staggered maturities. However, the lower interest rates applied to these bonds reduced profitability, which required the two banks to continue to avail themselves of the special BoS refinancing facilities as well as the interbank market for liquidity purposes. In June 1996, a NFA restructuring agreement was reached between Slovenia and foreign private creditors regarding the debts of the former SFRY (see Section V.D). This agreement, negotiated with the London Club of creditors, released Slovenian banks in rehabilitation from the “joint and several liability” clause between ex-SFRY debtors and foreign private creditors—substantially improving Slovenia’s credit rating.76

121. On June 7, 1997, the BoS determined that both banks had fulfilled the conditions set for ending the rehabilitation process. These requirements were: (i) a solid liquidity position, (ii) the ability to implement monetary policy, (iii) the maintenance of statutory capital, (iv) an adjustment of the volume of banking operations so that statutory capital reaches at least 8 percent of risk-adjusted total and off-balance sheet assets, (v) the abidance by prudent provision measures and of restrictions on individual credit exposure, and (vi) the observance of investment ceilings on land, buildings, equipment, and equity stakes in banks and nonbank organizations.77 On July 16, the BoS officially concluded the rehabilitation process and ended the special treatment afforded to these two banks. Given the ultimate goal of privatizing them, procedural legislation is being drawn up to determine the exact process. An important concern has been the amount of foreign participation that would be allowed in the two banks.

Financial legislation

122. Revisions have been pending for some time on an array of financial system legislation, including new laws on banking, foreign exchange, securities markets and investment and management companies, insurance companies, and electronically issued securities.78

123. Regarding the new Banking Law, the two primary objectives are to upgrade Slovenian prudential standards to EU norms and to further open up the banking sector to foreign competition. The law includes the following main provisions: (i) a more precise definition of (exclusive) banking services and other financial services that also may be performed by banks; (ii) strengthening of financial responsibility of management and the Board of Directors;79 (iii) strengthening of minimum capital requirements to ECU 5 million;80 (iv) limits on overall exposure to any one client and insiders; (v) consolidated banking group supervision by the BoS; (vi) provisions to strengthen the ownership structures; (vii) granting of permission for foreign branch banking; and (viii) creation of a bank financed deposit insurance scheme. The deposit insurance scheme would be in line with EU directives, with one exception, and would provide insurance up to ECU 20,000 per account. The one difference between the proposed deposit insurance scheme and EU practice is that enterprise accounts and branches of foreign banks would not be under this umbrella. Enterprise accounts are to be excluded because the BoS feels that there are still too many financial difficulties with enterprises and that the enterprises and banks have had a history of close insider relationships, which could create moral hazard problems.

124. The basic goals of the new Foreign Exchange Law are to consolidate legislation regarding foreign exchange transactions (between residents and nonresidents as well as among residents) and to meet the requirements of the EU Accession Agreement regarding harmonization of foreign exchange legislation.81 The main issue is the speed of full capital account liberalization, especially regarding portfolio inflows. Slovenia plans to follow a gradualist approach—while the new law provides for immediate liberalization of foreign direct investment (FDI) and long-term credit operations with special emphasis on opening up outward direct investment and credit operations, liberalization of portfolio inflows will be extended over four years.82 Adoption of the new law will dispose of the 40 percent interest-free deposit requirement on all drawdowns of nontrade-related credits, as required by the EU Accession Agreement. However, the purchase of portfolio securities will continue to go through custodial accounts. Liberalization of portfolio investment will be particularly cautious on the outflow side, with banks and domestic brokers given priority. While the placing of domestic securities abroad will be liberalized, only top quality foreign securities, mainly from OECD countries, will be permitted to be sold domestically. In addition, the new law will abolish the differentiation in foreign exchange regulations between legal entities and natural persons and provide guidelines using the normal separation of transactions between residents and nonresidents, and among domestic residents. Coupled with the removal of required repatriation of export proceeds, the elimination of the distinction in treatment between households and enterprises should consolidate the unification of exchange rates in the bank/enterprise and cash markets.

125. The new Securities Markets Law and the proposed amendment to the 1994 Insurance Companies Law have yet to fulfill the government’s procedural requirements. The Securities Markets Law will codify regulation of brokerage houses and the Ljubljana Stock Exchange (LSE), which have operated without government regulation. The main objective is harmonization of securities law with EU standards. One of the most difficult challenges in creating this proposed law was the definition of “public” versus “non-public” companies. It was decided that companies that went through employee buyouts were not “public” companies that could be traded on the stock exchange, unless they went through full disclosure. Only companies that produce a prospectus and accept full disclosure can be considered “public,” with a listing on the LSE. These companies will also receive the protection of the recently passed Law on Takeovers. At present, there is a 24 percent ceiling on nonresident participation in brokerage houses; a proposal is under review to allow branching of foreign brokerage houses.83

126. The Insurance Companies Law of 1994 imposed international accounting standards, solvency ratios, auditing procedures, and other modernization provisions to the insurance market. The market remains small and concentrated, with only 10 insurance companies84 and 2 re-insurance companies. Its premium volume is approximately US$800 million, or about 8 percent of banking assets (4.4 percent of GDP). The top insurance firm (Triglav) constitutes 60 percent of the market; foreign branches are not allowed. A working group in the Ministry of Finance is trying to fine-tune the 1994 law through: (i) separating life and non-life lines of insurance; (ii) strengthening prudential standards and bankruptcy procedures; and (iii) allowing insurance companies to establish pension funds and annuity contracts. Foreign branches of insurance companies would be allowed to enter into the insurance market in 3-4 years and the ban on insurance and re-insurance abroad would be lifted gradually.

APPENDIX
Table 9.Slovenia: Aggregate Demand and Supply, 1992-96
19921993199419951996

Est.
(Percentage changes, in real terms)
Demand and supply
Total aggregate demand-12.68.17.47.12.9
Exports of goods and nonfactor services-23.50.610.51.02.5
Total domestic demand3.213.35.6113.2
Private consumption3.613.93.89.22.6
Public consumption1.75.32.12.52.2
Gross fixed investment12.910.712.517.16.9
Imports of goods and services-22.917.610.711.61.3
GDP-5.52.85.34.13.1
Agriculture, forestry and fishing-6.7-4.24.21.61.7
Industry-11.9-3.16.02.92.2
Services0.84.84.34.43.5
Real net wages and other remunerations (average)-2.916.212.17.67.9
(In percent of GDP)
Gross fixed investment18.618.819.721.222.5
Gross national savings24.620.624.523.223.7
Source: Institute of Macroeconomic Analysis and Development.
Source: Institute of Macroeconomic Analysis and Development.
Table 10.Slovenia: Gross Domestic Product by Sector, 1992-96
19921993199419951996

Est.
(In millions of tolars, current prices)
Agriculture, hunting, forestry, and fishing52,88064,71673,86887,56298,583
Mining and quarrying17,61814,68124,85528,27628,619
Manufacturing288,613371,638487,912550,112617,362
Electricity, gas, and water supply20,17134,55350,64257,13663,303
Construction38,69858,85876,27196,949123,474
Wholesale and retail trade95,791139,346191,413228,364256,151
Hotels and restaurants22,67136,50948,43757,81968,957
Transport and communications66,48997,909121,179147,446170,357
Financial intermediation32,04349,83953,22676,98792,779
Real estate and other business services95,260133,606182,243225,942259,216
Public administration and defense40,40561,76881,902102,459117,504
Education45,01767,90587,206107,692122,584
Health and social work48,14863,91484,533102,104119,485
Other community and personal services44,92465,33858,75266,59577,586
Total value added892,1421,235,3401,589,4841,891,4962,160,833
Plus: Taxes on production and on imports150,962229,385306,636377,964444,708
Minus: Subsidies25,13929,63043,12348,00152,873
GDP1,017,9651,435,0951,852,9972,221,4592,552,668
(In percent of GDP)
Agriculture, hunting, forestry, and fishing5.24.54.74.44.2
Industry and construction35.933.433.932.431.5
Industry32.129.329.627.926.8
Construction3.84.14.24.44.7
Services48.249.949.050.449.4
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development.
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development.
Table 11.Slovenia: Cost of Structure of Gross Domestic Product, 1992-96
19921993199419951996

Est.
(In millions of tolars, current prices)
1.GDP1,017,9651,435,0951,852,9972,221,4592,552,668
(1=2+3-4+5)
2.Compensation of employees652,814861,9371,074,4941,271,6991,400,005
Wages and salaries545,185718,687902,0401,070,0101,213,414
Employers’ social security cont.107,629143,250172,454201,689186,591
3.Indirect taxes150,962229,385306,636377,964444,708
Taxes on products and import duties149,212224,825298,936368,834418,577
Other taxes on production1,7504,5607,7009,13026,131
4.Subsidies25,13929,63043,12348,00152,873
5.Gross operating surplus and Gross mixed income (5=6+7) 1/239,328373,403514,990619,797760,828
Of which:
6.Gross operating surplus139,301215,616316,774380,932485,599
Consumption of fixed capital190,336222,401280,387330,634415,237
Net operating surplus-51,035-6,78536,38750,29870,362
7.Gross mixed income100,027157,787198,216238,865275,229
Consumption of fixed capital12,58922,97733,44238,57645,528
Net mixed income87,438134,810164,774200,289229,701
(In percent of GDP)
Compensation of employees64.160.158.057.254.8
Indirect taxes14.816.016.517.017.4
Subsidies2.52.12.32.22.1
Gross operating surplus and Gross mixed income23.526.027.827.929.8
Of which:
Gross operating surplus13.715.017.117.119.0
Consumption of fixed capital18.715.515.114.916.3
Net operating surplus-5.0-0.52.02.32.8
Gross mixed income9.811.010.710.810.8
Consumption of fixed capital1.21.61.81.71.8
Net mixed income8.69.48.99.09.0
Sources: Statistical Office and Institute of Macroeconomic Analysis and Department.

Income from non-incorporated businesses.

Sources: Statistical Office and Institute of Macroeconomic Analysis and Department.

Income from non-incorporated businesses.

Table 12.Slovenia: Supply and Use of Resources, 1992-96
19921993199419951996

Est.
(In millions of tolars, current prices)
1.Gross domestic product1,017,9651,435,0951,852,9972,221,4592,552,668
2.Factor income from the rest of the world5,67412,98934,81743,63956,853
3.Factor income to the rest of the world13,09518,79820,93126,22835,872
4.Gross national product (4=1+2-3)1,010,5431,429,2861,866,8832,238,8692,573,650
5.Current transfers from the rest of the world12,23523,20430,24429,61028,021
6.Current transfers to the rest of the world3,81215,05018,61319,02219,628
7.Gross national disposable income (7=4+5-6)1,018,9661,437,4401,878,5142,249,4572,582,042
8.National final consumption768,1241,141,8551,423,7781,735,1271,978,154
Private consumption Government consumption561,120839,2491,049,4901,286,9761,463,795
Government consumption207,004302,606374,288448,151514,359
9.Gross national saving (9=7-8)250,842295,585454,736514,330603,888
10.Current account balance71,82017,95373,435-3226,555
11.Gross capital formation (11=9-10)179,022277,632381,301514,652597,333
Of which:
Gross fixed capital formation189,608270,237365,964470,891573,863
Change in stocks-10,5867,39515,33743,76123,470
12.Consumption of fixed capital202,925245,378313,829369,210460,765
13.Net capital formation (13=11-12)-23,90332,25467,472145,442136,568
(In percent of GDP)
Gross national product99.399.6100.7100.8100.8
Gross national saving24.620.624.523.223.7
Gross capital formation17.619.320.623.223.4
Net capital formation-2.32.23.66.55.4
Current account balance7.11.34.00.00.3
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development.
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development.
Table 13.Slovenia: Expenditure on Gross Domestic Product, 1992-96
19921993199419951996

Est.
(In millions of tolars, current prices)
Consumption768,1241,141,8551,423,7781,735,1271,978,154
Private561,120839,2491,049,4901,286,9761,463,795
Households548,668823,4591,032,4191,262,6231,438,302
Nonprofit institutions12,45215,79017,07124,35325,493
Government207,004302,606374,288448,151514,359
Investment179,022277,632381,301514,652597,333
Gross fixed investment189,608270,237365,964470,891573,863
Change in stocks-10,5867,39515,33743,76123,470
Foreign balance70,81915,60847,918-28,320-22,819
GDP1,017,9651,435,0951,852,9972,221,4592,552,668
(In percent of GDP)
Consumption75.579.676.878.177.5
Private55.158.556.657.957.3
Households53.957.455.756.856.2
Nonprofit institutions1.21.10.91.11.0
Government20.321.120.220.220.1
Investment17.619.320.623.223.4
Gross fixed investment18.618.819.721.222.5
Change in stocks-1.00.50.82.00.9
Foreign balance7.01.12.6-1.3-0.9
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development.
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development.
Table 14.Slovenia: Income and Expenditure of Households, 1992-96 1/(In millions of tolars, current prices)
19921993199419951996

Est.
Total income1,048,7361,443,3551,857,4702,188,7102,440,594
Compensation of employees652,814861,9371,074,4941,271,9691,422,281
Wages and allowances (net)369,355485,062622,566739,556852,477
Taxes on employees’ income67,30487,888110,340132,830156,109
Employees’ social contributions108,526145,737169,466199,470227,183
Employers’ social contributions107,629143,250172,122200,113186,512
Operating surplus of self-employed156,544230,808303,276361,978397,090
Social benefits194,582285,642374,205437,439494,079
Imputed social benefits5817729251,0411,142
Actual interest received22,34117,84726,26827,02428,200
Income from intangible assets5,6468,38310,51112,42714,314
Accident insurance claims8,09022,54027,94634,42237,761
Private international transfers3,1386,53110,10011,48610,551
Miscellaneous transfers5,0008,89529,74530,92435,176
Deductions374,196512,284634,955741,489817,780
Actual social contributions216,155288,987341,588399,583413,695
Imputed social contributions41,63755,44171,62686,39397,617
Net accident insurance premiums14,00632,26937,00046,05350,521
Current taxes on income and wealth75,572102,695137,226157,611184,653
Actual interest paid12,55514,37325,17027,38343,800
Private international transfers5,9506,6768,5479,9919,531
Compensation of employees to ROW1,7781,6621,5053,113
Miscellaneous current transfers8,32110,06512,13612,97014,850
Disposable income674,540931,0711,222,5151,447,2211,622,814
Gross saving125,872107,612190,096184,597212,094
Private consumption548,668823,4591,032,4191,262,6241,410,720
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development
Sources: Statistical Office and Institute of Macroeconomic Analysis and Development
Table 15.Slovenia: Structure of Gross Fixed Investment, 1992-96
19921993199419951996

Est.
(In millions of tolars, current prices)
Total gross fixed investment189,608270,237365,964470,891573,863
Enterprises138,022193,181263,660344,623
Private sector 1/51,58677,056102,304126,268
Productive investment116,199163,011235,685321,295
Enterprises99,323139,477198,019267,502
Private sector 1/16,87623,53437,66653,793
Nonproductive investment73,409107,226130,279149,596
Dwellings35,71052,02263,13873,869
Other nonproductive investment37,69955,20467,14175,727
(Annual percentage change, at constant prices)
Total gross fixed investment-12.910.712.517.16.9
Enterprises-12.79.916.920.6
Private sector-13.217.213.813.9
(In percent)
Total gross fixed investment100.0100.0100.0100.0
Socially- and state-owned enterprises73.671.972.873.5
Private sector26.428.127.226.5
(In percent of GDP)
Total gross fixed investment18.618.819.721.222.5
Enterprises13.613.514.315.5
Private sector5.15.45.55.7
Sources: Statistical Office; and Institute of Macroeconomic Analysis and Development.

Private sector includes: craftsmen, farmers, lawyers and cultural workers, as well as households.

Sources: Statistical Office; and Institute of Macroeconomic Analysis and Development.

Private sector includes: craftsmen, farmers, lawyers and cultural workers, as well as households.

Table 16.Slovenia: Investment in Economic Infrastructure, 1992-96
19921993199419951996

Est.
(In millions of tolars, current prices)
Economic Infrastructure24,38748,73775,11591,425130,237
Energy sector7,69712,32422,38922,74728,982
Electricity supply6,70911,04821,24021,15122,343
Other9881,2761,1491,5966,639
Transport infrastructure12,41426,54940,40256,97891,355
Railways1,3152,5786,1958,30711,355
Air traffic3167678477171,999
Roads, motor-ways1,8578,03614,92529,33347,263
PTT services7,02412,49116,430
Post3,5006,200
Telecommunications12,18320,000
Other1,9022,6772,0052,9384,538
Water supply233299213200800
Public utilities4,0439,56512,11111,5009,100
(In percent of gross fixed investment)
Economic Infrastructure12.918.020.519.422.7
Energy sector4.14.66.14.85.1
Electricity supply3.54.15.84.53.9
Other0.50.50.30.31.2
Transport infrastructure6.59.811.012.115.9
Railways0.71.01.71.82.0
Air traffic0.20.30.20.20.3
Roads, motorways1.03.04.16.28.2
PTT services3.74.64.5
Post0.71.1
Telecommunications2.63.5
Other1.01.00.50.60.8
Water supply0.10.10.10.00.1
Public utilities2.13.53.32.41.6
(In percent of GDP)
Economic Infrastructure2.43.44.14.15.1
Energy sector0.80.91.21.01.1
Electricity supply0.70.81.11.00.9
Other0.10.10.10.10.3
Transport infrastructure1.21.82.22.63.6
Railways0.10.20.30.40.4
Air traffic0.00.10.00.00.1
Roads, motorways0.20.60.81.31.9
PTT services0.70.90.9
Post0.20.2
Telecommunications0.50.8
Other0.20.20.10.10.2
Water supply0.00.00.00.0
Public utilities0.40.70.70.50.4
Sources: Statistical Office and Institute for Macroeconomic Analysis and Development.
Sources: Statistical Office and Institute for Macroeconomic Analysis and Development.
Table 17.Slovenia: Developments in Production, 1993-97(1993=100)
19931994199519961997
Industrial production 2/73.978.680.281.181.7
Capital goods60.168.273.380.7
Intermediate goods74.480.982.881.5
Final goods75.977.777.278.4
Construction 1/3/76.77784.193.480.1
Transport 1/3/77.18287.990.990.3
Trade 1/3/94.198.5103.1108103.4
Source: Statistical Office.

Real value added.

January-July 1997.

January-March 1997.

Source: Statistical Office.

Real value added.

January-July 1997.

January-March 1997.

Table 18.Slovenia: Indicators of Real Economic Activity, 1993-July 1997

(Annual percentage change) 1/

Real GDPIndustrial OutputRetail Sales 2/
Industry TotalCapital GoodsIntermediate GoodsFinal Consumption Goods
19932.8-2.8-3.8-4.7-0.33.3
19945.36.413.58.62.45.2
19954.12.07.42.40.33.1
19963.11.010.1-1.51.63.5
1993March-1.3-7.3-9.4-8.0-6.63.6
June0.0-5.8-5.8-9.4-0.43.6
September4.8-0.51.6-3.11.24.4
December7.93.1-0.62.34.61.6
1994March4.63.4-1.73.05.17.6
June7.311.524.614.65.88.4
September4.27.718.07.11.21.8
December5.33.414.69.8-2.13.5
1995January13.822.117.25.63.6
February10.335.39.81.71.9
March6.25.417.47.3-0.7-1.3
April-1.32.5-0.6-3.50.5
May1.712.0-2.34.82.4
June3.33.912.33.41.93.7
July1.411.73.40.06.9
August-5.14.71.6-6.15.4
September4.2-0.30.15.30.34.8
October-0.1-9.50.02.02.2
November0.5-4.2-2.9-2.14.2
December2.5-5.6-3.2-11.1-0.92.9
1996January-4.9-7.9-6.01.46.5
February-4.0-9.6-3.01.67.4
March2.2-6.4-2.6-9.0-2.10.0
April11.523.05.016.92.4
May-0.55.6-0.5-3.61.6
June2.5-11.41.7-13.0-12.8-3.5
July6.211.52.55.53.3
August-1.88.3-4.0-3.33.6
September3.45.040.7-0.11.43.0
October9.931.24.17.99.9
November3.611.6-0.14.85.3
December4.17.910.19.44.82
1997January0.2
February1.7
March2.2-1.4
April-3.8
May-2.9
June3.84.3
July-0.1
Source: Statistical Office.

Growth over same period of previous year. Annual and quarterly data show changes between average levels of current and previous periods.

Retail sales deflated by the retail price index for goods.

Source: Statistical Office.

Growth over same period of previous year. Annual and quarterly data show changes between average levels of current and previous periods.

Retail sales deflated by the retail price index for goods.

Table 19.Slovenia: Developments in Tourism, 1992-96
19921993199419951996
(In thousands)
Total number of nights
in all types of accommodations5,0985,3845,8665,8835,832
Domestic tourists3,0833,3723,3853,4483,282
Foreign tourists2,0152,0122,4812,4352,550
Total number of tourists
in all types of accommodations1,3671,4501,5791,5771,658
Domestic tourists751826831845826
Foreign tourists616624748732832
(Number of beds)
Bed capacity in all types of accommodation71,76174,82575,00372,85377,803
Hotels and similar establishments34,49134,72835,54333,87836,028
Hotels29,42729,19329,31928,28927,929
Motels9419509589801,137
Others4,1234,5855,2664,6096,962
Supplementary37,27040,09739,46038,97541,775
Camping places16,81617,26118,43116,56818,591
Rented rooms, houses and flats6,9578,9366,5637,7396,517
Health establishments 1/278278248248-
Others13,21913,62214,21814,42016,667
(In millions of U.S. dollars)
International tourist receipts6717349591,0791,210
Source: Statistical Office.

Since 1996 included in hotels and similar establishment.

Source: Statistical Office.

Since 1996 included in hotels and similar establishment.

Table 20.Slovenia: Agricultural Production, 1992-96
19921993199419951996
(Thousands of tons)
Production of selected commodities
Wheat178168182178161
Corn208249324305333
Sugar beets97133222265308
Sunflower seeds00000
Meat142159148158169
Of which:
Beef3850434449
Pork4160615762
Poultry5849445658
Milk (millions of liters)563533559590576
(Volume indices: 1969-1971=100)
Production of selected commodities
Wheat122115124121110
Corn148177231217237
Sugar beets 1/
Sunflower seeds5173111129119
Meat143160149159170
Of which:
Beef104139120123137
Pork137201205192206
Poultry212178161204212
Milk147139146154143
(Percentage share of agricultural production)
Crop production33.235.838.836.236.9
Fruit growing5.46.47.75.56.2
Viticulture7.08.67.55.48.5
Totals100.0100.0100.0100.0100.0
Socialized sector29.725.019.618.9
Private sector70.375.080.481.1
Source: Statistical Office.

There was not yet any production of sugar beets in the years 1969-71.

Source: Statistical Office.

There was not yet any production of sugar beets in the years 1969-71.

Table 21.Slovenia: Primary Energy Production and Consumption, 1992-96
Unit 1/19921993199419951996
I.Coal (all coals, including anthracite and coke)
Production1,000 tons5,5735,1214,8544,8844,768
1,000 TJ6054505149
Imports1,000 tons192358308419490
1,000 TJ36688
Exports1,000 tons519632
1,000 TJ10000
Consumption1,000 tons5,7145,4705,1555,2995,024
1,000 TJ6260565954
II.Crude petroleum
Production1,000 tons22221
1,000 TJ00000
Imports1,000 tons500481340496455
1,000 TJ2221152120
Available for refining1,000 tons502483342498482
1,000 TJ2221152121
III.Natural gas
Productionmil. Nm31713131813
1,000 TJ11010
Importsmil. Nm3703697740878840
1,000 TJ2424253029
Consumption1,000 TJ2524263129
IV.Hydroelectric power
Potential1,000 TJ1211121213
V.Nuclear energy
Production1,000 TJ00000
Imports1,000 TJ4141485050
Consumption1,000 TJ4141485050
VI.Wood1,000 TJ1010101010
Total primary energy (I+II+III+IV+V+VI)
Production1,000 TJ8375737372
Imports1,000 TJ909294109105
Exports1,000 TJ10000
Consumption1,000 TJ172167167182163
Source: Data provided by the Milan Vidmar Institute.

TJ = terajoules.

Source: Data provided by the Milan Vidmar Institute.

TJ = terajoules.

Table 22.Slovenia: Secondary Energy Production and Consumption, 1992-96
19921993199419951996
(In thousands of terajoules)
Electric energy
Production 1/33.635.033.634.232.7
Imports1.22.51.62.73.1
Exports7.77.68.68.69.1
Consumption 2/39.340.838.939.940.0
Petroleum products
Production28.523.915.725.021.7
Imports47.365.276.975.990.7
Exports1.21.90.41.42.3
Consumption74.687.292.299.5110.8
Coke (included in coal)
Imports1.31.21.71.71.8
Consumption1.31.21.71.71.9
Imports24.023.825.229.90.0
Total secondary energy
Production62.158.949.359.254.5
Imports48.567.778.578.595.6
Exports8.99.59.010.011.4
Consumption 2/114.0128.0131.2139.4152.6
Total energy
Primary Production 3/82.775.372.773.172.3
Imports138.0159.2172.4187.3201.0
Exports9.69.69.010.011.4
Consumption 4/211.0224.7236.1250.3261.9
(In percent)
Memorandum item:
Energy imports/consumption65.470.973.074.876.7
Source: Data provided by the Milan Vidmar Institute.

Thermal and nuclear only; hydroelectric power is included in Primary Energy Production.

Including hydroelectric energy.

Secondary production is included in primary production.

Total energy consumption is not equal to the sum of primary + secondary consumption due to transformation (e.g., crude petroleum is consumed as secondary energy).

Source: Data provided by the Milan Vidmar Institute.

Thermal and nuclear only; hydroelectric power is included in Primary Energy Production.

Including hydroelectric energy.

Secondary production is included in primary production.

Total energy consumption is not equal to the sum of primary + secondary consumption due to transformation (e.g., crude petroleum is consumed as secondary energy).

Table 23.Slovenia: Distribution of Enterprises by Sector and Ownership, 1992-96
Total 1/SocialPrivateCooperative
Activities:19921993199419951996199219931994199519961992199319941995199619921993199419951996
Total20,30227,90230,94133,60935,7862,6352,5242,4792,3171,91616,40423,90727,17929,97832,243169257413635
Manufacturing, mining and electricity supply3,4334,3564,5414,8755,0719719628798136602,2283,1263,4033,7834,0341216344
Agriculture and fishing335433311326350906845443415122724926929387127956
Forestry and hunting11772575959682017171432333941421517
Water management1212121413101010121022222
Construction1,0981,5541,6551,8572,0151981841711531268391,3001,4271,6451,8051517544
Transport and communication4937578649831,08910176706752366644769887994712554
Trade4,6906,2996,6747,2747,7063062942842722054,1315,7226,1266,7447,193912545
Hotels and restaurants7231,0271,1521,2911,4241321521441271155268029391,0961,236211
Crafts and personal services1,4552,0162,1372,2392,3651911881631451091,2101,7741,9282,0432,1801613111
Community services24932832034637611212012012111191133155177203335876
Financial and business services7,69711,04812,15513,12013,9764564504374103626,82810,14411,26712,25813,11158354
Education and culture 2/9361,0501,119918267806923995
Health and work 2/12717522348545169110155
Source: Agency for Payments, Supervision, and Information.

Includes the number of enterprises with mixed ownership.

Includes only profit-making companies.

Source: Agency for Payments, Supervision, and Information.

Includes the number of enterprises with mixed ownership.

Includes only profit-making companies.

Table 24.Slovenia: Distribution of Enterprises by Size in 1996
Number of employees per enterpriseRevenue per employee (In thousands of tolarsWages per employee (In thousands of tolars)Net Profits (In millions of tolars)Number of enterprisesRevenues (In percent)Exports/revenues (In percent)Capital/capital and liabilities (In percent)
TotalTotal1412,1461,376121,76433,786100.022.454.6
Large33612,5431,50774,88085263.227.761.2
Medium4911,0851,35219,6101,57815.216.448.0
Small311,8471,03227,27433,35621.510.833.2
AgricultureTotal268,8271,3961,420422100.08.465.6
Large2498,9331,4401,0373171.510.066.7
Medium767,0571,4321812916.13.071.5
Small311,89898220236212.46.243.3
IndustryTotal379,6191,29945,5147,086100.037.558.8
Large41110,4471,38133,39846378.141.862.5
Medium707,2881,2046,13159011.828.247.9
Small57,7599505,9856,03310.014.530.5
ServicesTotal715,8151,48074,83028,278100.010.250.2
Large24617,3781,78440,44435850.510.359.0
Medium3615,8981,52413,29995918.010.347.4
Small313,7851,07221,08726,96131.59.933.8
Source: Agency for Payments, Supervision, and Information.
Source: Agency for Payments, Supervision, and Information.
Table 25.Slovenia: Distribution of Enterprises by Ownership in 1996
ActivitiesNumber of employees per enterpriseRevenue per employee (In thousands of tolars)Net profits (In millions of tolars)Number of enterprisesRevenues (In percent)Exports/Revenues (In percent)
TotalTotal1312,146121,76435,786100.022.4
Social12310,14038,6891,91642.223.1
Private316,31040,28232,24331.114.6
Cooperative611,9818350.05.8
Mixed7712,33942,7851,59226.630.4
AgricultureTotal268,8271,420422100.08.4
Social1528,2421,0665875.38.2
Private216,14418633711.95.9
Cooperative148,648260.26.3
Mixed678,7211662112.712.1
IndustryTotal379,61945,5147,086100.037.5
Social1859,28917,37078653.233.0
Private710,96512,6555,83917.429.0
Cooperative1810,310580.11.2
Mixed1739,53715,48445329.450.6
ServicesTotal715,81574,83028,278100.010.2
Social7711,85220,2541,07232.010.4
Private319,51627,44026,06743.29.8
Cooperative214,6941210.015.3
Mixed3817,60027,1351,11824.710.6
Source: Agency for Payments, Supervision, and Information.
Source: Agency for Payments, Supervision, and Information.
Table 26.Slovenia: Labour Force, Employment, Unemployment, 1992-96 1/
19921993199419951996
Total employment and water supply789,630765,783751,512747,647744,809
Agriculture, forestry, fishing15,37113,82012,3999,1508,548
Mining9,9899,4278,9938,3447,632
Manufacturing, mining, electricity, gas, water supply282,104256,731244,787232,256219,558
Electricity, gas, and water supply11,79211,76211,51511,80711,995
Construction36,46332,18032,49931,06731,975
Wholesale, retail, certain repair71,98568,16264,67167,59365,979
Hotels and restaurants17,08215,44514,89114,34014,043
Transport, storage, communication44,76642,03837,54734,76832,418
Financial intermediation13,20013,09713,26614,10615,082
Real estate, renting, business activities27,38926,44322,79326,83327,965
Public administration26,48535,12237,02438,47940,403
Education and culture34,23235,99937,06348,01249,425
Health and social services51,60851,55552,33642,97243,717
Other services14,49914,79715,54312,68312,912
Employees in small nonagricultural sector33,15736,55341,84047,55853,530
Self-employed in small nonagricultural sector43,98847,13248,82552,15954,107
Farmers55,52055,52055,52055,52055,520
Register unemployment102,593129,087127,056121,483119,799
Total active population892,223894,870878,568869,130864,607
(In percent)
Total employment100.0100.0100.0100.0100.0
Agriculture, forestry, fishing1.91.81.61.21.1
Mining1.31.21.21.11.0
Manufacturing, mining, electricity, gas35.733.532.631.129.5
Electricity, gas, water supply1.51.51.51.61.6
Construction4.64.24.34.24.3
Wholesale, retail, certain repair9.18.98.69.08.9
Hotels and restaurants2.22.02.01.91.9
Transport, storage and communication5.75.55.04.74.4
Financial intermediation1.71.71.81.92.0
Real estate, renting, business activites3.53.53.03.63.8
Public administration3.44.64.95.15.4
Education and culture4.34.74.96.46.6
Health and social services6.56.77.05.75.9
Other services1.81.92.11.71.7
Employees in small non-agricultural sector4.24.85.66.47.2
Self-employed in small non-agricultural sector5.66.26.57.07.3
Farmers7.07.37.47.47.5
Memorandum items:
Unemployment rate
Registered11.514.414.514.013.9
ILO8.39.19.07.47.3
Job vacancies (average)6,8619,06712,57212,93513,100
Sources: Statistical Office and Institute for Macroeconomic Analysis and Development.
Sources: Statistical Office and Institute for Macroeconomic Analysis and Development.
Table 27.Slovenia: Nominal and Real Average Monthly Net Wage Per Worker in the Enterprise and Public Sectors, 1993-July 1997
Net Average Monthly Wage (nominal)Net Average Monthly Wage (real) 1/
Tolars monthPercent change 2/Index 1990=100Percent change 2/
199346,82652.094.314.3
199460,08928.3100.06.1
199571,27918.6104.64.6
199681,83014.8109.34.5
1994January53,31028.396.46.2
February55,71423.199.52.6
March56,23028.099.06.8
April57,06629.398.16.1
May58,00632.598.69.8
June58,45330.597.97.3
July59,27327.997.94.4
August60,64729.099.45.2
September62,53028.7100.85.3
October65,28431.0103.58.3
November66,36327.1103.35.4
December68,30623.9105.94.2
1995January68,19827.9103.17.0
February68,20222.4101.92.4
March69,63323.8103.74.8
April69,06821.0103.05.1
May70,94922.3104.76.2
June70,41620.5103.45.6
July71,00719.8104.26.3
August71,85618.5105.86.4
September71,36414.1103.93.1
October73,23212.2106.12.5
November75,44513.7107.84.4
December76,16311.5107.81.7
1996January76,31411.9106.53.3
February76,41412.0105.43.4
March76,5529.9104.00.3
April79,35114.9106.23.1
May80,58513.6107.32.5
June80,57314.4107.03.5
July83,58817.7110.86.3
August83,13315.7110.84.8
September83,86317.5111.37.1
October85,73217.1112.76.2
November87,14515.5114.15.8
December88,90516.7115.47.1
1997January87,83515.1112.65.7
February87,07013.9110.85.2
March88,01015.0111.57.2
April89,23412.5111.75.2
May90,29812.1111.23.7
June90,80612.7111.94.5
July91,6649.7112.31.3
Source: Statistical Office.

Average net personal income deflated by the consumer price index.

Change from corresponding period of preceding year.

Source: Statistical Office.

Average net personal income deflated by the consumer price index.

Change from corresponding period of preceding year.

Table 28.Slovenia: Average Monthly Net Wage By Sector, 1992-June 1996
19921993199419951996

June
Enterprise sector 1/29,31443,99157,12567,34675,055
Of which:
Industry (including mining)27,02940,30552,73561,90968,636
Agriculture 2/31,83447,83460,34172,94184,281
Construction25,53839,19351,96061,52970,696
Transport35,87150,94666,47178,02286,419
Trade31,93848,27160,60570,73278,163
Catering, tourism29,68646,67661,69071,05878,519
Handicrafts25,71238,29149,99458,39964,794
Housing services28,57845,21357,60667,88374,238
Financial, other services38,81958,89178,20193,683102,959
Public sector36,94956,80269,61883,26496,571
Education and culture37,11755,92568,91382,88894,943
Health, social security34,34052,30264,87477,69490,971
Government41,45664,50076,94191,019105,601
Total30,81346,82660,08971,27980,573
(percentage change)
Enterprise sector 1/50.129.917.912.8
Of which:
Industry (including mining)49.130.817.411.6
Agriculture 2/50.326.120.919.7
Construction53.532.618.415.6
Transport42.030.517.413.0
Trade51.125.616.712.0
Catering, tourism57.232.215.213.6
Handicrafts48.930.616.811.5
Housing services58.227.417.811.7
Financial, other services51.732.819.812.5
Public sector53.722.619.617.3
Education and culture50.723.220.315.2
Health, social security52.324.019.818.9
Government55.619.318.317.6
Total52.028.318.614.4
Memorandum items:
Retail price index201.332.319.812.69.8
Consumer price index207.332.921.013.59.9
Source: Statistical Office.

Includes socially-owned, state-owned and private enterprises with fewer than 3 employees.

Includes forestry and water supply.

Source: Statistical Office.

Includes socially-owned, state-owned and private enterprises with fewer than 3 employees.

Includes forestry and water supply.

Table 29.Slovenia: Ownership Structure, 1992-96
19921993199419951996#
(Number of enterprises)
Socially owned2,8972,9122,4791,8281,458#
Privately owned31,88234,92627,17930,26633,306#
Cooperatives22627641278293#
Mixed1,4431,4831,2421,1091,127#
Total36,44839,59730,94133,48136,184#
(In percent)
Socially owned7.97.48.05.54.0#
Privately owned87.588.287.890.492.0#
Cooperatives0.60.70.10.80.8#
Mixed4.03.74.03.33.1#
Total100.0100.0100.0100.0100.0#
Source: Statistical Office.

Number of enterprises: economically active only

Number of employees: source BPOZ

Source: Statistical Office.

Number of enterprises: economically active only

Number of employees: source BPOZ

Table 30.Slovenia: Registered Unemployment and Job Vacancies, 1993-97
19931994199519961997 1/
1Average annual number of registered unemployment129.1127.1121.5119.8123.1
Of which (in percent):
Women43.344.946.648.148.8
Under 2637.433.532.231.430.1
Unskilled45.345.846.747.048.1
Over 4028.232.434.136.639.7
Unemployed more than one year53.059.062.156.255.8
Those receiving unemployment benefit43.142.130.330.333.3
2Job vacancies (monthly average)9.112.612.913.110.1
Average number of unemployed per job vacancy (1/2)14.210.19.49.112.1
3Average annual number of foreigners with work permits31.535.039.140.440.4
Per 100 person in employment (in percent)3.84.34.84.94.9
Registered unemployment flows balance
4.1Number of registered unemployed at the beginning of the year118.2137.1123.5126.8124.5
4.2First-time job-seekers25.822.324.321.120.3
4.3Redundant71.955.655.465.461.3
Per 100 of persons in employment (in percent)8.86.86.78.07.5
4.4Total unemployed registered during the year (4.1)+(4.2)+(4.3)215.9215.1203.2213.2206.0
4.5Of which: Those who found employment60.074.660.054.661.8
Per 100 of persons in employment (in percent)7.39.17.36.77.6
4.6Crossed out of register18.817.016.434.117.4
In percent of unemployed registered during the year8.77.98.116.08.5
5Registered unemployed at the end of year (4.4)-(4.5)-(4.6)137.1123.5126.8124.5126.8
6Labor force, end of period892.5871.4873.6864.6872.8
Rate of registered unemployment at the end of year (5/6, in percent15.414.214.514.414.5
Sources: National Employment Office, Statistical Office, and Institute for Macroeconomic Analysis and Development.

Per March 31.

Sources: National Employment Office, Statistical Office, and Institute for Macroeconomic Analysis and Development.

Per March 31.

Table 31.Slovenia: Output and Employment in Industry, 1993-96(Annual percentage change)
19921993199419951996
Industrial production-13.2-2.86.42.01.0
Employment-6.0-8.5-4.5-4.9-5.2
Labour productivity-7.66.311.57.26.6
Industrial producer prices215.721.617.712.86.8
Source: Statistical Office of the Republic of Slovenia.
Source: Statistical Office of the Republic of Slovenia.
Table 32.Slovenia: Price Developments, 1993-August 1997(Percentage change)
Retail pricesIndustrial Producer PricesAgricultural Producer PricesCost of Living
Annual GrowthMonthly GrowthControlled SectorsUncontrolled SectorsAnnual GrowthMonthly GrowthAnnual GrowthMonthly GrowthAnnual GrowthMonthly Growth
199332.31.70.71.021.61.418.71.432.91.7
199419.81.40.41.017.71.42471.521.01.5
199512.60.712.80.613.30.613.50.7
19969.70.76.80.510.81.09.90.7
1993March42.51.40.11.327.7-0.218.6-0.143.31.6
June26.21.50.60.914.41.94.43.525.10.6
September24.01.70.41.413.61.216.5-0.224.02.1
December22.91.50.51.018.62.418.8-0.122.81.8
1994March19.51.10.11.019.90.526.01.019.91.5
June20.51.60.51.123.81.336.73.521.81.5
September19.91.50.60.919.11.618.9-0.522.11.7
December18.31.10.50.618.21.520.01.019.50.9
1995March16.80.50.00.616.60.720.8-0.318.30.4
June12.60.80.50.313.70.210.7-2.314.10.5
September10.91.30.90.510.91.16.20.210.71.0
December8.60.70.10.57.91.27.83.113.51.0
1996January8.51.00.10.97.10.32.9-0.38.41.4
February8.40.90.60.97.61.15.92.18.41.2
March9.31.30.61.26.8-0.18.42.19.61.6
April10.71.20.10.67.10.410.42.211.41.4
May10.90.70.00.36.5-0.711.00.510.80.6
June10.60.50.10.37.00.712.82.410.50.2
July10.70.50.10.47.40.410.5-4.110.70.3
August10.30.17.30.310.90.010.4-0.6
September9.40.56.80.615.23.79.70.4
October9.70.86.71.215.11.310.20.9
November8.60.45.90.411.80.49.20.5
December8.80.75.81.112.93.29.00.8
1997January9.01.15.80.311.1-0.88.91.3
February8.50.45.40.77.6-1.48.40.7
March7.40.35.0-0.55.0-0.17.20.5
April8.22.05.00.42.0-0.77.01.2
May8.91.36.20.42.41.08.11.6
June8.80.46.20.81.72.17.80.0
July9.41.05.90.110.93.18.10.6
August9.60.35.80.29.00.2
Source: Statistical Office.
Source: Statistical Office.
Table 33.Slovenia: Coverage of Enterprise Losses, 1992-96(In millions of dinars/tolars)
199219931994 1/1995 1/1996 1/
Loss in current year169,168115,943119,870136,362180,934
Uncovered losses from previous year34,876133,722181,586254,008306,819
Total loss to be covered204,044249,665301,456390,370487,753
Loss covered by nonreimbursable funds6,80523,641
Subsidy3,33437
Claims written off82412
Joint and own reserve funds1,0886,891
Equity write-off2,30116,300
Uncovered loss for the current and previous year197,239226,024
Source: Income statements, Agency for Payments, Supervision, and Information.

Data from 1994, 1995, and 1996 financial statements are not comparable with data for previous years (change in accounting method).

Source: Income statements, Agency for Payments, Supervision, and Information.

Data from 1994, 1995, and 1996 financial statements are not comparable with data for previous years (change in accounting method).

Table 34.Slovenia: Consolidated General Government Operations, 1993-97(In percent of GDP)
19931994199519961997
ActualActualActualActualProjection
Total revenue47.045.945.745.244.9
Tax revenue22.023.923.924.725.2
Of which:
Corporate income0.50.80.60.91.2
Personal income6.86.96.66.86.7
Sales11.112.413.013.213.7
Customs duties3.63.53.53.02.1
Social security contributions20.918.718.416.615.7
Of which:
Pension Fund12.411.811.79.99.0
Health Fund7.16.36.26.56.5
Non-tax revenue3.93.13.03.53.5
Of which:
Interest receipts0.50.60.30.30.3
Capital revenue0.20.10.10.00.1
Revenue from privatization0.00.00.40.40.5
Total expenditure46.746.145.744.946.4
Central government21.020.220.419.520.7
Of which:
Wages5.74.86.46.77.2
Social transfers4.13.93.43.44.0
Transfers to business sector3.02.32.52.02.0
Interest payments1.31.51.11.21.2
Capital expenditure2.83.43.12.42.4
Local government5.25.34.64.94.9
Pension Fund13.013.413.613.413.5
Health Fund7.57.16.96.86.8
Solidarity Fund0.10.10.00.00.0
Privatization0.00.00.20.40.5
Overall balance0.3-0.20.00.3-1.5
Financing (net)-0.30.20.0-0.31.5
Foreign0.60.30.30.90.6
Domestic-0.9-0.1-0.3-1.10.9
Source: Ministry of Finance.
Source: Ministry of Finance.
Table 35.Slovenia: General Government Revenue, 1993-97(In billions of tolars)
19931994199519961997 1/
ActualActualActualBudgetActualEstimateOutturn
Jan.-Oct
Total revenue (consolidated)674.8849.81,015.41,109.51,153.81,290.91,041.2
Central government319.9421.1520.7576.6613.8710.0560.4
Tax revenue273.8389.9481.1539.6570.0661.6521.8
Corporate income tax6.715.012.914.822.333.328.0
Payroll tax0.05.93.82.918.337.530.3
Personal income tax57.475.8101.0114.3119.3134.3105.6
Sales taxes158.2228.9285.1319.5333.7389.0302.4
General103.9144.9185.6207.2215.2258.8200.7
Petroleum41.756.667.075.984.595.073.2
Tobacco and alcohol11.225.932.536.534.035.228.6
Other taxes1.51.50.00.00.08.26.5
Customs duties51.564.378.288.176.659.348.9
Contributions21.111.09.14.04.94.83.9
Unemployment21.19.97.32.02.82.42.0
Health0.00.00.00.00.00.00.0
Maternity leave0.01.11.82.02.12.41.9
Non-tax revenue25.020.230.533.138.943.634.7
Registration, road charges7.45.86.47.37.28.66.8
Fees and charges5.06.913.515.314.817.613.9
Bank of Slovenia profit transfers3.61.00.00.00.00.00.0
Interest income1.53.21.91.51.71.11.3
Other4.43.48.89.115.216.312.7
Capital revenue3.10.00.00.00.00.00.0
Extrabudgetary funds
Pension Fund revenue207.0260.9308.4344.7352.3409.6348.0
Of which:
Pension Fund contributions192.4238.5283.7296.2280.2290.3238.0
Health Fund revenue109.4125.0145.7168.1176.4197.1160.3
Of which:
Health Fund contributions87.698.3116.1134.8139.9156.4128.2
Solidarity Fund contributions2.12.10.00.00.00.00.0
Local governments75.6100.7108.9114.3131.0143.1117.5
Of which:
Income taxes40.652.446.651.955.457.049.8
Revenue from privatization0.00.08.68.010.414.714.7
Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Table 36.Slovenia: General Government Revenue, 1993-97(In percent of GDP)
19931994199519961997 1/
ActualActualActualBudgetActualEstimate
Total revenues (consolidated)47.045.945.744.645.244.9
Central government22.322.723.423.124.024.7
Tax revenue19.121.021.721.822.323.0
Corporate income tax0.50.80.60.60.91.2
Payroll tax0.00.30.10.10.71.3
Personal income tax4.04.14.54.74.74.7
Sales11.012.412.812.813.113.5
General7.27.88.48.38.49.0
Petroleum2.93.13.03.03.33.3
Tobacco and alcohol0.81.41.51.41.31.2
Other0.10.10.00.00.00.3
Custom duties3.63.53.53.63.02.1
Contributions1.50.60.40.20.20.2
Unemployment contribution1.50.50.30.10.10.1
Health contribution0.00.00.00.00.00.0
Maternity leave0.00.10.10.10.10.1
Non-tax revenue1.71.11.41.31.51.5
Registration, road charges0.50.30.30.30.30.3
Fees and charges0.30.40.60.60.60.6
Bank of Slovenia profit transactions0.20.10.00.00.00.0
Interest income0.10.20.10.10.10.0
Other0.30.20.40.40.60.6
Capital revenues0.20.00.00.00.00.0
Extrabudgetary funds
Pension Fund revenue14.414.113.913.913.814.3
Of which:
Pension Fund contributions13.412.912.811.911.010.1
Health Fund revenue7.66.76.66.86.96.9
Of which:
Health Fund contributions6.15.35.25.45.55.4
Solidarity Fund contributions0.10.10.00.00.00.0
Local government5.35.44.94.65.15.0
Of which:
Income taxes2.82.82.12.12.22.0
Revenues from privatization0.00.00.40.30.40.5
Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Table 37.Slovenia: General Government Expenditure, 1993-97(In billions of tolars)
19931994199519961997 1/
ActualActualActualBudgetActualEstimateOutturn

Jan.-Oct.
Total expenditure (consolidated)670.2854.01,016.01,089.91,147.11,334.21,049.0
Central government323.5413.1502.2538.3597.5743.7586.0
Current expenditures278.8345.6426.7471.9524.6662.8535.6
Wages81.589.5142.9149.9171.6206.0170.5
Other goods and services17.224.736.930.142.548.137.0
Transfers to individuals59.373.976.590.888.5116.093.1
Transfers to nonprofit organizations29.136.431.535.736.446.930.2
Transfers to Pension Fund6.416.119.944.267.1111.7104.9
Interest18.728.024.932.530.434.129.3
Domestic13.721.019.121.720.920.118.5
Foreign4.97.05.810.79.614.010.8
Payments of guarantees4.13.70.92.02.21.41.2
Transfers to enterprises31.530.136.429.329.837.324.6
Transfers to local communities13.419.024.725.423.028.020.6
Refugees2.12.42.21.51.91.71.1
Other15.421.930.130.631.231.623.2
Capital expenditures43.067.175.163.472.080.450.1
Budget reserves1.80.40.43.11.00.50.3
Extrabudgetary funds
Pension Fund201.6267.3325.8361.0369.7419.6348.7
Health Insurance Fund107.6131.9153.2168.1173.6197.0157.9
Solidarity Fund2.12.10.00.00.00.00.0
Local budgets75.199.2103.8112.8125.6142.9106.9
Expenditure of revenues from privatization0.00.04.911.511.014.86.4
Memorandum item:
Defense expenditures20.924.531.729.832.0n.a.n.a.
Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Table 38.Slovenia: General Government Expenditure, 1993-97(In percent of GDP)
19931994199519961997 1/
ActualActualActualBudgetActualEstimate
Total expenditure (consolidated)46.746.145.743.844.946.4
Central government22.522.322.621.623.425.9
Current expenditure19.418.719.218.920.523.1
Wages5.74.86.46.06.77.2
Other goods and services1.21.31.71.21.71.7
Transfers to individuals4.14.03.43.73.54.0
Transfers to nonprofit organizatio2.02.01.41.51.41.5
Transfers to Pension Fund0.40.90.91.72.63.9
Interest1.31.51.11.31.21.2
Domestic1.01.10.90.90.80.7
Foreign0.30.40.30.40.40.5
Payments of guarantees0.30.20.00.10.10.0
Transfers to enterprises2.21.61.61.21.21.3
Transfers to communities0.91.01.11.00.91.0
Refugees0.10.10.10.10.10.1
Other1.11.21.41.21.21.1
Capital expenditure3.03.63.42.62.92.8
Budget reserves0.10.00.00.10.00.0
Extrabudgetary funds
Pension Fund14.014.414.714.514.514.6
Health Insurance Fund7.57.16.96.86.86.9
Local government5.25.44.74.64.95.0
Solidarity Fund0.10.10.00.00.00.0
Expenditure of revenue from privatization0.00.00.20.50.40.5
Memorandum item:
Defense expenditures1.51.31.51.21.4n.a.
Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Source: Ministry of Finance.

The 1997 estimates of the central government accounts are identical to the accepted budget.

Table 39.Slovenia: Central Government Expenditure on Restructuring Programs, 1993-97
19931994199519961997
(In billions of tolars)
Total60.570.673.988.393.9
Banks9.715.514.618.514.1
Enterprises11.711.611.514.915.9
Social safety net 1/35.337.434.534.641.4
Active programs15.412.912.28.49.0
Passive programs19.924.622.326.232.4
Amortization of debt 1/3.76.113.220.322.5
(In percent of GDP)
Total4.23.83.43.63.3
Banks0.70.80.70.90.5
Enterprises0.80.60.50.60.6
Social safety net 1/2.52.01.61.41.5
Active programs1.10.70.60.40.3
Passive programs1.41.31.01.01.1
Amortization of debt 1/0.30.30.60.80.8
(In percent of total expenditure) 2/
Total9.08.37.37.57.1
Banks1.51.81.41.41.1
Enterprises1.71.41.11.31.2
Social safety net 1/5.34.43.43.03.1
Active programs2.31.51.20.80.7
Passive programs3.02.92.22.22.4
Amortization of debt0.50.71.31.81.7
Source: Ministry of Finance.

Related to restructuring programs only.

Consolidated.

Source: Ministry of Finance.

Related to restructuring programs only.

Consolidated.

Table 40.Slovenia: Social Security Contribution Rates, 1992-96(In percent of gross wage)
19921993199419951996
Pension and disability insurance28.830.831.031.024.4
Employees14.415.415.515.515.5
Employers14.415.415.515.58.9
Obligatory health insurance18.213.812.812.713.3
Employees8.76.66.16.16.4
Employers9.57.26.66.66.9
Unemployment insurance3.43.41.30.80.2
Employees1.71.70.60.40.1
Employers1.71.70.60.40.1
Maternity leave0.00.00.20.20.2
Employees0.00.00.10.10.1
Employers0.00.00.10.10.1
Total50.448.045.244.738.0
Employees24.823.722.422.122.1
Employers25.624.322.922.615.9
Source: Ministry of Finance.
Source: Ministry of Finance.
Table 41.Slovenia: Monetary Survey, 1993-June 1997
19931994199519961997
MarchJuneSep.Dec.MarchJuneSep.Dec.MarchJune
(In billions of tolars, end of period)
Net foreign assets99.0269.3278.5292.8312.6335.1345.6398.5454.2457.3494.5553.0
Bank of Slovenia102.5189.1192.5215.8221.6250.3232.9227.5314.6329.6385.9455.4
Deposit Money Banks-3.480.286.076.991.084.8112.7171.0139.6127.7108.597.6
Net domestic assets333.9353.9378.3420.1429.5470.6496.8489.1448.7520.3514.9485.4
Claims on government (net)162.9164.0166.2168.5164.4193.1213.6152.5125.8178.6192.2179.3
Claims on National Bank of Yugoslavia52.651.750.746.044.130.131.030.730.731.131.231.0
Claims on non-bank financial institutions2.05.05.15.95.511.57.58.010.48.38.710.4
Claims on enterprises261.2325.9345.6387.3402.5433.6467.8504.0494.2509.6514.9519.8
Claims on private sector55.392.1100.5117.8142.7167.5176.6198.0204.8207.4209.7223.6
Bonds69.4120.5121.6134.1142.8171.7158.4130.5189.1215.5271.4306.4
Restricted deposits9.912.114.114.813.912.916.019.715.117.920.119.7
Other items (net)120.9152.2154.1156.6172.9180.4225.2253.9213.0181.2150.3152.7
M198.0140.6131.2158.5156.5176.9163.6179.5177.0202.4200.3219.8
Currency in circulation32.747.342.852.254.060.055.861.959.566.869.170.0
Demand deposits64.492.2872105.0101.1115.5106.6116.2115.7133.9129.1147.8
Other0.91.11.21.21.31.41.21.51.81.62.02.0
M2 (= M1 + tolar deposits)235.9386.4415.6450.2460.9489.1501.4541.7547.4608.3642.4675.7
Of which: Tolar Deposits138.0245.8284.5291.7304.5312.3337.8362.3370.4405.9442.2455.9
M3 (= M2 + foreign currency deposits)432.9623.2656.8712.9742.1805.8842.4887.6902.9977.61009.41038.4
Of which: Foreign currency deposits197.0236.8241.2262.7281.2316.6341.0345.9355.5369.3366.9362.7
(Annual percentage change)
M1 growth40.943.541.648.344.225.824.713.213.114.522.422.5
M2 growth58.863.869.957.452.726.620.620.318.824.428.124.7
M3 growth62.043.944.241.940.529.328.324.521.721.319.817.0
(In percent)
Contributions to M3 growth
Net foreign assets22.139.333.625.715.910.610.214.819.115.217.717.4
Net domestic assets39.94.610.616.224.618.718.09.72.66.22.1-0.4
(In percentage points)
Contributions to M3 growth
Net foreign assets35.689.576.161.439.336.136.260.588.171.189.2102.4
Net domestic assets64.410.523.938.660.763.963.839.511.928.910.8-2.4
Source: Data provided by the Bank of Slovenia according to IFS classification.
Source: Data provided by the Bank of Slovenia according to IFS classification.
Table 42.Slovenia: Balance Sheet of the Bank of Slovenia, 1993-June 1997
19931994199519961997
MarchJuneSep.Dec.MarchJuneSep.Dec.MarchJune
(In billions of tolars, end of period)
Foreign assets104.0190.1193.3216.5222.3250.9233.4227.9315.0329.8386.0455.4
Of which:
Convertible foreign exchange101.5174.8177.5197.5201.8227.2205.9221.4309.5322.6376.3446.6
Investment in foreign treasury bills6.711.612.315.318.026.330.034.042.354.768.294.2
Claims on central government18.815.615.615.515.715.315.515.815.715.515.816.1
Claims on deposit money banks16.029.919.518.231.843.143.428.243.215.714.018.5
Of which:
Lombard0.40.00.00.00.00.20.30.30.30.21.00.9
Liquidity loans13.613.814.411.29.77.710.35.10.61.30.60.3
Repurchase agreements1.512.63.95.611.316.818.616.018.413.611.311.7
Assets = Liabilities138.8235.6228.4250.2269.8309.2292.4271.9373.9361.0415.8490.0
Reserve money51.380.578.390.991.4100.899.9104.5102.2116.6117.3127.4
Of which:
Currency outside banks32.747.342.852.254.060.055.861.959.566.869.170.0
Deposit money banks’ cash2.13.63.44.13.64.33.74.24.15.04.94.8
Deposit money banks’ deposits15.628.530.933.432.535.239.237.036.743.141.350.7
Bonds50.499.899.0107.3110.9126.7116.193.9151.6178.4232.4264.0
Import and restricted deposits0.41.81.01.00.91.91.10.50.70.80.80.8
Foreign liabilities1.50.90.80.60.70.50.50.40.40.20.00.0
Central government deposits6.027.423.624.637.747.533.830.477.922.314.543.1
Capital accounts29.327.222.622.626.831.838.639.739.843.350.350.4
Of which: SDR allocation4.64.74.54.44.54.85.05.14.95.25.45.5
Other items (net)-0.1-2.03.23.11.50.02.32.71.4-0.60.54.1
Memorandum items:
Reserve money51.380.578.390.991.4100.899.9104.5102.2116.6117.3127.4
Net foreign assets102.5189.1192.5215.8221.6250.3232.9227.5314.6329.6385.9455.4
Net domestic assets-51.2-108.5-114.2424.9-130.3-149.5-133.0-123.0-212.5-213.0-268.6-328.0
(Annual percentage change)
Reserve money growth38.256.971.056.362.325.227.614.911.815.717.522.0
Contributions to growth
Net foreign assets85.4169.0195.2137.4118.676.051.612.8101.778.6153.3218.1
Net domestic assets-47.2-111.8-124.1-81.1-56.2-51.0-24.02.0-90.0-63.0-135.8-196.2
Source: Data provided by the Bank of Slovenia according to IFS classification.
Source: Data provided by the Bank of Slovenia according to IFS classification.
Table 43.Slovenia: Balance Sheet of Deposit Money Banks, 1993-June 1997(In billions of tolars, end of period)
19931994199519961997
MarchJuneSep.Dec.MarchJuneSep.Dec.MarchJune
Reserves55.4114.5117.5120.3121.9146.6138.3126.1170.9209.0265.0304.1
Currency2.13.63.44.13.64.33.74.24.15.04.94.8
Deposits with central bank53.3110.9114.1116.2118.3142.3134.6122.0166.7204.0260.1299.4
Foreign assets136.2239.3235.8238.8257.1271.7314.2339.9332.5334.0302.2284.8
Claims on nonresident banks130.4202.7199.3198.4216.3226.5261.6282.3276.2289.6253.1232.3
Claims on nonresident nonbanks5.736.636.440.440.845.252.657.656.444.549.152.5
Claims on central government208.1255.2254.3257.9278.0315.5321.5309.9315.2319.4326.9344.2
Government securities188.7224.9224.6225.8232.7264.6268.0271.2274.7278.7285.0287.8
Loans and advances19.430.229.732.245.350.953.538.740.540.741.956.4
Claims on National Bank of Yugoslavia52.651.750.746.044.130.131.030.730.731.131.231.0
Claims on private sector316.5417.5445.6504.8544.8594.1644.3701.9698.8716.8724.4743.3
Businesses (corporate)261.2325.9345.6387.3402.5433.6467.8504.0494.2509.6514.9519.8
Private households55.291.6100.0117.5142.3160.5176.5197.9204.6207.2209.5223.4
Claims on nonmonetary financial institutions2.05.05.15.95.511.57.58.010.48.38.710.4
Assets - Liabilities7711,0831,1091,1741,2511,3691,4571,5171,5591,6191,6581,718
Deposit liabilities399.3574.8612.8659.4686.8744.4785.4824.3841.6909.1938.2966.4
Demand deposits64.492.287.2105.0101.1115.5106.6116.2115.7133.9129.1147.8
Foreign currency deposits197.0236.8241.2262.7281.2316.6341.0345.9355.5369.3366.9362.7
Time deposits103.7198.6232.2229.7243.4251.4271.9290.8298.9334.5363.2368.2
Savings deposits29.941.947.056.355.454.759.665.165.865.273.281.8
Margin deposits4.35.45.35.75.76.36.36.45.76.25.86.0
Money market instruments16.412.513.015.317.727.022.816.717.513.214.314.4
Bonds2.68.39.511.514.318.119.520.019.923.824.728.0
Import and restricted deposits9.510.313.113.813.011.014.919.314.417.019.418.9
Foreign liabilities139.6159.2149.8161.9166.2186.9201.5168.9192.9206.4193.7187.2
Nonresident banks114.7128.6119.2125.7129.0146.9161.6128.4149.5156.2141.4134.6
Nonresident nonbanks24.930.530.636.237.240.039.940.543.550.152.252.6
Central government deposits57.979.079.780.091.483.389.7142.8127.2134.0136.0137.9
Government lending funds2.44.96.16.27.08.39.111.011.612.314.913.1
Credit from the central bank15.529.619.318.030.141.738.328.542.515.313.718.2
Liabilities to nonmonetary financial institutions9.914.716.519.017.227.330.433.138.644.645.564.4
Capital accounts151.1233.3235.5242.9260.1274.4293.1298.3303.3299.1310.3323.9
Other items (net)-33.5-43.3-46.6-54.3-52.3-52.9-48.0-46.2-51.1-56.2-52.2-54.5
Source: Data provided by the Bank of Slovenia according to IFS classification.
Source: Data provided by the Bank of Slovenia according to IFS classification.
Table 44.Slovenia: Selected Interest Rates, 1993-June 1997 1/(Annualized, in percent)
19931994199519961997
MarchJuneSep.Dec.MarchJuneSep.Dec.MarchJune
Interbank market rate
Real 2/12.88.34.4
Nominal39.129.016.07.39.315.915.518.010.510.29.89.6
Deposit rates
Demand deposits9.48.34.71.52.45.31.41.41.41.41.41.0
Time deposits (31-90 days)
Real7.97.87.26.26.26.24.84.94.94.94.93.7
Nominal33.028.119.210.112.920.817.818.411.511.213.912.9
Time deposits (over 1 year)
Real11.211.010.49.49.59.47.27.27.27.17.16.2
Nominal37.131.922.713.516.324.420.621.013.913.616.315.6
Foreign exchange deposits6.55.25.44.74.84.23.13.03.13.02.93.0
Lending rates
Short term
Real20.416.915.213.812.612.511.811.611.611.511.110.1
Nominal48.638.928.018.019.728.025.826.018.618.320.719.8
Long term
Real21.217.316.715.214.213.612.812.712.612.512.211.3
Nominal49.639.429.719.521.329.226.927.219.719.321.821.2
Consumer credits
Real19.316.314.212.712.111.710.610.610.810.39.98.6
Nominal47.238.226.916.919.127.124.424.917.817.019.318.2
Bank of Slovenia interest rates
Lombard rate21.317.217.011.011.011.011.011.011.011.011.011.0
Penalty rate
Real 2/25.825.025.0
Nominal55.348.538.932.824.331.830.530.924.324.126.626.9
Liquidity loans (overnight)
Real 2/9.05.85.0
Nominal34.425.716.79.08.510.510.513.013.010.510.510.5
Tolar bills (14 days)
Real 2/8.88.05.5
Nominal34.228.317.26.55.55.55.56.06.05.05.05.0
Foreign exchange bills (60 days)6.75.24.74.23.93.83.23.33.03.13.13.0
Source: Bank of Slovenia.

Nominal rates are calculated by adding a “revaluation clause” to the real component. The revaluation clause is calculated on the basis of past inflation (one-month through May 1995, average of 3 months through January 1996, average of 4 months through November 1996, average of 6 months through April 1997, and average of 12 months thereafter).

Interest rates on financial assets with less than one-month maturity began to be determined in nominal terms in May 1995.

Source: Bank of Slovenia.

Nominal rates are calculated by adding a “revaluation clause” to the real component. The revaluation clause is calculated on the basis of past inflation (one-month through May 1995, average of 3 months through January 1996, average of 4 months through November 1996, average of 6 months through April 1997, and average of 12 months thereafter).

Interest rates on financial assets with less than one-month maturity began to be determined in nominal terms in May 1995.

Table 45.Slovenia: Balance of Payments, 1993-July 1997
19931994199519961997

July
(In millions of U.S. dollars)
Current account191.9600.1-22.839.0-84.2
Trade balance-154.2-337.5-954.3-881.7-575.0
Exports f.o.b.6,082.96,830.38,350.28,370.04890.5
Imports f.o.b.-6,237.1-7,167.8-9,304.5-9,251.7-5,465.6
Services375.3675.8631.1704.2369.2
Exports1,392.71,804.32,022.92,126.91149.8
Of which:
Transportation446.2486.3504.8480.4247.9
Travel734.1911.31,082.41,229.9667.8
Construction0.0125.1135.593.647.7
Imports-1,017.3-1,128.5-1,391.8-1,422.6-780.6
Income-51.4169.6209.5154.975.6
Receipts114.7334.3439.0419.5136.5
Expenditures-166.0-164.7-229.4-264.6-14.5
Current transfers22.292.290.861.646.0
Capital and financial account 1/-202.0-737.0170.4-34.3141.9
Capital account4.1-4.4-17.9-4.6-2.0
Capital transfers4.7-2.8-15.6-2.1-0.9
Nonproduced nonfinancial assets-0.6-1.6-2.3-2.5-1.0
Financial account 1/-206.1-732.6188.2-29.7143.9
Direct investment111.3131.0170.5179.5205.9
Portfolio investment3.1-32.5-13.5638.0226.2
Other investment-209.2-188.7266.7-260.6680.7
Assets-313.5-353.5-348.8-401.5500.9
Commercial credits93.3-0.10.0-170.1-4.4
Loans11.5-12.1-14.4-5.1-39.4
Currency and deposits-383.7-231.5-181.9-387.7559.4
Other assets-34.6-109.9-152.5161.4-14.6
Liabilities104.3164.9615.4140.9179.8
Commercial credits-13.0-11.1-3.712.32.6
Loans161.2333.4572.2-11.7153.0
Deposits-40.319.839.259.224.4
Other liabilities-3.7-177.27.781.1-0.2
Official reserves (increase -)-111.3-642.4-235.4-586.6-969.0
Net errors and omissions10.1136.9-147.6-4.7-56.4
(Percentage change)
Memorandum items:
Merchandise exports 2/-9.012.322.30.2-1.4
Merchandise imports 2/5.914.929.8-0.6-0.1
Tourism receipts9.424.118.813.6
(In percent of GDP)
Trade balance-1.2-2.3-5.1-4.8
Current account1.54.2-0.10.2
Capital and financial account 1/3/-1.6-5.10.9-0.2
Change in official reserves0.94.51.33.2
GDP (in billions of US$)12.714.418.718.6
Source: Bank of Slovenia.

Excludes Slovenia’s share of debt associated with the 1988 New Financing Agreement as settled in June 1996.

Data for 1997 are compared to Jan-July 1996.

Includes net errors and omissions.

Source: Bank of Slovenia.

Excludes Slovenia’s share of debt associated with the 1988 New Financing Agreement as settled in June 1996.

Data for 1997 are compared to Jan-July 1996.

Includes net errors and omissions.

Table 46.Slovenia: Direction of Trade, Exports, 1993-July 1997
19931994199519961997

Jan.-July
(In millions of U.S. dollars)
EU 1/3,8474,4805,5755,3673,187
Of which:
Austria303373535551323
France528586681598291
Germany1,7982,0682,5082,5451,473
Italy7569231,2121,103762
United Kingdom14820822916289
EFTA 1/6575878350
Of which:
Switzerland5258716841
CEFTA261308403451261
Czech and Slovak Republics86113184204115
Hungary889911510564
Poland879610514282
Others1,9101,9652,2512,4101,377
Of which:
U.S.A216250261246143
former U.S.S.R.298316375390774
countries of former SFRY9641,0401,2091,385227
Total6,0836,8288,3168,3104,875
(In percent)
EU 1/63.265.667.064.665.4
Of which:
Austria5.05.56.46.66.6
France8.78.68.27.26.0
Germany29.630.330.230.630.2
Italy12.413.514.613.315.6
United Kingdom2.43.02.81.91.8
EFTA 1/1.11.11.01.01.0
Of which:
Switzerland0.90.80.90.80.8
CEFTA4.34.54.85.45.4
Czech and Slovak Republics1.41.72.22.52.4
Hungary1.41.41.41.31.3
Poland1.41.41.31.71.7
Others31.428.827.129.028.2
Of which:
U.S.A.3.63.73.13.02.9
former U.S.S.R.4.94.64.54.715.9
countries of former SFRY15.815.214.516.74.7
Total100.0100.0100.0100.0100.0
Sources: Statistical Office; and Bank of Slovenia.

Former EFTA countries are included in EU data.

Sources: Statistical Office; and Bank of Slovenia.

Former EFTA countries are included in EU data.

Table 47.Slovenia: Composition of Exports, F.O.B., 1993-July 1997
19931994199519961997

Jan.-July
(In millions of U.S. dollars)
Food and live animals239274263264139
Beverages and tobacco4550517240
Crude materials, edible, except fuels10813117113998
Mineral fuels, lubricants, and related materials31376997750
Animal and vegetable oils and fats77797
Chemicals552706871881528
Manufactured goods classified by material1,5861,8662,3732,2771,311
Machinery and transport equipment1,6642,0672,6142,7731,675
Miscellaneous manufactured goods1,5571,6361,8481,8151,026
Others11141811
Total 1/6,0836,8288,3168,3104,875
(In percent)
Food and live animals3.94.03.23.22.9
Beverages and tobacco0.70.70.60.90.8
Crude materials, edible, except fuels1.81.92.11.72.0
Mineral fuels, lubricants, and related materials5.21.11.20.91.0
Animal and vegetable oils and fats0.10.10.10.10.1
Chemicals9.110.310.510.610.8
Manufactured goods classified by material26.127.328.527.426.9
Machinery and transport equipment27.430.331.433.434.4
Miscellaneous manufactured goods25.624.022.221.821.0
Others0.20.20.20.00.0
Total100.0100.0100.0100.0100.0
Source: Statistical Office.

These totals may differ from those compiled by the Bank of Slovenia for balance of payments.

Source: Statistical Office.

These totals may differ from those compiled by the Bank of Slovenia for balance of payments.

Table 48.Slovenia: Decomposition of U.S. Dollar Export Values, 1993-July 1997
19931994199519961997

Jan-July 1/
(Index: 1993=100)
Total export value100.0112.2136.7136.6137.4
Price100.0107.0129.4130.4119.7
Of which:
Inter-currency valuation100.0101.2110.6107.897.8
Partner country prices100.0105.7117.0121.0122.4
Volume100.0104.9105.6104.8114.7
(Percent change)
Total export value-8.912.221.8-0.10.6
Price0.07.020.90.8-8.2
Of which:
Inter-currency valuation-5.81.29.3-2.5-9.3
Partner country prices6.25.710.73.41.2
Volume-9.24.90.7-0.89.5
Source: Bank of Slovenia, Statistical Office.

In 1997, percentage change with respect to the same period in the previous year.

Source: Bank of Slovenia, Statistical Office.

In 1997, percentage change with respect to the same period in the previous year.

Table 49.Slovenia: Direction of Trade, Imports, 1993-July 1997
199319941995199619961997
January-July
(In millions of U.S. dollars)
EU 1/4,2665,0526,5326,3603,6973,767
Of which:
Austria553756919835492454
France522613798925502598
Germany1,6261,7342,2062,0441,2121,159
Italy1,0511,2581,6111,593927931
United Kingdom103130190208118138
EFTA 1/135188237249155124
Of which:
Switzerland12715419917810997
CEFTA331451634616343394
Czech and Slovak Republics152236329329191197
Hungary165193267239125166
Poland142238482732
Others1,7691,6132,0892,1971,2411,304
Of which:
Japan12512615716397104
U.S.A.188197291325174170
former U.S.S.R.217169275236138166
countries of former SFRY696584671709401348
Total imports6,5017,3049,4929,4215,4365,589
(In percent)
EU 1/65.669.268.867.568.067.4
Of which:
Austria8.510.49.78.99.18.1
France8.08.48.49.89.210.7
Germany25.023.723.221.722.320.7
Italy16.217.217.016.917.116.7
United Kingdom1.61.82.02.22.22.5
EFTA 1/2.12.62.52.62.92.2
Of which:
Switzerland2.02.12.11.92.01.7
CEFTA5.16.26.76.56.37.0
Czech and Slovak Republics2.33.23.53.53.53.5
Hungary2.52.62.82.52.33.0
Poland0.20.30.40.50.50.6
Others27.222.122.023.322.823.3
Of which:
Japan1.91.71.71.71.81.9
U.S.A.2.92.73.13.43.23.0
former U.S.S.R.3.32.32.92.52.53.0
countries of former SFRY10.78.07.17.57.46.2
Total imports100.0100.0100.0100.0100.0100.0
Sources: Statistical Office; and Bank of Slovenia.

Former EFTA countries are included in EU data.

Sources: Statistical Office; and Bank of Slovenia.

Former EFTA countries are included in EU data.

Table 50.Slovenia: Composition of Imports, C.I.F., 1993-July 1997
19931994199519961997

Jan.-July
(In millions of U.S. dollars)
Food and live animals478555637637351
Beverages and tobacco4447616032
Crude materials, edible, except fuels345473620476284
Mineral fuels, lubricants, and related materials700521624755448
Animal and vegetable oils and fats2330383923
Chemicals7508911,1451,125677
Manufactured goods classified by materials1,1471,4191,8761,8561,130
Machinery and transport equipments1,9692,3243,2053,1751,910
Miscellaneous manufactured goods7838001,0091,289731
Others262245277105
Total 1/6,5017,3049,4929,4215,591
(In percent)
Food and live animals7.47.66.76.86.3
Beverages and tobacco0.70.60.60.60.6
Crude materials, edible, except fuels5.36.56.55.15.1
Mineral fuels, lubricants, and related materials10.87.16.68.08.0
Animal and vegetable oils and fats0.40.40.40.40.4
Chemicals11.512.212.111.912.1
Manufactured goods classified by materials17.719.419.819.720.2
Machinery and transport equipments30.331.833.833.734.2
Miscellaneous manufactured goods12.010.910.613.713.1
Others4.03.42.90.10.1
Total100.0100.0100.0100.0100.0
Source: Statistical Office of the Republic of Slovenia.

These totals may differ from those compiled by the Bank of Slovenia for balance of payments.

Source: Statistical Office of the Republic of Slovenia.

These totals may differ from those compiled by the Bank of Slovenia for balance of payments.

Table 51.Slovenia: Decomposition of U.S. Dollar Import Values, 1993-July 1997
19931994199519961997

Jan.-July 1/
(Index: 1993=100)
Total import value100.0112.4146.0144.9147.4
Price100.0102.0119.2117.9108.7
Of which:
Inter-currency valuation100.0101.0109.1106.897.7
Partner country prices100.0101.0109.3110.4111.3
Volume100.0110.2122.5122.9135.6
(Percent change)
Total import value5.812.429.9-0.80.03
Price-10.02.016.9-1.1-7.8
Of which:
Inter-currency valuation-5.61.08.0-2.1-8.5
Partner country prices-4.71.08.21.00.8
Volume17.810.211.20.410.3
Sources: Bank of Slovenia and Statistical Office.

In 1997, percentage change with respect to the same period in the previous year.

Sources: Bank of Slovenia and Statistical Office.

In 1997, percentage change with respect to the same period in the previous year.

Table 52.Slovenia: Services Balance, 1993-July 1997(In millons of U.S. dollars)
19931994199519961997

Jan.-July
Services, net375676631704369
Credit1,3931,8042,0232,1271,150
Transport446486505480248
Travel7349111,0821,230668
Tourism7349111,0821,230668
Communications services51312149
Construction services01251369448
Insurance services11110
Financial services778116
Computer and information services55122920
Royalties and license fees43463
Other business services185244247242136
Operational leasing services301113115
Merchanting468110912372
Miscellaneous business, professions, and technical services10915312510860
Personal, cultural, and recreational services66596
Government services1311115
Other services00000
Debit-1,017-1,129-1,3921,423-781
Transport-389-418-435-405-194
Travel-305-374-524-542-311
Tourism-245-314-461-479-278
Communications services-2-6-10-15-10
Construction services0-3-24-36-25
Insurance services-2-1-2-2-1
Financial services-14-12-15-20-11
Computer and information services-18-19-27-31-20
Royalties and license fees-13-16-23-27-18
Other business services-257-249-297-309-169
Operational leasing services-78-60-56379-18
Merchanting-69-69-78-79-48
Miscellaneous business, professions, and technical services-110-120-163-192-103
Personal, cultural, and recreational services-10-13-19-22-14
Government services-7-16-16-14-7
Other services00000
Source: Bank of Slovenia.
Source: Bank of Slovenia.
Table 53.Slovenia: International Liquidity, 1993-July 1997(In millions of U.S. dollars, end of period)
19931994199519961997

July
Bank of Slovenia
Total reserves minus gold7881,4991,8212,2982,945
SDRs00000
Reserve position in IMF1819191920
Foreign exchange7701,4801,8022,2792,925
Other foreign assets 1/11031703440
Use of IMF credit-12-7-4-1
Commercial banks
Foreign exchange7971,2841,6241,8511,100
Short-term liabilities to financial institutions-45-75-52-88-17
Gross foreign exchange reserves 2/1,5672,7643,4264,1304,025
Memorandum item:
Gold 3/0.130.120.130.120.10
Sources: Bank of Slovenia; IMF International Financial Statistics

1996 reflects the release of assets due to the closing of the fiduciary account in Luxembourg following settlement of the 1988 New Financing Agreement in June.

Foreign exchange reserves include currency, deposits abroad and foreign securities. Balances on fiduciary accounts are included in other foreign assets.

Valued according to national practice.

Sources: Bank of Slovenia; IMF International Financial Statistics

1996 reflects the release of assets due to the closing of the fiduciary account in Luxembourg following settlement of the 1988 New Financing Agreement in June.

Foreign exchange reserves include currency, deposits abroad and foreign securities. Balances on fiduciary accounts are included in other foreign assets.

Valued according to national practice.

Table 54.Slovenia: International Investment Position, 1994-96
199419951996
(In millions of dollars)
Net141-232-1,029
Assets5,4506,3306,856
Direct investment abroad281404366
Portfolio investment63108102
Other investment3,6073,9924,092
Reserve Assets1,4991,8272,297
Liabilities5,3106,5627,885
Direct investment in reporting economy1,3311,7451,934
Portfolio investment861121,121
Other investment3,8934,7054,830
(In percent of GDP)
Net1.0-1.2-5.5
Assets37.933.836.4
Direct investment abroad2.02.21.9
Portfolio investment0.40.60.5
Other investment25.121.321.7
Reserve Assets10.49.712.2
Liabilities36.935.041.8
Direct investment in reporting economy9.39.310.3
Portfolio investment0.60.65.9
Other investment27.125.125.6
Source: Bank of Slovenia.
Source: Bank of Slovenia.
Table 55.Slovenia: External Debt, 1993-July 1997
19931994199519961997

July
(In millions of U.S. dollars)
Medium-and long-term 1/1,7442,1722,9163,9603,872
Public and publicly guaranteed1,2061,3311,4372,0252,078
Official creditors723749702770690
Multilateral 2/442472482541524
IBRD129143165153144
EBRD15512715898
EIB196213235279273
IFC80493314
EUROFIMA363922159
Bilateral281277220229166
Paris Club rescheduled debt234218171181124
Austria232118139
Belgium33332
France333128228
Germany3432278259
Italy28643
Netherlands181614119
Sweden55663
Switzerland1210965
USA10492603426
Paris Club non-rescheduled debt2828000
Private creditors4835827351,2551,388
Bonds0009741,136
Commercial Banks470569725275249
Others13131063
Private non-guaranteed5388411,4791,9351,794
Commercial banks3575861,0441,4321,332
Others181255435503462
Short-term11779504992
Total outstanding debt1,8732,2582,9704,0103,964
(In percent of GDP)
Memorandum items:
Total external debt14.815.715.821.3
Medium- and long-term debt13.815.115.621.0
Source: Bank of Slovenia.

Excludes non-allocated debt of the former SFRY and the IMF through 1995; 1996 excludes non-allocated SFRY debt not yet formally assumed by Slovenia.

Excludes IFC credits from 1995, which are included in private non-guaranteed debt.

Source: Bank of Slovenia.

Excludes non-allocated debt of the former SFRY and the IMF through 1995; 1996 excludes non-allocated SFRY debt not yet formally assumed by Slovenia.

Excludes IFC credits from 1995, which are included in private non-guaranteed debt.

Table 56.Slovenia: External Debt Service: Medium- and Long-Term Debt, 1993-July 1997 1/
19931994199519961997

January-July
PrincipalInterestTotalPrincipalInterestTotalPrincipalInterestTotalPrincipalInterestTotalPrincipalInterestTotal
(In millions of U.S. dollars)
Public and publicly guaranteed967917512862190184742583849247614569214
Official creditors95591541055415913960199167482157528103
Multilateral60441047042112514091424082352358
Of which:
IBRD16112724133721133420133318725
Bilateral3515503512478820108125813340545
Of which:
Concessional0000001125125331435
Private creditors1202123831451459217442617041111
Commercial banks020202072741135452197138846
Other private10131441516525190323365
Private non-guaranteed15346199187492363588544335110145228356339
Commercial banks1404118117940219201582592407531521943262
Other private1351889171572718411126137641377
Total249125374315111426542159701735193928428125553
(In percent of exports of goods and non-factor services)
Memorandum item:
Debt service ratio3.31.75.03.61.34.95.21.56.87.01.88.9
Source: Bank of Slovenia.

Excludes non-allocated debt of the former SFRY and the IMF through 1995; 1996 excludes non-allocated SFRY debt not yet formally assumed by Slovenia.

Source: Bank of Slovenia.

Excludes non-allocated debt of the former SFRY and the IMF through 1995; 1996 excludes non-allocated SFRY debt not yet formally assumed by Slovenia.

1The infrastructure investments are partly financed through borrowing, both at home and abroad, and are to a large extent supported by state guarantees. State guarantees for loans constituted about 5 percent of GDP by the end of 1996 (see also Table 3 in Section III.C). Foreign borrowing constituted 40 percent of outstanding liabilities related to infrastructure projects at the end of 1996.
2The payroll tax that was introduced to compensate for the lowering of employers’ social security contribution rate is not included in gross compensation but in taxes on production, which as a result continued to increase as a share of GDP.
3At end-1995, Slovenia’s total population was 1.99 million. The population is slowly shrinking, mainly due to a low and falling fertility rate that reached 1.29 in 1995, down from 1.42 in 1991 and 2.11 in 1980.
4As of January 1997, the employment register was expanded to include all enterprises—not only enterprises with more than three employees. The Labor Force Survey—conducted every May from 1992 to 1996—will be conducted on a quarterly basis, beginning in the third quarter of 1997.
5See Section IV.D for a discussion on the relationship between inflation and monetary policy.
6Beginning in 1998, a Consumer Price Index (CPI) will replace the Retail Price Index (RPI) as the main gauge of inflation, for instance in the wage indexation clauses.
7The main component of the controlled prices is gasoline, which constitutes almost half of the total. Gasoline prices in Slovenia were raised three times in 1997 by a total of 20 percent, but were still some 40 percent below the average EU level. Other controlled prices are electricity, public services, transport, and basic foodstuffs. Controlled prices will constitute a smaller share in the new CPI.
8The Social Agreement is a tripartite agreement between the government, employers, and labor (the social partners), which gives directions for wage, fiscal, social, and labor market policy. Specifically, it sets a target for wage growth and a minimum wage and may also contain government commitments to impose particular legislative measures. The new Labor Law will change the existing rules governing the relationship between the social partners and, as a result, collective wage agreements will no longer be compulsory.
9Although because of generally higher qualifications of employees, on average, wages in the government sector are higher than those in the productive sector, the base wage in the latter is higher. Government sector workers are vying for parity in base wages.
10Labor Force Survey based rate (see Box 1).
11For a detailed discussion on the extrabudgetary funds, see OECD, Economic Survey, Slovenia, 1997, pp. 57-58.
12For further details on the Paris Club and London Club agreements, see Section V.D.
13For a detailed description of the pension system, see OECD, Economic Survey, Slovenia, 1997, and SM/96/120.
14The Law on the Modifications and Amendments of the Act on Pension and Disability Insurance.
15As pointed out by Begg (“Monetary Policy in Central and Eastern Europe: Lessons After a Half Decade of Transition,” IMF WP/96/108, September 1996), pursuit of multiple nominal anchors has not been unusual in transition economies. Notwithstanding exogenous shocks, stable fiscal balances—as found in Slovenia—have allowed a greater degree of policy freedom, with a monetary anchor seen as a credible stabilization policy. As reserves were accumulated, an exchange rate peg was viewed as a complementary disinflation tool.
16Bole (“Financial Flows in a Small Open Economy: The Case of Slovenia,” draft paper prepared for the Conference on Financial Flows to Transitional Economies, Laxenburg, Austria, May 9–10, 1997) described the measures taken to limit the negative consequences of capital inflows as well as the special attractiveness of the BoS’s unique sterilization instruments and capital controls as a vehicle for managing debt and reducing well-known fiscal costs of sterilization. Given the considerable distortions in the labor and capital markets, Bole takes a decidedly second best argument in his defense of the BoS’s policy to neutralize the effects of these inflows.
17The BoS has estimated its sterilization costs at approximately SIT 8.8 billion or 0.3 percent of GDP in the first eight months of 1997 alone.
18With most deposit rates stated in real terms and indexed to inflation or the exchange rate, interest rates have tended to remain at the upper end of the cartel agreement. The deposit interest rate ceilings have weakened the linkage between interbank rates and commercial market rates (see Section IV.F).
19As a result, monetary conditions tightened, notwithstanding lower real interest rates (Box 3).
20However, as new capital restrictions were imposed in an attempt to stem the inflow of volatile capital, the government took advantage of solid external credit ratings to float two Eurobond issues.
21The M3 projection was calculated with a targeted real GDP growth rate of 4.0 percent, 1996’s inflation rate of 8.8 percent, and an extrapolated downward trend in velocity.
22In December 1995, the BoS introduced “liquidity loans of last resort” for banks under severe liquidity constraints. The “special facility for banks with liquidity problems” was introduced in July 1996; this facility allowed banks that suffered declines in deposits or lacked BoS bills for refinancing to access BoS facilities with the help of participating commercial banks. “Foreign exchange sales for BoS foreign exchange bills” were introduced in September 1995 and allowed banks to buy foreign exchange from the BoS at slightly higher rates than present selling rates in exchange for 120-day BoS foreign exchange bills. The “triple offer” was introduced in April 1996; this instrument allowed banks to sell foreign exchange to the BoS, partly in spot and as a swap operation for four weeks, while the banks subscribed to 180-day BoS foreign exchange bills in the same amount as the original sale.
23These bills effectively reduce the amount of foreign exchange in the market without affecting reserve money of the central bank and can be used as collateral at the BoS’ refinancing facilities as well as fulfill liquidity requirements. Given their deutsche mark denomination, interest costs to the central bank are lower and less upward pressure is placed on tolar interest rates.
24Banks were required to accept 80 percent of the transaction in tolars and 20 percent in 360-day BoS bills; the adjusted warrant also gave commercial banks the option to sell additional foreign exchange back to the BoS (90 percent of the originally auctioned amount) at or above the auction rate floor and allowed the free movement of funds between both the bank/enterprise and bank/bureau markets. The increased use of these options and the implementation of a floor rate contributed to the movement of the tolar outside of its implicit deutsche mark band after August 1997 (Figure 6, upper panel).
25These adjustments in reserve requirements and foreign exchange cover regulations were reviewed in SM/96/120. In 1995, banks complied with the foreign exchange minimum without any adjustment period except for an interval in the fall of 1995 when the volume of reserves necessitated a lengthening of the adjustment period. Banks were also allowed to hold a foreign exchange position 5 percent below the minimum required subject to an interest penalty. In June 1996, banks were obliged to hold at least 30 percent of the foreign exchange minimum in BoS foreign exchange bills by end-1996. This requirement was increased to 60 percent in mid-1997.
26Starting in February 1995, a 40 percent deposit requirement was applied to nontrade related foreign exchange loans with a maturity of less than five years. In July 1996, the maturity on the 40 percent deposit requirement was lengthened to seven years and in December 1996 a 10 percent deposit requirement was introduced for loans with maturities of more than seven years.
27See Coorey, S., M. Mecagni, and E. Offerdal, “Disinflation in Transition Economies: The Role of Relative Price Adjustment,” IMF WP/96/138, December 1996.
28See Bole, V., “Stabilization in Slovenia: From High Inflation to Excessive Inflow of Foreign Capital” in Macroeconomic Stabilization in Transition Economies, edited by Mario Blejer and Marko Skreb, pp. 212-233, (Cambridge University Press, London, U.K.), 1997a.
1Ross, K., “Post Stabilization Inflation Dynamics in Slovenia,” SM/97/292, Section II.
2There is some intermixing in the reporting of foreign direct investment (FDI) and portfolio flows (see paragraph 92).
31In June 1997, this capital restriction was relaxed by exempting from the balancing requirement portfolio investment in shares acquired by nonresidents who undertake in the subsequent seven years not to sell or assign these securities to third parties, except for other nonresidents who make the same seven-year commitment.
32The government also issued an additional Eurobond in June for DM 400 million (approximately US$230 million).
33TOM stands for “Temeljna Obrestna Mera”, which means the “base rate of interest.” The TOM is also known as the R clause. The D clause is related to movements in the tolar/deutsche mark exchange rate.
34The number of previous months used in the calculation of the TOM clause was adjusted from one to three months in June 1995, to four months in February 1996, and to six months in December 1996, before the final change in 1997.
35The new agreement also eliminated the distinction between enterprise and household accounts.
36The spread between deposit and lending rates during 1995 to mid-1997 as reported in the IFS was 5.5-6.0 percent for the Czech Republic, 5.7-6.5 percent for Hungary, 6.4-6.7 percent for Poland, and 6.6-7.4 percent for the Slovak Republic.
37See the chapter Slovenia: Measures and Assessment of External Competitiveness, in the accompanying selected issues paper for further details on the developments in competitiveness since independence.
38This improvement in competitiveness was entirely accounted for by the reduction in the employers’ social security contribution rate from 19.9 percent to 15.9 percent.
39Germany is the single most important export market with a share of Slovenian exports of about 30 percent. That is almost double the share of the second largest trading partner, Italy.
40More than 50 percent of those stays concern visits to Slovenian health resorts.
41The value of goods sold to foreigners through this trade was estimated at US$160 million.
42The term “capital account” in the text refers to “financial and capital accounts” of the Fifth Edition of the Balance of Payments Manual. The size of capital account flows, defined in accordance with the Manual, was relatively minor.
43Slovenia is the highest-rated Central and East European country, rated A3 by Moody’s and single A by Standard and Poor’s (see Euromoney, October 1997).
44Bole (“Financial Flows in a Small Open Economy: The Case of Slovenia,” Conference on Financial Flows to Transitional Economies, Laxenburg, Austria, May 9-10, 1997), in his description of balance of payments trends in 1991-1994, states that the current account surpluses evident during this early period stemmed from “distressed exporters” liquidating their stocks and equipment, thereby causing a capital outflow; the capital account, excluding net errors and omissions, first turned slightly positive in 1995. During the initial stages of stabilization, the capital account was affected by the repatriation of foreign currency by the household sector for the purchase of residences. Since this early period, foreign exchange movements by the household sector have not been as important to the overall capital account.
45In February 1995, the BoS imposed an interest-free 40 percent deposit requirement for foreign financial loans with a maturity of up to 5 years. This requirement was extended to loans up to 7 years in July 1996.
46Until February 1997, all purchases of shares on the secondary market were included in direct investment, making a clear distinction between FDI and portfolio flows impossible. Since then, only purchases involving at least 10 percent ownership have been counted as FDI.
47An offsetting entry was made to the liabilities of commercial banks in the “Other investment” accounts. Also, approximately US$150 million paid into a fiduciary account by the government since 1994 for the unallocated portion of the NFA debt was released. These amounts are reflected in an increase in other assets in 1996.
48As of August 1997, total foreign exchange reserves (US$4.2 billion) slightly exceeded total external debt (US$4.1 billion).
49Allocation of external debt obligations to commercial creditors through assumption of an agreed share of SFRY’s obligations took place under three different bilateral agreements, including the NFA, the Trade and Deposit Facility Agreement (TDF), and the Alternative Participation Instruments Exchange Agreement (API).
50In its Constitution, Slovenia accepted responsibility for all debt of the SFRY for which it was the final beneficiary and an unspecified portion of the unallocated debt.
51In the case of Spain, only notes have been exchanged, given that Slovenia owes no debt.
52The Slovenian government believed that individuals of the SFRY used a portion of the international reserves of the SFRY—of which Slovenia claims a share—to buy back a percentage of the NFA debt in the secondary market. Therefore, it has insisted that these “connected persons” be excluded from all debt agreements.
53Because of the still valid sharing provision under the original NFA agreement, Slovenia could not make cash payments to the consenting creditors to extinguish these arrears.
54“From Associated to Full-Fledged Membership in the European Union,” Ministry of Economic Relations and Development, August 1996.
55The CEFTA agreement was signed in 1992 by the Czech Republic, Hungary, Poland, and Slovakia. Slovenia joined in 1996 and Romania in July 1997.
56The other countries were: the Czech Republic, Estonia, Hungary, and Poland.
57There are presently two laws that govern individual labor rights; one was adopted in 1989 under the former SFRY and the other dates from 1990, with modifications in 1991 and 1993. ILO conventions were put into the 1990 law.
58The guaranteed wage was introduced in 1982 with the intention that it should fully cover the “minimum basket of living.” Due to subsequent changes, the current guaranteed wage covers only about half of the minimum basket, and unemployment assistance is now considered inadequate to cover even the basic needs of individuals. The minimum wage (see Section II.E), which is now set by law, is substantially higher than the guaranteed wage.
59European Bank for Reconstruction and Development, Transition Report 1997.
60This gap is the difference between the total value of the privatization vouchers held by the privatization funds and the presently available equity. Initially, the total value of vouchers had been set equal to the total value of the social capital. However, nationalization of part of the social capital consisting of land, forests, etc., and collusion by the privatization funds to depress auction prices led to a widening gap between the value of remaining vouchers and available equity.
61The commodity exchange, which was established in March 1995, recently filed for bankruptcy. It has 21 members, who mostly trade U.S. dollar and deutsche mark futures.
62The BoS supervises banking institutions in accordance with the Law on Banks and Savings Banks, and the Law on Savings Cooperatives. The Securities Market Agency is responsible for the supervision of investment firms, the Ljubljana Stock Exchange, investment funds, and management companies. Insurance companies are supervised by the Ministry of Finance.
63Legal entities include companies, official institutions, and both bank and nonbank financial institutions.
64These cashless giro payments are approximately 2,000 percent of GDP, versus about 20,000 percent of GDP in developed economies. Cash payments are about 2 percent of GDP versus the industrial country average of 1 percent. Checks account for 5 percent of GDP in Slovenia.
65Logica, a British company with much experience in this area, was chosen as the winning bidder.
66Above average returns of 24.5 and 16.3 percent, respectively, were realized by the two rehabilitated banks.
67The interest rate margin is the ratio between net interest income and gross interest earning assets, in percent.
68Revaluation clauses affect differently the asset and liability sides of banks’ balance sheets. Generally, assets are fully indexed while liabilities are only partially indexed.
69Assets can be classified in five categories from best (A) to worst (E).
70The banking groups are led by Bank Celje, SKB Banka, Banka Koper, and NLB. To form a group, the lead bank has to take a 40 percent interest in the equity of the smaller banks. The group can act as one with regard to its common liquidity position, risk assessment for common clients, and securities market activities.
71At present, only one Slovenian bank, NLB, has a foreign branch in Milan, Italy, which is supervised by the Banca d’Italia as a non-EU-based bank.
72The strategic plan calls for increasing the frequency of on-site inspections from once every two years to once every 18 months by 1999. Under the EU’s PHARE program, the BoS has been receiving assistance from experts from the accounting firm KPMG.
73OECD, Economic Survey, Slovenia, 1997.
74NKBM took over KBNG in January 1995.
75The BoS also created several special refinancing facilities to provide liquidity to these banks.
76The BRA also managed some DM 1 billion in bad assets transferred or acquired under the bond exchange process. Overall, the BRA managed to collect 32 percent of the bad loans in the form of DM 151 million in cash and DM 139 million in shares and equity stakes; DM 58 million was rescheduled.
77The NLB did not technically meet requirements on statutory capital and investments on land, buildings, equipment and equity investments. Therefore the NLB submitted a plan to meet these requirements by end-1998.
78The government had tried to push the full agenda through parliament in 1996-97 as a package, but procedural difficulties and parliamentary resistance had forced a more gradualist approach. As they stand, both the new Foreign Exchange Law and the new Banking Law have passed all governmental procedures and could be in effect by mid-1998.
79The provision creates greater fiduciary responsibility than that found under the normal Company Law on Standards.
80The BoS can impose higher capital adequacy requirements based upon banking activities with higher levels of risk and associated with the attainment of higher order banking licences. Currently, banks need to have a minimum of around US$32 million in capital for a full license. The prudential regulations regarding higher levels of capital adequacy ratios depart from EU practices (OECD, Economic Survey, 1997).
81Foreign exchange transactions in Slovenia are now governed by four separate pieces of legislation, which are nontransparent and contain various gaps i