IMF Executive Board Concludes 2021 Article IV Consultation with the Republic of Slovenia
IMF News, May 26, 2021
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- Published: May 26, 2021
Overview
- The Executive Board concluded the Article IV consultation on May 19, 2021.
- The pandemic is inflicting much suffering, met with "swift, substantial, and well-coordinated policy responses."
- Anti-crisis measures helped preserve jobs, provide liquidity to companies, and provide income support to vulnerable groups.
- Real GDP dropped by 5.5 percent in 2020 due to containment measures.
- Public debt rose to about 81 percent of GDP, from about 65.5 percent in 2019.
- The current account surplus rose to about 7 percent of GDP, driven by an increase of private sector saving relative to investment.
Economic projections and risks
- Staff projections: Real GDP growth of 3.9 percent in 2021 and 4.5 percent in 2022.
- Recovery expected to be driven by a rebound in consumption and investment, including public investment supported by EU funds.
- Outlook is clouded by significant uncertainty and risks are tilted to the downside.
- Key downside risks: delays in mass vaccination, spread of new virus variants, weak external demand, and worsening financial market conditions.
Executive Board assessment — fiscal and public investment implications
- Directors commended authorities for their "swift, substantial, and coordinated policy response."
- Near-term: maintain strong fiscal support with well-targeted policies continuously assessed and adjusted to evolving conditions.
- Once recovery is entrenched: withdraw emergency measures and shift focus toward consolidation.
- The large fiscal deficit should be reduced gradually over the medium term to maintain buffers; fiscal rules should continue to play a strong role.
- Ambitious public investment plans require improved public finance management to mitigate execution risks.
Financial stability and macroprudential considerations
- Although bankruptcies have not increased so far, risks to financial stability have risen.
- Directors stressed the need for continued close monitoring of banks’ asset quality.
- Exit from loan moratoria has started; phasing out of measures should be gradual and well-coordinated to avoid cliff-edge effects.
- Macroprudential policies should be reviewed regularly to balance financial stability and the need for credit to the economy.
Labor market, social, and structural policies
- The pandemic had an uneven impact on employment; those most affected include low-skilled workers, women, and youth.
- Directors encouraged adapting policies to facilitate labor reallocation and provide support to the most affected.
- Active labor market programs could help transition between jobs; supplement with measures to improve the business environment and strengthen the social safety net.
- Directors welcomed focus on digitalization and climate change mitigation.
- Recommendations for green and digital transformation: improve digital infrastructure, build human capital, promote digital inclusion, combine investment in green technologies with taxation of polluting industries.
- The Next Generation EU instrument could play a key role in Slovenia’s digital and green transformation.
- The goal of reaching carbon neutrality by 2050 should combine investment in green technologies with taxation of polluting industries.
Selected economic indicators and key statistics (2018–23, as presented)
- Nominal GDP (EUR millions): 45,863; 48,393; 46,297; 48,522; 51,444; 54,138.
- GDP per Capita (EUR): 22,189; 23,255; 22,090; 23,061; 24,377; 25,607.
- Real GDP (annual percent change): 4.4; 3.2; -5.5; 3.9; 4.5; 3.6.
- Domestic demand (contribution to growth): 5.0; 3.4; -5.9; 4.3; 4.9; (2023 not listed).
- Private consumption (annual percent change): 4.8; -9.8; 4.6; 3.7.
- Public consumption (contribution to growth): 3.0; 1.7; 1.8; 1.5; 1.6; 0.5.
- Gross capital formation (annual percent change): 10.3; -5.8; 9.8; 10.4; 8.4.
- Net exports (contribution to growth): -0.1; 0.1; 0.4; -0.5; -0.4; -0.3.
- Exports of goods and services (annual percent change): 6.3; 4.1; -8.7; 8.8; 6.0; 3.8.
- Imports of goods and services (annual percent change): 7.2; -10.2; 10.5; 7.1.
- Output gap (in percent of potential GDP): 0.3; 0.6; -4.5; -3.5; -1.8; -1.0.
- Consumer prices (national definition, period average): 1.2 (2018 shown; subsequent years not listed).
- Unemployment rate (in percent, ILO definition): 5.1; 5.3.
- Real wages (all sectors): 2.7; 4.0; 3.1; 2.8.
- General government balance 1/ (percent of GDP): 0.7; -8.4; -8.0; -4.8; -3.3.
- Structural balance 2/ (percent of GDP): 0.0; -6.3; -3.9; -2.7.
- Structural primary balance 2/ (percent of GDP): 2.3; -4.7; -4.9; -1.7.
- General government debt 3/ (percent of GDP): 70.3; 65.6; 80.8; 81.8; 80.5; 79.7.
- Credit to the private sector (annual percent change): 2.5; -0.2; 5.8.
- Lending rates 4/: 2.1 (… for later years).
- Deposit rates 5/: 0.2.
- Trade balance (goods and services, percent of GDP): 8.5; 9.7; 7.9.
- Current account balance (percent of GDP): 5.6; 6.5; 6.1.
- Gross external debt (percent of GDP, end-period): 91.9; 90.5; 104.1; 103.1; 98.2; 94.8.
- Nominal effective exchange rate (2010=100): 105.2; 104.8; 106.9.
- Real effective exchange rate (2010=100, CPI-based): 97.9; 97.2; 97.8.
Source: IMF Executive Board Concludes 2021 Article IV Consultation with the Republic of Slovenia (Press Release No. 21/139).
