IMF Executive Board Concludes 2024 Article IV Consultation with Slovenia
IMF News, May 14, 2024
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- Published: May 14, 2024
Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Republic of Slovenia on Friday, May 3, 2024.
- Slovenia’s economy recovered well from the pandemic, then faced spillovers from the war in Ukraine and severe flooding in August 2023.
- Authorities estimated direct flood damages at almost 5 percent of GDP; the cost of upgrading infrastructure to be more climate resilient is estimated to be much higher.
- Inflation has fallen from earlier highs as commodity price pressures eased and tighter monetary policy fed through to prices.
- It is expected that the next Article IV consultation with the Republic of Slovenia will be held on the standard 12‑month cycle.
Executive Board Assessment
- Directors commended the authorities for Slovenia’s economic resilience and timely and effective policy response to shocks, including the recent devastating floods.
- Directors underscored the need to:
- Maintain prudent fiscal and macroprudential policies.
- Advance structural reforms to boost growth, accelerate income convergence with the EU, and strengthen climate resilience.
- Fiscal policy views:
- Stronger medium‑term fiscal consolidation and fiscal reforms are important to rebuild fiscal space and underpin debt sustainability, especially given the expected increase in age‑related spending.
- Directors called for expenditure‑driven consolidation, accompanied by pension, health, tax, and public sector wage reforms.
- Eliminating remaining pandemic and energy‑related measures would support consolidation.
- Directors welcomed transparent handling of flood‑related spending and underscored the need for careful prioritization and phasing.
- Directors recognized potential negative effects of the new bank asset tax and agreed that it should be allowed to lapse after the allotted 5‑year period.
- With expected increases in public investment, Directors recommended enhancing the efficiency of capital spending by implementing recommendations from the recent Public Investment Management Assessment.
- Financial sector views:
- The banking system appears sound, with strong profitability, capital, and liquidity, and with low non‑performing loans.
- High interest rates have increased repayment and rollover risks, warranting continued close monitoring of bank assets.
- The Bank of Slovenia’s macroprudential stance is appropriate; the planned increase in the neutral countercyclical capital buffer will help strengthen the banking system’s capacity to respond to adverse shocks.
- Directors welcomed progress on strengthening the AML/CFT framework.
- Structural and climate policy views:
- Directors called for structural reforms to boost productivity growth, supported by the EU‑backed National Recovery and Resilience Plan.
- Key reforms highlighted: address skill mismatches, improve regulatory quality, deepen capital markets, reduce the tax wedge on labor, invest in the digital and green transitions, and prepare a national climate adaptation strategy.
Economic Outlook and Risks
- Growth and inflation projections:
- Growth is expected to increase to about 2 percent in 2024, led by domestic demand, including higher flood‑related investment, and higher consumption as real wages recover.
- Inflation is projected to decline to below 3 percent by end‑year and to 2 percent in 2025.
- Risk environment:
- External risks: intensification of regional conflicts, renewed commodity price volatility, and lower external demand.
- Supply chain disruptions: pose risks but may create nearshoring opportunities for Slovenia.
- Labor shortages and broader capacity constraints: could affect post‑flood reconstruction or undermine disinflation.
- Severe weather events remain a risk.
Selected Economic Indicators, 2020–25 (annual percentage change unless noted)
- Real GDP: 2020: -4.2; 2021: 8.2; 2022: 2.5; 2023: 1.6; 2024: 2.0; 2025: (not shown)
- Domestic demand (contribution to growth): 2020: -3.9; 2021: 9.2; 2022: 3.5; 2023: -1.2; 2024: 3.7; 2025: 3.0
- Private consumption: 2020: -6.5; 2021: 10.3; 2022: 3.6; 2023: 1.3; 2024: 2.6
- Public consumption: 2020: 4.2; 2021: 6.1; 2022: -0.5; 2023: 2.4; 2024: 5.4
- Gross capital formation: 2020: -6.3; 2021: 13.9; 2022: 7.9; 2023: -9.8; 2024: 12.2; 2025: 5.0
- Gross fixed capital formation: 2020: -7.2; 2021: 12.6; 2022: 9.5; 2023: 5.9; 2024: 3.1
- Net exports (contribution to growth): 2020: -0.3; 2021: -1.0; 2022: 2.8; 2023: -1.7; 2024: (not shown)
- Exports of goods and services: 2020: -8.5; 2021: 14.5; 2022: 7.2; 2023: -2.0; 2024: 2.9; 2025: 4.3
- Imports of goods and services: 2020: -9.1; 2021: 17.8; 2022: 9.0; 2023: -5.1; 2024: 5.2; 2025: 5.1
- Output gap (in percent of potential GDP): 2020: -2.2; 2021: 2.3; 2022: 1.9; 2023: 0.7; 2024: 0.2; 2025: 0.0
- Unemployment rate (in percent, ILO definition): 2020: 4.7; 2021: 4.0; 2022: 3.8; 2023: (not shown)
- Consumer prices (national def., period average): 2020: -0.1; 2021: 8.8; 2022: 7.4; 2023: 2.7; 2024: (not shown)
- Core inflation (period average) 1/: 2020: 1.0; 2021: 6.8; 2022: 7.8; 2023: (not shown)
- General government balance (percent of GDP): 2020: -7.6; 2021: -4.6; 2022: -3.0; 2023: -2.5; 2024: -2.7
- Cyclically‑adjusted general government balance: 2020: -6.6; 2021: -5.6; 2022: -3.8; 2023: -2.8; 2024: -3.1
- Structural primary balance 2/: 2021: -5.2; 2022: -4.4; 2023: -2.9; 2024: -1.4
- General government gross debt (percent of GDP): 2020: 79.6; 2021: 74.4; 2022: 72.5; 2023: 69.2; 2024: 68.1; 2025: 67.4
- Credit to the private sector: 2020: -0.6
- Lending rates 3/: 2020: 1.8; 2021: 4.9; 2022: 5.5; 2024: …
- Deposit rates 4/: 2020: 0.1; 2021: 0.8; 2022: 1.4; 2024: …
- Government bond yield (10-year): 2020: 3.4
- Current account balance (percent of GDP): 2020: 3.3; 2021: 4.5; 2022: 2.1
- Trade balance (goods and services): 2020: -2.1; 2021: 0.3
- Gross external debt (percent of GDP, end-period): 2020: 102.1; 2021: 97.4; 2022: 90.9; 2023: 91.8; 2024: 87.0; 2025: 83.7
- Nominal effective exchange rate (2010=100): 2020: 106.8; 2021: 107.7; 2022: 106.7; 2023: 109.6
- Real effective exch. rate (2010=100, CPI-based): 2020: 98.0; 2021: 97.6; 2022: 96.5; 2023: 99.4
Memorandum items (levels)
- Population (millions): (not shown)
- Nominal GDP (EUR millions): 2020: 47,045; 2021: 52,279; 2022: 57,038; 2023: 63,090; 2024: 66,900; 2025: 69,995
- GDP per capita (EUR): 2020: 22,447; 2021: 24,789; 2022: 27,068; 2023: 29,802; 2024: 31,572; 2025: 33,023
1/ Harmonized Index of Consumer Prices excluding energy and unprocessed food. 2/ Excludes one‑offs and adjusted for calendar year shifts between receipts and expenditures of earmarked EU funds. 3/ Floating or up‑to‑one‑year fixed rate for new loans to NFCs over €1 million. 2024 value shows an average for the first two months. 4/ For household time deposits with maturity up to one year. 2024 value shows an average for the first two months.
Source: IMF Communications Department — Press Release No. 24/158 (May 14, 2024).