{
  "title": "Public Information Notice: IMF Concludes 2003 Article IV Consultation with the Republic of Slovenia",
  "publication": "IMF News, April 25, 2003",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0354",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2003-04-25",
  "sections": [
    {
      "heading": "Background",
      "content": "- EU accession scheduled for May 2004.\n- Sustained real convergence in per capita income to around 70 percent of the EU average; nominal convergence stalled with inflation stuck at about 8 percent since 1997.\n- Prudent macroeconomic policies and gradualist structural reform supported strong growth in the 1990s.\n- High domestic saving ratio and sound fiscal position limited external imbalances.\n- Foreign direct investment was limited until 2000; manufacturing restructured, raised productivity, and remained export-oriented.\n- Capital account transactions fully liberalized; significant fiscal and financial sector reforms implemented, though important challenges remain."
    },
    {
      "heading": "Recent developments (2001–02)",
      "content": "- Economic growth slowed to around 3 percent in 2001-02 due to weak external environment and subdued domestic demand.\n- Export performance:\n  - Export growth slowed as EU demand weakened, partially offset by rapid expansion of exports to southeastern Europe and Russia.\n  - Exports gained market shares in non-EU countries in 2001-02.\n- External position:\n  - With imports growing more slowly than exports and terms of trade improving, the external current account swung into surplus in 2001 and strengthened further in 2002.\n  - Foreign direct investment increased sharply to the equivalent of about 9 percent of GDP in 2002.\n- Inflation and wages:\n  - Disinflation progress slower than envisaged, partly owing to large increases in indirect taxes, oil prices, and non-oil administered prices.\n  - Wage pressures lessened in 2002; real wage increases receded below productivity growth.\n- Monetary and financial conditions:\n  - Real interest rate on 60-day tolar bills exhibited sharp swings, turning negative briefly in late 2001.\n  - Tolar depreciated vis-à-vis the euro continuously at varying rates, around a decelerating trend path.\n  - Privatization receipts of the government were deposited in the Bank of Slovenia (BoS); rest of inflows largely sterilized through open market operations.\n  - Base money growth in 2002 was limited to 8.6 percent.\n  - Domestic credit growth to the private sector and corporate borrowing abroad slowed significantly.\n- Fiscal developments:\n  - General government deficit remained slightly below 1.5 percent of GDP since 2000.\n  - 2001 experienced expenditure overruns; 2002 budget pressure arose from revenue shortfalls due to weak domestic demand.\n  - Government responded with expenditure cuts and upward revision of the fiscal deficit target.\n- Structural reforms and privatization:\n  - De-indexation: as of July 2002, financial contracts with maturity less than one year ceased to be indexed to inflation.\n  - Thirty-nine percent of Nova Ljubljanska Banka (NLB) sold to foreign investors.\n  - Privatization of Nova Kreditna Banka Maribor and Telecom postponed."
    },
    {
      "heading": "Projections and risks (2003–04)",
      "content": "- Growth:\n  - Growth expected to pick up only slightly in 2003 due to uncertainties about EU recovery strength and higher international oil prices.\n  - Real GDP growth projected at 3.8 percent for 2004, based on continued European recovery and strong pickup in private consumption.\n- Current account:\n  - Likely to remain in surplus of about 1.8-2 percent of GDP in 2003-04.\n- Fiscal:\n  - Two-year rolling budget subject to risks; deficit targets of 1.2 percent of GDP in 2003 and 0.9 percent in 2004 are unlikely under present policies.\n- Inflation forecasts:\n  - BoS announced inflation forecasts of 5.3 percent for end-2003 and 3.5 percent for end-2004.\n  - IMF staff projection for end-2004 suggests an outcome of around 4.8 percent unless policies are tightened further."
    },
    {
      "heading": "Executive Board assessment — findings and policy recommendations",
      "content": "- Commendations and overview:\n  - Directors commended prudent macroeconomic management, sustained real convergence in the 1990s, and meeting Maastricht fiscal criteria.\n  - Noted full fiscal consolidation broadly on track, comfortable foreign exchange reserves, strong foreign investment inflows, and productivity-driven export competitiveness.\n- Main policy challenge:\n  - Given EU accession in May 2004 and limited disinflation since 1997, priority is to lower inflation and inflation expectations while entering ERM2 at a viable exchange rate.\n- Indexation:\n  - Widespread indexation (wages, pensions, financial contracts) identified as key factor behind sticky inflation.\n  - Directors encouraged authorities and social partners to eliminate indexation mechanisms to speed up disinflation.\n- Monetary policy and exchange rate:\n  - Sustained monetary policy efforts needed to achieve disinflation.\n  - Directors saw scope for lowering inflation by accepting a stronger tolar, given strong external current account position.\n  - Recommended BoS forecast and monitor a core inflation measure that excludes administered prices, indirect taxes, and oil prices.\n  - Suggested treating inflation goals as targets rather than projections to build credibility.\n- Administered prices:\n  - Cost-push factors should be tackled vigorously.\n  - Welcomed enhanced coordination between government and BoS on administered price adjustments.\n  - Warned that caps on administered price increases should not substitute for policy tightening or lead to losses for service providers.\n- Fiscal policy:\n  - Endorsed medium-term fiscal goal of attaining close to structural balance before adopting the euro.\n  - Noted deficit targets for 2003-04 might not be achieved under present policies; initial adverse fiscal effect of EU accession uncertain.\n  - Urged return in 2004 to previously planned pace of fiscal adjustment.\n  - Recommended medium-term expenditure restraint focus early on wages and social transfers.\n  - Priorities: lower public sector wage increases, maintain freeze on public sector hiring, eliminate wage indexation.\n  - Commended measures to contain public sector wage increases below economy-wide increases and welcomed a social agreement linking wages to the average EU inflation rate.\n  - Encouraged keeping the cost of the new wage structure within the budgeted wage bill for 2004.\n  - Suggested further pension savings by indexing pensions to inflation instead of to wages.\n  - Urged determined pursuit of planned health care reforms.\n- Structural reforms and privatization:\n  - Welcomed significant strides and encouraged maintaining momentum.\n  - Supported initiatives to reduce the state's role in steel and energy sectors and accelerate privatization generally.\n- Financial sector:\n  - Considered banking system generally sound.\n  - Welcomed progress on the authorities' financial sector action plan, strengthening BoS's ability to manage risks.\n  - Stressed importance of monitoring rising foreign currency borrowing by enterprises to contain credit risks.\n  - Observed increased competition from foreign bank entry; encouraged enhancing competitiveness of Nova Kreditna Banka Maribor through private capital infusion.\n  - Endorsed de-indexation of short-term financial contracts in mid-2002 and banks' initiative to offer long-term instruments at nominal rates.\n  - Encouraged elimination of indexation of all financial instruments at an early date."
    },
    {
      "heading": "Selected economic indicators — key figures (1999–2004, as presented)",
      "content": "- Real GDP (annual percent change): 1999: 5.2; 2000: 4.6; 2001: 3.0; 2002: 2.9; 2003 (Proj.): 3.2; 2004 (Proj.): 3.8.\n- Domestic demand (annual percent change): 1999: 9.1; 2000: 1.1; 2001: 0.5; 2002: 2.2; 2003 (Proj.): 3.1; 2004 (Proj.): 4.0.\n- Consumer prices (period average): 1999: 6.1; 2000: 8.9; 2001: 8.4; 2002: 7.5; 2003 (Proj.): 5.7; 2004 (Proj.): 5.0.\n- Consumer prices (end of period): 1999: 8.0; 2000: 7.0; 2001: 7.2; 2002: 5.3; 2003 (Proj.): 4.8.\n- Wages, nominal all sectors (annual percent change): 1999: 9.6; 2000: 10.6; 2001: 11.9; 2002: 9.8; 2003 (Proj.): 7.8.\n- General government balance (percent of GDP): 1999: -0.6; 2000: -1.4; 2001: -2.9; 2002: -1.2; 2003 (Proj.): -0.9.\n- General government debt (percent of GDP): 1999: 24.9; 2000: 25.8; 2001: 27.5; 2002: 28.4; 2003 (Proj.): 26.3.\n- Base money (percentage change, end-period): 1999: 16.4; 2000: 21.4; 2001: 8.6.\n- Credit to the private sector (percentage change, end-period): 1999: 25.0; 2000: 18.4; 2001: 18.3; 2002: 11.1.\n- Rate on 60-day BoS bills (percent): 1999: 7.1; 2000: 8.2; 2001: 10.4; 2002: 8.3.\n- Merchandise exports (millions of U.S. dollars): 1999: 8,623; 2000: 8,808; 2001: 9,343; 2002: 10,473; 2003 (Proj.): 12,149; 2004 (Proj.): 13,208.\n- Merchandise imports (millions of U.S. dollars): 1999: -9,858; 2000: -9,947; 2001: -9,962; 2002: -10,716; 2003 (Proj.): -12,364; 2004 (Proj.): -13,471.\n- Current account balance (millions of U.S. dollars): 1999: -698; 2000: -548; 2001: 31; 2002: 375; 2003 (Proj.): 476; 2004 (Proj.): 441.\n- Gross official reserves (millions of U.S. dollars): 1999: 3,168; 2000: 3,196; 2001: 4,397; 2002: 7,064; 2003 (Proj.): 8,230; 2004 (Proj.): 8,945.\n- External debt (percent of GDP, end-period): Total: 1999: 26.9; 2000: 34.3; 2001: 35.7; 2002: 41.5; 2003 (Proj.): 37.9; 2004 (Proj.): 38.4.\n- External debt service (millions of U.S. dollars): 1999: 840; 2000: 1,012; 2001: 1,652; 2002: 1,820; 2003 (Proj.): 2,014; 2004 (Proj.): 2,310.\n- Tolars per euro (end-period): 1999: 197.3; 2000: 211.5; 2001: 221.4; 2002: 230.3.\n- Nominal effective exchange rate (1998Q1=100, period average): 1999: 96.8; 2000: 90.6; 2001: 85.0; 2002: 81.8.\n- Real effective exchange rate, CPI based (1998Q1=100, period average): 1999: 103.0; 2000: 102.1; 2001: 101.1; 2002: 102.8.\n\nPublic Information Notice: IMF Concludes 2003 Article IV Consultation with the Republic of Slovenia — April 25, 2003. IMF EXTERNAL RELATIONS DEPARTMENT, Public Affairs, Media Relations.\n\n---\n\n Content in this bundle\n\n- Cr03108pdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Republic of Slovenia and the IMF\n- Public Information Notices\n- Article IV\n- Adobe Acrobat Reader\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0354"
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    "Published: April 25, 2003",
    "EU accession scheduled for May 2004.",
    "Sustained real convergence in per capita income to around 70 percent of the EU average; nominal convergence stalled with inflation stuck at about 8 percent since 1997.",
    "Prudent macroeconomic policies and gradualist structural reform supported strong growth in the 1990s.",
    "High domestic saving ratio and sound fiscal position limited external imbalances.",
    "Foreign direct investment was limited until 2000; manufacturing restructured, raised productivity, and remained export-oriented.",
    "Capital account transactions fully liberalized; significant fiscal and financial sector reforms implemented, though important challenges remain.",
    "Economic growth slowed to around 3 percent in 2001-02 due to weak external environment and subdued domestic demand.",
    "Export performance:",
    "External position:",
    "Inflation and wages:",
    "Monetary and financial conditions:",
    "Fiscal developments:",
    "Structural reforms and privatization:",
    "Growth:",
    "Current account:",
    "Fiscal:",
    "Inflation forecasts:",
    "Commendations and overview:",
    "Main policy challenge:",
    "Indexation:",
    "Monetary policy and exchange rate:",
    "Administered prices:",
    "Fiscal policy:",
    "Structural reforms and privatization:",
    "Financial sector:",
    "Real GDP (annual percent change): 1999: 5.2; 2000: 4.6; 2001: 3.0; 2002: 2.9; 2003 (Proj.): 3.2; 2004 (Proj.): 3.8.",
    "Domestic demand (annual percent change): 1999: 9.1; 2000: 1.1; 2001: 0.5; 2002: 2.2; 2003 (Proj.): 3.1; 2004 (Proj.): 4.0.",
    "Consumer prices (period average): 1999: 6.1; 2000: 8.9; 2001: 8.4; 2002: 7.5; 2003 (Proj.): 5.7; 2004 (Proj.): 5.0.",
    "Consumer prices (end of period): 1999: 8.0; 2000: 7.0; 2001: 7.2; 2002: 5.3; 2003 (Proj.): 4.8.",
    "Wages, nominal all sectors (annual percent change): 1999: 9.6; 2000: 10.6; 2001: 11.9; 2002: 9.8; 2003 (Proj.): 7.8.",
    "General government balance (percent of GDP): 1999: -0.6; 2000: -1.4; 2001: -2.9; 2002: -1.2; 2003 (Proj.): -0.9.",
    "General government debt (percent of GDP): 1999: 24.9; 2000: 25.8; 2001: 27.5; 2002: 28.4; 2003 (Proj.): 26.3.",
    "Base money (percentage change, end-period): 1999: 16.4; 2000: 21.4; 2001: 8.6.",
    "Credit to the private sector (percentage change, end-period): 1999: 25.0; 2000: 18.4; 2001: 18.3; 2002: 11.1.",
    "Rate on 60-day BoS bills (percent): 1999: 7.1; 2000: 8.2; 2001: 10.4; 2002: 8.3.",
    "Merchandise exports (millions of U.S. dollars): 1999: 8,623; 2000: 8,808; 2001: 9,343; 2002: 10,473; 2003 (Proj.): 12,149; 2004 (Proj.): 13,208.",
    "Merchandise imports (millions of U.S. dollars): 1999: -9,858; 2000: -9,947; 2001: -9,962; 2002: -10,716; 2003 (Proj.): -12,364; 2004 (Proj.): -13,471.",
    "Current account balance (millions of U.S. dollars): 1999: -698; 2000: -548; 2001: 31; 2002: 375; 2003 (Proj.): 476; 2004 (Proj.): 441.",
    "Gross official reserves (millions of U.S. dollars): 1999: 3,168; 2000: 3,196; 2001: 4,397; 2002: 7,064; 2003 (Proj.): 8,230; 2004 (Proj.): 8,945.",
    "External debt (percent of GDP, end-period): Total: 1999: 26.9; 2000: 34.3; 2001: 35.7; 2002: 41.5; 2003 (Proj.): 37.9; 2004 (Proj.): 38.4.",
    "External debt service (millions of U.S. dollars): 1999: 840; 2000: 1,012; 2001: 1,652; 2002: 1,820; 2003 (Proj.): 2,014; 2004 (Proj.): 2,310.",
    "Tolars per euro (end-period): 1999: 197.3; 2000: 211.5; 2001: 221.4; 2002: 230.3.",
    "Nominal effective exchange rate (1998Q1=100, period average): 1999: 96.8; 2000: 90.6; 2001: 85.0; 2002: 81.8.",
    "Real effective exchange rate, CPI based (1998Q1=100, period average): 1999: 103.0; 2000: 102.1; 2001: 101.1; 2002: 102.8.",
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