News & Analysis

IMF: Slovenia should deepen fiscal and structural reforms

Slovenia should take advantage of the positive economic cycle to deepen fiscal and structural reforms, rebuild fiscal buffers, and increase productivity growth, a new report from the International Monetary Fund (IMF) claims.

According to the IMF, a broad-based recovery continued in Slovenia in 2018, lowering unemployment, swinging the headline fiscal balance into surplus, and reducing the public debt ratio. Inflation has been subdued, while the external position has continued to strengthen, reflecting strong exports and continued deleveraging.

Financial sector stability has improved as banks are well capitalised and liquid, and overall asset quality improved. Progress was made in resolving non-performing loans (NPL) and the authorities also implemented macro-prudential policies, and the privatisation of the largest bank advanced.

But while near-term growth prospects are positive, the medium-term outlook is less favourable. In 2019, growth is projected to slow to 3.4 per cent, as export demand eases and capacity constraints becomes more severe. The medium-term outlook is less favourable also due to the rapidly ageing population that will reduce potential growth. Other major risks include trade protectionism, uncertainty in Europe, and weaker-than-expected global demand.