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TITLE:  SLOVENIA ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE


                             SLOVENIA

    Slovenia, the most developed republic of the former
Yugoslavia, gained its independence in 1991.  It had the
highest per capita GDP (over $6,000) in Eastern Europe for
1992.  After four years of steep decline in both industrial
production and GDP, the economy is expected to level out in
1993.  GDP in 1993 is projected to fall by two percent, and
unemployment will stay at about 15 percent.  The painful
transition to a market based economy has been exacerbated by
the disruption of intra-Yugoslav trade.

    Slovenia has successfully reoriented much of its trade from
its former Yugoslav neighbors towards Western Europe.  The 1992
imposition of United Nations trade sanctions against Serbia cut
off Slovenia's largest market.  In 1990, 30 percent of
Slovenia's exports went to other former Yugoslav republics.  In
contrast, Slovenia sent 55 percent of its exports to the
European Union in 1992, and only about 20 percent to Croatia
and the other former Yugoslav states.  Slovenia reported a $540
million trade surplus in 1992 and a $135 million trade deficit
for the first six months of 1993.

    The European Union (EU) signed a cooperation agreement with
Slovenia in April 1993, which provided for greater access to
the EU market.  Negotiations on an Association Agreement began
in December 1993.  Also, Slovenia in 1993 entered into trade
agreements with Hungary, the Czech Republic and Slovakia that
provide for gradual elimination of most trade barriers.

    The Bank of Slovenia's tight control of monetary policy has
brought inflation under control, and this has helped the
Slovenian currency, the tolar, to hold its value since its
introduction in October 1991.  Hard currency reserves rose to
nearly $1.5 billion in 1993.  Unsettled issues relating to the
division of the former Yugoslavia debt has caused disbursements
by official creditors to drop by two-thirds since 1991. 
Slovenia and the U.S. Export-Import Bank have not resolved the
issue of arrearages on the Krsko plant financing.

    Slovenia has liberalized prices and implemented many
economic reforms.  A privatization law was passed in November
1992.  Legislation on bankruptcy, company structure reform and
public sector reform is still needed.  The banking system
carries a large amount of non-performing assets, and needs
recapitalization.  In 1992, about 85 percent of employees
worked for socially owned enterprises, while less than five
percent worked for privately owned firms.  The government plans
to privatize some of those socially owned enterprises. 
Slovenia remains relatively attractive to German and other
foreign investors, but U.S. investment is very low.

    Slovenia is now a member of the IMF, but does not have a
Standby Arrangement.  It is a member of the World Bank, and
obtained an $80 million loan for financial rehabilitation. 
Slovenia obtained a $50 million loan from the EBRD for the
railway sector.  Slovenia, currently an observer at the GATT,
began accession negotiations in 1993.

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