Return to: Index of "1994 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



U.S. DEPARTMENT OF STATE
SLOVENIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             SLOVENIA

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                    1992      1993      1994 1/

Income, Production and Employment:

Real GDP (1985 prices)               N/A       N/A       N/A
Real GDP Growth (pct.)              -5.4       1.3       6.0
GDP (at current prices):          12,365    12,672    13,800
By Sector:
  Agriculture                        590       563       570
  Energy/Water                       289       322       360
  Manufacturing                    4,095     3,870     3,900
  Construction                       458       521       510
  Rents                            1,445     1,421     1,600
  Financial Services                 409       443       450
  Other Services                   2,637     2,821     3,400
  Government/Health/Education      2,368     2,734     3,000
  Net Exports of Goods & Services     92        50       200
Real Per Capita GDP (1985 base)      N/A       N/A       N/A
Labor Force (000s)                   783       760       748
Unemployment Rate (pct.)             8.3       9.1       9.0

Money and Prices:  (annual percentage growth)

Money Supply (M2)                    2.8       2.5       1.9
Base Interest Rate 3/                 25        18        16
Personal Saving Rate                  48        30        24
Retail Inflation                     201.3      32.3      20.5
Wholesale Inflation                  215.7      21.6      18.5
Concumer Price Index                 201        32        21
Exchange Rate (USD/Sit)
  Official                            83       115       125
  Parallel                            87       117       115

Balance of Payments and Trade:

Total Exports (FOB)                6,681     6,083     6,500
  Exports to U.S.                    195       216       233
Total Imports (CIF)                6,141     6,501     6,696
  Imports from U.S.                  167       188       197
Aid from U.S.                        N/A       N/A       N/A
Aid from Other Countries             N/A       N/A       N/A
External Public Debt               1,741     1,873     2,000
Debt Service Payments (paid)         388       374       390
Gold and Foreign Exch. Reserves    1,163     1,566     2,800
Trade Balance                        791.1    -154.2     -40
  Trade Balance with U.S.             28        28        35


N/A--Not available. 

1/ 1994 figures are all estimates based on available monthly
data in October 1994.







1.  General Policy Framework

    In 1991, Slovenia set out on the path of complete political
and economic transformation.  In the first phase, after market
reforms and a stabilization policy were introduced, the
immediate consequences were predominantly lower employment and
somewhat lower standards of living.  In the second phase, the
positive effects at the macroeconomic level have appeared step
by step.  But Slovenia is still at the beginning with regard to
some crucial elements of its economic transformation, above all
with regard to efficient affirmation of property rights
(privatization, sanctioning of contracts) and the development
of a financial market.

    The main reason for the economic depression in 1991-1992
was a dramatic decrease in aggregate demand (the collapsed
trade flows with other regions of former Yugoslavia, a decrease
of trade with eastern European markets).  Likewise the revival
of activity in 1993 was also caused by the increase of demand. 
The contraction of markets in the former Yugoslavia stopped at
a low level, but the growth of exports to other countries was
high.  A very restrictive monetary policy was loosened up to a
more neutral one.  The credibility of the Slovene currency and
domestic institutions significantly increased.

    After five years of decline, the GDP increased by one
percent in 1993.  In the first eight months of 1994, positive
growth continued, but under conditions of the declining import
of consumer goods and the increasing import of semifinished
materials, while the current balance of payment shows a larger
surplus again.  The actual annual growth rate as of August 1994
was five percent.

    The public debt of the Republic of Slovenia, including
potential obligations stemming from the state succession
negotiations was estimated at 33 percent of GDP at the end of
1993.  For loan servicing, 0.8 percent of GDP or 1.6 percent of
total public receipts was spent in 1993.  Comparable figures
for 1994 are 1.1 and 2.3 percent, respectively.  Slovenia's
public debt is still relatively small.

    The Bank of Slovenia has successfully realized its primary
goals, lowering inflation and supplying the required quantity
of stable money.  Other goals were the decreasing of interest
rates, facilitating liquidity conditions in commercial banks,
and a fluctuation of the tolar's exchange rate on the foreign
exchange market.  The most often used instruments were the
liquidity loans given on the basis of papers of value as
collateral.  Both M1 and primary money increased in real terms
in 1993, while the real growth of money in 1994 is slowing
down.  In the structure of primary money, the share of giro
accounts and bank reserves is increasing at the expense of
currency in circulation.  Financial assets of the population in
banks are increasing very quickly, both in tolar and foreign
exchange deposits.

    Slovenia signed an accession agreement with the GATT on
September 27, 1994.  Slovenia has also started negotiations to
join the new World Trade Organization.


2.  Exchange Rate Policy

    When creating its currency (launched on October 8, 1991),
Slovenia opted for a managed float of the tolar against the
Deutsche mark, rather than a straight peg.  A peg remains the
long term objective.  In real effective terms, the tolar has
appreciated strongly against the mark throughout 1992, by 3.3
percent in 1993, and by an additional 6.8 percent in the first
eight months of 1994.  This is due to a surplus in the balance
of payment as well as to a high net inflow of foreign exchange
in foreign exchange offices in the country.  The mentioned data
are valid for the exchange rate for business transactions,
which grew at a slightly slower pace than the rate of the Bank
of Slovenia ("the official rate").  The latter reflects actual
movements of different money aggregates in the previous month
and is used for administrative purposes only (customs, etc.).


3.  Structural Policies

    Slovenia has made significant progress across a broad
spectrum of structural reforms. Slovenia is undertaking a
rehabilitation and reform of the financial sector and a
privatization of "socially-owned capital" to make the economy
more market-oriented.  Structural reforms in these two areas
are interrelated.  New prudential regulations (e.g.,
provisioning, capital adequacy, large borrower limits) and
accounting standards (e.g., nonaccrual of late interest) were
put in place along with the establishment of Bank of Slovenia
supervision activities.  The necessary legal framework was
erected with the passage of key implementing legislation for
ownership transformation; a bankruptcy law; a company law; a
banking law; and a securities market and mutual fund law.

    With regard to bank rehabilitation, the three most
important banks were put under the rehabilitation program.  By
the end of September 1994, 625 programs for privatization were
submitted to the Rehabilitation Agency.  These programs cover
approximately 850 "socially owned" companies (out of around
2,500).  304 programs were approved (first round of
approvals).  The programs submitted represent about 55 percent
of GDP and an equal percentage of employees.

    In 1993, changes were introduced in the personal income
tax, effective January 1, 1994.  With regard to the corporate
income tax, tax holidays have been eliminated and the
depreciation schedule has been liberalized.  The carry-forward
period for losses has been extended to five years from the
previous regulation that allowed carry-forward for only one
year.  A new corporate income tax law has been prepared and is
expected to become effective in the Fall of 1994 with the rate
lowered from 40 percent to 25 percent.  Overall payroll tax
rates were lowered considerably during 1993, from 50.35 percent
to 44.60 percent on average, as of the second quarter of 1994.

    Prices are mainly market driven.  Prices for electricity,
gas and telecommunications are the only prices still controlled
by the government.


4.  Debt Management Policies

    Public debt of the Republic of Slovenia, including
potential obligations stemming from the succession
negotiations, is estimated at 33 percent of the GDP at the end
of 1993.  For loan servicing, 0.8 percent of GDP or 1.6 percent
of total public receipts was channeled in 1993.  Comparable
figures for 1994 are 1.1 and 2.3 percent, respectively. 
Slovenia's public debt is still relatively small.

    According to the Monthly Bulletin of the Bank of Slovenia
from August 1994, the latest actual data for foreign debt and
foreign exchange reserves are $1,985 million and $2,208
million, respectively.  The debt servicing ratio was 5.4
percent at the end of 1993.

    From a total debt of $1,985 million, $1,891 million
represents long term debt, $84 million accounts for short-term
debt, and $10 million is IMF credit (all data are stipulated
according to the World Bank methodology).  The debt data apply
only to loans used directly by Slovene beneficiaries.  The
division of federal (old Yugoslav) debt (approximately $2.6
billion - obligations to the IMF already excluded) is the
subject of ongoing negotiations on Yugoslav succession.

    The Republic of Slovenia became a member of the IMF in
January 1993.  By the decision of the Executive Board of the
IMF in December 1992, Slovenia was declared a successor state
to a percentage share of assets and liabilities of the former
Yugoslavia.  At the moment of succession, total liabilities
were SDR 51 million dollars, of which disbursed credits
amounted to SDR 25.5.

    A breakdown by creditors of the external long-term debt
follows (millions of dollars): 1) multilateral 442 (IBRD 120,
EBRD 14, EIB 204, IFC 65, EUROFIMA 39); 2) Paris Club 227; 3)
Refinancing: commercial banks 418; 4) Other long-term loans 804.

    Following the Slovene Government's decision of January 13,
1994, payments related to the following obligations are, until
final agreement is concluded, made to a fiduciary account of
the Bank of Slovenia in the Dresdner Bank, Luxembourg SA: 16.39
percent of interest due under the "Yugoslav New Financing
Agreement" (NFA) from 1988 for the amounts for which the
obligor is the National Bank of Yugoslavia; principal and
interest due under the NFA, for live credits only, where the
beneficiary is a Slovene entity; and amounts on deposit with
the Ljubljanska Banka d.d. under the Trade and Deposit Facility
Agreement from 1988.  The balance of this account as of July
31, 1994 is $68 million.


5.  Significant Barriers to U.S. Exports

    Traditionally, Slovenia had a relatively market oriented
economic system with liberalized prices and a high degree of
openness to foreign trade.  With the beginning of its
transition to a market oriented economy, Slovenia gradually
loosened the remaining obstacles in its foreign trade regime. 
However, some statutory barriers to foreign investment remain.

    In October 1994, Slovenia became a member of the GATT. 
Slovenia has started negotiations to join the new World Trade
Organization.  Slovenia had prepared all the necessary measures
to comply with GATT by the first half of 1994.

    Foreign Investment:  Two major barriers to U.S. investment
exist.  First, any company incorporated in Slovenia must have a
managing director of Slovene nationality, or the majority of
the board of directors must be Slovene.  Second, a foreign
registered company or individuals of foreign nationality are
not allowed to buy (own) land in Slovenia.  However, any
company incorporated in Slovenia, regardless of the origin of
its founding capital, may buy real estate in Slovenia.

    Slovenia's exchange system is free of restrictions on the
making of payments and transfers for current international
transactions, following the removal of a restriction limitating
transferability of tolar balances held by certain nonresidents.


6.  Export Subsidies Policies

    Slovenia has no special export subsidies policy.  The
Slovene economy has always been export oriented.  It is driven
by the exchange rate of domestic currency only.  As a fledgling
nation, Slovenia lacks different tools to stimulate exports. 
Slovenia adopted new legislation in 1994 on tax exemptions on
imported inputs.  This helps domestic companies compete with
foreign competition on a more equitable basis.


7.  Protection of U.S. Intellectual Property

    Intellectual property is well protected in Slovenia, and
the governments's commitment to such protection is high.  Two
bills were submitted to the Parliament in 1994.  The bills are
the Act on Protection of Topography of Semiconductors Circuits
(which is harmonized with the American Patent Office) and the
Copyright and Related Rights Act.

    Slovenia is a member of all major relevant conventions such
as the Bern, Paris, WIPO, Madrid Arrangement of Internationally
Registered Marks, PCT, and two classification arrangements:
Locarno, and Nice.  By the end of 1995 Slovenia will fulfill
all obligations from the Uruguay Round's Trade Related Aspects
of Intellectual Propertry Rights agreement (TRIPs), including
Trade in Counterfeit Goods.

    Some years ago, computer software and video piracy was
present in the country.  However, several successful court
cases in the late eighties helped remedy the situation.  The
first and best known case involved the U.S. company Autodesk. 
Today Slovenia's position is comparable to that of the West.


8.  Worker Rights

    a.  The Right of Association

    The Slovene constitution provides that trade unions, their
operation, and their membership shall be free.  Workers, except
for some in the public sector, enjoy the right to strike. 
Virtually all workers, except for the police and military, are
eligible to form and join labor organizations of their own
choosing.

    The former Yugoslav government-sponsored and controlled
unions disappeared with Slovenia's independence in 1991. 
Slovenia now has two main labor groupings, with constituent
branches throughout the country.  There is a third, much
smaller, regional labor union on the Adriatic coast.  Unions
are independent of government and the political parties.  The
constitution provides that the state shall be responsible for
"the creation of opportunities for employment and for work." 
There are no restrictions on affiliating with like-minded
international union organizations.

    b.  The Right to Organize and Bargain Collectively

    Slovenia's economy is in transition from the command
economy of the communist system, which included some private
ownership of enterprises along with state and "social"
ownership.  In the transition to a fully market based economy,
the collective bargaining process is changing.  Formerly, the
Yugoslav government had a dominant role in setting the minimum
wage and conditions of work.  The Slovene government still
exercises this role to an extent, although private businesses,
growing steadily in number, set pay scales directly with their
employees' unions or employee representatives.  The U.SS
Embassy has received no reports of anti-union discrimination.

    c.  Prohibition of Forced or Compulsory Labor

    There is no forced labor in Slovenia.

    d.  Minimum Age for Employment of Children

    The minimum age for employment is 16 years.  Children must
remain in school until age 15.  During the harvest on the farms
younger children do work.  In general, urban employers respect
the age limits.  The constitution specifically prohibits
exploitation of children.

    e.  Acceptable Conditions of Work

    Slovenia has a minimum wage of $240 (gross wage) per month,
with a 40 hour work week.  Slovenia has an active concern for
occupational safety.  In general, Slovene enterprises provide
acceptable conditions of work equal to standards in force in
other European countries.

    f.  Rights in Sectors with U.S. Investment

    The information given above on the five areas of concern
for worker rights, applies equally in all sectors of the
economy.




  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                              0
Total Manufacturing                                   -4
  Food & Kindred Products                    0
  Chemicals and Allied Products             -4
  Metals, Primary & Fabricated               0
  Machinery, except Electrical               0
  Electric & Electronic Equipment            0
  Transportation Equipment                   0
  Other Manufacturing                        0
Wholesale Trade                                        0
Banking                                                0
Finance/Insurance/Real Estate                          0
Services                                               0
Other Industries                                       0
TOTAL ALL INDUSTRIES                                  -4       

Source: U.S. Department of Commerce, Bureau of Economic
Analysis

(###)


To the top of this page