According to the tentative forecasts, the Gross Domestic Product (GDP) of Slovenia in FY2013 will be $46,7 billion. Bearing in mind that approximately 2 million people reside in this country, the GDP per capita will be nearly $22,700. After the recession had hit Europe, the GDP of Slovenia shrank by 7,9%, in 2009. Due to the painstaking efforts of the Slovenian authorities, it increased by 1,2% and 0,6% in the ensuing two years. However, in 2012, Slovenia experienced another onslaught of the economic stasis, and its GDP decreased by 2,5%. In juxtaposition to the gruesome statistics of the GDP growth in 2012, the prospects for 2013 are a little more luminous. Many analysts argue that the darkest moment for the Slovenian economy has passed, but still few can see the green shoots of recovery. It is estimated that the Slovenia's GDP growth in FY 2013 will be negative again (at -1,7%). According to the most conservative forecasts, inflation in Slovenia in 2013 will reach the rate of 2,6%.
Unemployment rate has been skyrocketing in Slovenia since the outbreak of economic crisis. In 2012, 8,2% of the Slovenians could not find a job, and an army of the unemployed is steadily growing into the future. Exact figures for 2013 are not available, but it is estimated that nearly 9% of the Slovenians are unemployed, at present. According to the official website of the Bank of Slovenia, the annual interest rate fell to 2,37% in March 2013, while the monthly basic interest rate remained at 0,2%. In 2001, Slovenia introduced euro as its main currency. In stark contrast to other macroeconomic indicators, foreign exchange rates are easier to trace (but not predict), as they are refreshed every day. As of 23 May, the exchange rate of euro against US dollar was set at 1,2888. In March 2013, Slovenias trade surplus widened to 10,53 million euros. Earlier, the country experienced a severe widening of the trade gap. Slovenias import surplus was fluctuating between 47 million euros, in July 2011, and 215 million euros, in January 2013. The table below illustrates these fluctuations.
Figure 2. Slovenia Balance of Trade, Reprinted from Slovenia Balance of Trade, in Trading Economics, n.d., Retrieved on May 23, 2013 from http://www.tradingeconomics.com/slovenia/balance-of-trade
By and large, any sane economist would not dare say that Slovenian economy is firmly on the mend. On the contrary, there is much speculation that the country might become the sixth piece of the European domino to tumble down. Slovenian authorities have embarked on the fundraiser to pay down its budget deficit and bail out its banks. Although the economy of Slovenia is unlikely to tailspin into chaos, the failure to salvage its banking system could ripple across Europe.
Slovenian authorities nostalgically recollect the days of yore, when budget deficit fluctuated within some 3%. In May 2013, Slovenias budget deficit soared to 7,8%, an unprecedented level even in the non-so-halcyon years of the economic downturn. Under duress of Brussels, Slovenia obliged to reduce its budget deficit significantly, towards the end of 2013. To this end, it has settled on a strategy of selling off some of the countrys biggest companies, raising VAT, and scything public spending. The current fiscal policy of Slovenian government is two-pronged. It aspires to attain structural balance by 2017 (this will enable the lowering of deficit to the level below 3% of the GDP), as well as stabilize government debt at the level below 55% of the GDP, in the long term. The government intends to achieve these goals by means of reducing public expenditure and increasing revenue. There is a paucity of official information about the current government expenditure in Slovenia. As of 2011, the government spending breakdown looked like this: social security (19% of GDP), health (6,9% of GDP), education (6,7% of GDP), and economic affairs (5,8% of GDP). Broad masses of population in Slovenia bear the main brunt of taxation. The taxes that the government imposes on ordinary Slovenians bring the treasury as much as 45% of the overall tax revenues. Business rates represent nearly 7% of the total Slovenias tax income. Value added tax (VAT), excise duty, and other indirect taxes constitute the third largest source of government revenues. VAT is charged at 20% on supplies of commodities and services.
Thus, in order to resuscitate Slovenian economy and prevent the country from descending into chaos, the Slovenian government and central bank should take a series of concerted actions. First of all, it is imperative that they reduce budget deficit at any cost. In order to accomplish this daunting challenge, the increase in VAT and sharp reduction in government spending must be initiated. It is essential that the Slovenian government manage to extricate the country from its overwhelming financial difficulties without falling back on the EU bailout package. Otherwise, it would fail.
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