Chapter 5: Slovenia
(continued)
5.2 Introduction
Political Situation
In June 1991, Slovenia declared its independence from the Yugoslav Federation, and the country was formally recognized by the United Nations and the European Union in January 1992. In the most recent parliamentary elections, held in November 1996, the center-right alliance won exactly half of the seats in the 90-member National Assembly, and formed a centrist coalition government. The strength of the conservative forces within the coalition will likely benefit Slovenia's economic reform, although a more Euro-skeptic position could emerge and might delay Slovenia's harmonization of laws with EU standards. Regardless, it seems the right will speed up the industrial privatization and promote free-trade agreements that are currently in existence with more than 40 countries, including the EU and EFTA countries. It is also highly probable that Slovenia will be accepted in the first wave of EU enlargement scheduled for early next century.
Economic Situation
At the beginning of its independence, Slovenia's economy suffered severe decline. Economic output reached the lowest point ever in 1992, causing unemployment to rise to over 15 percent. Since 1994, many of the economic indicators have shown improvement. However, the rate of GDP growth has slowed from almost 5 percent in 1994 to 2.5 percent in 1996, mirroring a decline in the rate of growth of industrial output, which fell from 6.4 percent in 1994 to 1.5 percent in 1996. There is still a major crisis of competitiveness and a widespread need for restructuring, and industrial output remains 20 percent below the level of 1990.
Despite the economic crisis, the government has managed to hold down the budget deficit, keeping it below 0.5 percent of GDP since 1994. Inflation also decreased significantly from almost 20 percent in 1994 to 10.2 percent in 1996. The unemployment rate, which was 13.5 percent in 1996, is still regarded as quite high, and more jobs are threatened in labor intensive industries. Foreign direct investment peaked in 1995 at USD 176 million and decreased significantly to USD 55 million in 1996.
| TABLE 5.1: KEY ECONOMIC INDICATORS
|
| |
1994 |
1995 |
1996* |
1997* |
|
| GDP growth (%) |
4.9 |
3.5 |
2.5 |
3.5 |
| Inflation (%) |
19.8 |
12.7 |
10.2 |
8.5 |
| Unemployment (%) |
14.4 |
13.9 |
13.5 |
13.8 |
| Exports (mln USD) |
6.8 |
8.3 |
8.5 |
9.1 |
| Imports (mln USD) |
7.3 |
9.5 |
9.5 |
10.1 |
| Budget balance (% of GDP)
|
-0.2 |
0.0 |
-0.3 |
-0.4 |
| Gross debt (bln USD) |
2.3 |
3.0 |
4.2 |
4.6 |
| Annual foreign direct investment inflows (mln USD) |
128 |
176 |
55 |
120 |
*forecast
Source: Business Central Europe, The Annual Report, 1996 |
In 1993, Slovenia signed a trade and cooperation agreement with the EU to improve Slovenia's access to the EU market. By the end of 1995, more than two-thirds of Slovenia's international trade was with members of the European Union. The rest was predominately with the countries of the former Yugoslavia and with members of the Central European Free Trade Agreement (CEFTA).
Slovenia has become a member of the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development. In January 1996, Slovenia become a member of CEFTA and joined the Visegrad countries, Bulgaria and Romania in a free trade union, taking over the presidency at the beginning of 1997 from the Slovak Government.
REC * PUBLICATIONS * EMERGING ENVIRONMENTAL MARKET 2 * SLOVENIA
