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Slovenia: Solid fundamentals protect during the international crisis July 2011 Ministry of Finance...
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Transcript of Slovenia: Solid fundamentals protect during the international crisis July 2011 Ministry of Finance...
Slovenia: Solid fundamentals protect during the international crisis
July 2011
Ministry of FinanceRepublic of Slovenia
2
Table of Contents
Country Overview
Key Strengths
Strong Economic Performance over the Past Years
Policy response to global financial crisis
Financing Programme
3
Key Considerations
Euro area member for over four years (joined January 1st, 2007)
Prudent fiscal policy track record and steady competitiveness position
Low government debt with low borrowing requirement in the future
Sound banking system
Solid economic fundamentals and adequate policy response to crisis to mitigate its impact
Government committed to stability and sustained reform
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Slovenia: Member of the Euro area for 4 years
Population of 2 million
Track record of strong macroeconomic performance
GDP per capita 87 % of EU average
Stable multi-party democracy
Joined the Euro area in January 2007
Joined OECD in June 2010
Austria
Slovenia
Hungary
Croatia
Italy
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A strong sovereign credit in the euro zone
Double A credit rating (Aa2 / AA /AA) Well diversified and open economy
Sustained real convergence
Low public debt burden (38.1 % of GDP in 2010)
ECB eligibility for government paper
Well recognised economic stability
Peer credit ratings
SloveniaAa2 / AA /AA
BelgiumAa1/ AA+/AA+
PortugalBa2/ A- /BBB-
ItalyAa2/A+/AA-
Source: Moody’s (July 12, 2011)/ Standard & Poors/Fitch (July 12, 2011)
Also a strong credit in European Union
Source: Standard&Poor`s, July 12, 2011
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AAA AU; DK; FI; FR; DE; LU; NL; SE; UK
CCC GR
BBB BG; LT
AA+ BEAA SLOVENIA; ESA+ IT; SKA MT; EE; CZ;
BBB- HU, PT
A- PL,CY
BB+ RO, LV
BBB+ IRL
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Industry, agriculture and services value added, 2009
Slovenia has a highly diversified economy
Comparable to EUmember states
Growth is driven by manufacturing and services
Successful and growing tourism industry
Small agricultural sector
Source: SORS
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Export driven economy
Focus on high value-added exports
More than two thirds of exports destined for EU
€ 16 bn exports of goods and services in 2010; 46.8% of GDP
Exports of goods jan 2011 Geographic distribution, 2010
Source: SORS
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Maintaining market share in EU-15
Exports of goods from Slovenia to EU-15 as % share of EU-15 intra-EU imports
Source: Eurostat
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Strong investment over the past years
Source: Eurostat, 21.06. 2011
Current account balance % GDP (2010) Slovenia´s current account balance (% GDP)
Source: Eurostat, 21.06.2011
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Good financial position and sound banking system
Low external indebtedness of the economy
Lowest household indebtedness in EMU 30% of GDP in 2008 and 33% in 2009
Banking sector assets in GDP only one third of EMU average
Banking system’s cross-border indebtedness has fallen from 46% of GDP in 2009 to about 32% at the end 2010
Comfortable banking system capital adequacy of 11.3% and Tier 1 of 9.6% (March 2011)
Short-term net creditor position of domestic banking system vis-a-vis euro area ???
Banking system’s external debt maturity profile is spread out (bulk more than 2 years)
Source:IMF
0
200
400
600
800
1000
1200
1400
1600
Outstanding gross external debt in euro area % GDP (2009)
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Banking system still to catch up
Source: Bank of Slovenia Annual Report 2009; EU banking structures; Statistical Office RS, Eurostat, elaboration by Institue of Macroeconomic Analysis
Total Assets of Financial Credit % GDP, 2009
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Stabilization and gradual recovery in line with major trading partners
Source: Eurostat, 22.06.2011
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Policy to turn the fiscal position and enhance economic potential
2010 Stabilization Program targets return to 3% deficit by 2013
After keeping close to the Program in 2010, a weaker domestic consumption and the need for a systemic bank capitalization prompted the goverment to introduce a supplementary budget to keep the deficit within the Program limits. The supplementary budget is targeting mainly own investments, investment transfers and costs.
Until the budget is enacted by the Parliament, the Ministry of finance used its legal powers to minimize expenditures for wages and salaries and for investements and to keep certain subsidies in check.
The government has already proposed a number of laws that will streamline the management social transfers and has lowered the indexation of pensions to a minimum.
After rejection of 2010 pension reform in a public referendum initiated by the trade unions, the government has reinstated the social dialogue on the issue, intending to propose a new pension law as close to the earliest possible date for the Parliament to pass a new law, which is one year
from the referendum.
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Preventive measures to ensure functioning of banking system in line with EU
In 2010, the government has used, in line with EU Commission reccomendations, guarantees to provide four local banks with necessary liquidity. A portion of guaranteed loans has already been replaced with fresh funding withiout state guarantees.
No other measures were necessary and Slovenian banks have passed the first EBA stress test.
Measures were phased out end 2010.
Stability Programme submitted to EU
General government deficit to return into the scope of Maastricht criteria (3% of GDP) by 2013
Source: Ministry of Finance 27
Withdrawal of fiscal stimulus and consolidation
The Stabilization Program, approved by the EU Council and last updated in April 2011, foresees a gradual, primarily expenditure driven fiscal consolidation over the medium term. Deficit below 3% of GDP by 2013
— Rationalization and discontinuation of inefficient government programs
— Rationalization of cost of public administration
— Rationalization and better targeting of social transfers
— Shifting investment financing towards EU funds
— Increase in excises’ rates and widening social security contribution tax base
Besides the above and continuing the work on pension reform, the goverment is launching a reform of the health sector in order to achieve a higher efficiency, lower unit cost and more equitable access to the public health services.
The government is preparing a liberalization of the labour market.
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Functioning of minority government
At present, Slovenia is run by a minority government, the governing coalition losing two smaller partners out of four. Despite this formal drawback, the regulation proposed so far to the Parliament are being dealt with and several laws from the reform and adjustment package have already been approved and enacted.
The government is preparing a strategy on management and privatization of state assets.
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2011 borrowing requirement
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Max. gross borrowing: 4.2 Bn. EUR
Purpose of borrowing:— Gross borrowing for 2011 central government
budget: 2.9 Bn. EUR— Pre-financing of debt due for redemption in 2012
and 2013: 1.3 Bn. EUR
Already executed borrowing:— Pre-financing of part of 2011 repayments executed
in 2010: 0.3 Bn. EUR
Expected structure of borrowing at the end of 2011:— Short term (end of the year) 30 Ml. EUR— Long term Up to 3 Bn.
EUR
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Further government debt market integration
Established issuer in the Euro debt market
International structure of primary dealers with strong domestic institutions— Abanka; BNP Paribas; Credit Agricole CIB; Commerzbank; Deutsche Bank; Goldman
Sachs; HSBC; JP Morgan; Nova Ljubljanska Banka; RBS; Société Générale CIB; UniCredit Banka Slovenija
Newly issued bonds trading on major international trading platforms— MTS Slovenia (www.mtsslovenia.com ), Bloomberg (SLOREP Govt <GO>), Bondvision— Benchmark size issues to ensure liquidity (minimum € 1 bn)— Bonds in new S&P Eurozone Government Bond Index
MTS Slovenia established since March 2007 (www.mtsslovenia.com) — Currently 17 system participants (14 international and 3 from Slovenia) — 8 bonds on the system (http://www.mtsdata.com/content/data/public/rsl/bulletin/ ,
http://www.mtsdata.com/content/data/public/rsl/fixing/ )
Broaden investor base to increase integration of Slovenia’s signature in the Euro area
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Strong performance and support
Source: MTS Slovenia, Bloomberg, 24 June 2011; Ministry of Finance
Asia0,2%
Austria / Germany
29,2%
Benelux9,4%
CEE2,5%
France11,9%
Iberia1,2%
Italy7,5%
Other EMU1,8%
Rest of the World0,8%
Scandinavia5,6%
Slovenia15,8%
Swiss2,6%
UK / Ireland11,5%
Distribution by region
Bank41,5%
Central Bank3,5%
Fund Manager32,4%
Insurance Company
14,6%
Pension Fund6,4%
Supranational1,0%
Other0,8%
Distribution by investor type
Name RatingsSize EUR
mln Issue Date Maturity Cpn Mid Price Mid Yield
Bid Spr vs MS (at lunch)
Bid Spr vs MS
(current) bps Dur (yrs)
Slovenia 02/12
Aa2/AA/AA 1 05.02.2009 05.02.2012 4,25% 101,600 1,590% 165 bps -26,5 0,6
Slovenia 04/14
Aa2/AA/AA 1,500 02.04.2009 02.04.2014 4,375% 103,185 3,150% 160 bps 95,7 2,6
Slovenia 03/15
Aa2/AA/AA 1,000 17.03.2010 17.03.2015 2,750% 96,955 3,640% 37 bps 114,2 3,4
Slovenia 02/16
Aa2/AA/AA 1,066 17.01.2005 17.02.2016 4,000% 100,480 3,880% - 127,2 4,1
Slovenia 03/18
Aa2/AA/AA 1,000 22.03.2007 22.03.2018 4,000% 98,305 4,290% -8 bps 129,8 5,7
Slovenia 02/19
Aa2/AA/AA 1,000 06.02.2008 06.02.2019 4,375% 99,760 4,410% -3 bps 130,4 6,3
Slovenia 01/20
Aa2/AA/AA 1,500 26.01.2010 26.01.2020 4,125% 96,320 4,650% 68 bps 138,9 6,9
Slovenia 01/21
Aa2/AA/AA 1.500 18.01.2011 18.01.2021 4,375% 97,210 4,740% 125bps 139,8 7,5
Slovenia 09/24
Aa2/AA/AA 1,500 09.09.2009 09.09.2024 4,625% 95,025 5,150% 80 bps 150,2 9,2
Slovenia 03/26
Aa2/AA/AA 1.500 30.03.2011 30.03.2026 5,13% 97,000 5,420% 130bps 170,4 10
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Favourable state budget debt portfolio
Stable debt service profile Most debt denominated in local currency
Source: Ministry of Finance (financing in 2011 included)
Outstanding debt by type of currency (31.12.10)
EUR: 99.8%
USD: 0.0%
Other: 0.2%
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Contact details
Republic of SloveniaMinistry of Finance
Treasury Directorate
Boštjan PlešecDirector [email protected]: +386 1 369 6410
Public Debt Management Department
Marija EberHead of [email protected]: +386 1 369 6442