Recently Released Market Study: Slovenia Business Forecast Report Q1 2013

New Country Reports research report from Business Monitor International is now available from Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 05 January 2013

Core Views

We maintain that Slovenia will need an emergency bailout given the dire state of the domestic banking sector. We also forecast the government will miss its fiscal deficit target of 2.9% of GDP in 2013 and forecast the deficit at 3.4% of GDP following a 4.3% shortfall in 2012.

Slovenian consumer price inflation has fallen to 2.7% y-o-y in October after spiking at 3.3% in September and we forecast the rate to fall to a 2.4% by end-2012. This view is supported by our negative growth predictions for 2012, falling oil and gas prices and public sector reforms, which are all likely to drive inflation down.

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Major Forecast Changes

We have revised down our real GDP growth forecasts for 2012 and 2013 to -1.8% and -0.7% from -1.0% and 1.0% respectively in our last quarterly report. This comes as a result of weaker than expected domestic demand in the first half of 2012 and our belief that the government will request a bailout in 2013.

Risks To Outlook

The biggest risk to the Slovenian economy lies abroad. A major deterioration in the eurozone sovereign debt crisis, or even a greaterthan- expected slowdown in the core eurozone nations, would have severe knock-on effects on the Slovenian economy, not only via depressed trade and investment flows, but also via credit channels and broader economic sentiment.

Partial Table of Contents:

Executive Summary

Core Views

Major Forecast Changes

Risks To Outlook

Chapter 1: Political Outlook

SWOT Analysis

BMI Political Risk Ratings

Domestics Politics

Referendum Call Threatens Rating

- A referendum call on government reform packages will threaten Slovenia's credit rating as well as their prospects for economic recovery in 2013. If the plans are rejected deeper fiscal austerity, minimal domestic demand and the spectre of a bailout means continued negative GDP growth will be all but a certainty.

TABLE: POLITICAL OVERVIEW

Long-Term Politics

Political Challenges Amid Economic Slowdown

- Slovenia will continue to enjoy broad-based political stability over the long term. The country's high level of domestic institutional development and full integration with all major Euro-Atlantic institutions including NATO, the EU, eurozone and Schengen Agreement will continue to mitigate major political risks. The likelihood of a structural shift in policy and/or governing institutions is highly unlikely. Nevertheless, we caution that a slowdown in economic growth over the long term will raise challenges to governance, potentially exacerbating political party divisions ahead of election cycles.

Chapter 2: Economic Outlook

SWOT Analysis

BMI Economic Risk Ratings

Economic Activity

Poor Q212 Growth Heralds GDP Downgrade

- The most recent data released by the Statistical Office of the Republic of Slovenia has shown a sharp decline in all components of real GDP growth in the second quarter of 2012, with y-o-y growth sinking to -3.2%. The outlook for the Slovenian economy in 2012 and 2013 is decidedly moribund, with continuing fiscal austerity negatively affecting on private consumption and a threat to the country's sovereign credit rating, contributing to downward pressure on consumer and investor confidence.

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