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Europe > Slovenia, Republic of

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Cover IMF Staff Country Reports
Euro Area Policies: 2024 Annual Consultation-Press Release; Staff Report; and Statement by the Executive Director for Member Countries
International Monetary Fund. European Dept.
The 2024 Article IV Consultation explains that the euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025. Increasing real wages together with some drawdown of household savings are contributing to consumption, while the projected easing of financing conditions is supporting a recovery in investment. A modest pickup in growth is projected for 2024, strengthening further in 2025. This primarily reflects expected stronger consumption on the back of rising real wages and higher investment supported by easing financing conditions. Inflation is projected to return to target in the second half of 2025. The economy is confronting important new challenges, layered on existing ones. Beyond returning inflation to target and ensuring credible fiscal consolidation in high-debt countries, the euro area must urgently focus on enhancing innovation and productivity. Higher growth is essential for creating policy space to tackle the fiscal challenges of aging, the green transition, energy security, and defense.
Keywords:
EU institution; EU industrial; headline inflation; EU climate; two-sided inflation risk; Inflation; Labor markets; Fiscal consolidation; Europe; Global
Cover IMF Staff Country Reports
Slovak Republic: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper focuses on drivers and impacts of inflation in Slovakia. High and volatile inflation in Slovakia in recent years seems to be mainly driven by volatile food prices amplified by the larger consumer price index weight of food items. Other drivers include the large impact of imported inflation, elevated profit margins of domestic firms, and higher wage growth. High inflation could erode external competitiveness through higher unit labor costs, but there is no clear evidence of this so far. Domestically, high inflation has had uneven impacts across households and firms. Firms with the largest cost increases experienced a deterioration in their financial situation, and certain categories of households, including those with low-income levels and the elderly, are particularly vulnerable to the rising cost of living. The recent fall in inflation is projected to continue, but strong unit labor cost growth or an increase in profit margins could keep inflation elevated and undermine competitiveness.
Keywords:
price change; unit labor cost; inflation in Slovakia; B. income convergence; D. policy implication; Inflation; Productivity; Total factor productivity; Aging; Europe; Central and Eastern Europe; Baltics
Cover IMF Working Papers
Calibrating Macroprudential Policies in Europe Amid Rising Housing Market Vulnerability
Ms. Laura Valderrama
Housing market developments are in the spotlight in Europe. Over-stretched valuations amid tightening financial conditions and a cost-of-living crisis have increased risks of a sustained downturn and exposed challenging trade-offs for macroprudential policy between ensuring financial system resilience and smoothing the macro-financial cycle. Against this backdrop, this paper provides detailed considerations regarding how to (re)set macroprudential policy tools in response to housing-related systemic risk in Europe, providing design solutions to avoid unintended consequences during a tightening phase, and navigating the trade-offs between managing the build-up of vulnerabilities and the macro-financial cycle in a downturn. It also proposes a novel framework to measure the effectiveness of tools and avoid overlaps by quantifying the risks addressed by different macroprudential instruments. Finally, it introduces a taxonomy allowing to assess a country’s macroprudential stance and whether adjustments to current policy settings are warranted—such as the relaxation of capital-based tools and possibly some borrower-based measures in the event of a more severe downturn.
Keywords:
Housing markets; household vulnerability; income distribution; economic cycle; financial stability; macroprudential policy.; Macroprudential policy; housing market vulnerability; Policy tool; calibrating Macroprudential policies in Europe amide; Macroprudential Policy stance framework; Countercyclical capital buffers; Mortgages; Housing prices; Credit; Europe; Global
Cover IMF Staff Country Reports
Republic of Slovenia: 2022 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
This 2022 Article IV Consultation discusses that Slovenia recovered quickly from the pandemic, with gross domestic product increasing by more than 8 percent in 2021, largely driven by exports and private consumption. Strong economic performance has continued into 2022, but growth slowed significantly in the third quarter as spillovers from the war in Ukraine and rising prices weighed on economic activity. Slovenia recovered quickly from the pandemic but Russia’s war in Ukraine is posing new challenges, especially the negative terms of trade shock. A center-left government took office in June, with a broad social and green reform agenda. Growth is expected to slow as external demand declines, higher prices hurt consumption, and supply constraints persist. Inflation will likely remain elevated. The economic outlook is uncertain, with significant downside risks stemming from the escalation of the war, further supply disruptions, the tight labor market, and high inflation. Policies should focus on providing targeted support to those affected by high commodity prices, while maintaining prudent fiscal and macroprudential stances, and on the continuation of structural reforms.
Keywords:
money market rate; government finance statistic yearbook; rising prices; mitigation measure; green transition; expenditure category; Energy prices; Inflation; Labor markets; Fiscal stance; Europe
Cover IMF Staff Country Reports
Romania: Technical Assistance Report on Improving Revenues from the Recurrent Property Tax
International Monetary Fund. Fiscal Affairs Dept.
This paper highlights Romania’s Technical Assistance report on improving revenues from the recurrent property tax. The current area-based property tax system in Romania is inefficient, producing revenue below its potential, while the taxable value determination is inequitable and complex. The best guiding principle for the property tax reform is to remind taxpayers that a property tax is in the first instance a benefit tax. Comprehensive property tax reform is complex, requiring both political and technical coordination, informed by realistic timelines. In respect of a recurrent property tax, there are two broad approaches to determine a taxable amount. The first approach—value-based assessment—utilizes methods and techniques that rely on market transactions to inform the value of property. It is generally agreed amongst experts that where it is possible to use the market-value approach in practice, since it provides the better, more buoyant, and more equitable tax base. A value-based assessment tends to better differentiate the tax burden between low-income and high-income households—accounting better for ability-to-pay or vertical equity.
Keywords:
property tax reform; real property; VALUE-BASED property tax; tax rate; property tax exemption; property tax system; property tax basis; Property tax; Land tax; Real estate prices; Asset valuation; Africa; Eastern Europe
Cover IMF Working Papers
Are Climate Change Policies Politically Costly?
Davide Furceri
,
Michael Ganslmeier
, and
Mr. Jonathan David Ostry
Are policies designed to avert climate change (Climate Change Policies, or CCPs) politically costly? Using data on governmental popular support and the OECD’s Environmental Stringency Index, we find that CCPs are not necessarily politically costly: policy design matters. First, only market-based CCPs (such as emission taxes) generate negative effects on popular support. Second, the effects are muted in countries where non-green (dirty) energy is a relatively small input into production. Third, political costs are not significant when CCPs are implemented during periods of low oil prices, generous social insurance and low inequality.
Keywords:
EPS change; policy design; Policy implication; popular support; baseline model; Climate change; Climate policy; Fuel prices; Environmental policy; Natural disasters; Global
Cover IMF Working Papers
A Fresh Look at Potential Output in Central, Eastern, and Southeastern European Countries
Jiri Podpiera
,
Ms. Faezeh Raei
, and
Ara Stepanyan
Was the postcrisis growth slowdown in Central, Eastern and Southeastern Europe (CESEE) structural or cyclical? We use three different methods—production function approach, basic multivariate filter, and multivariate filter with financial frictions—to evaluate potential growth and output gaps for 18 CESEE countries during 2000-15. Our findings suggest that potential growth weakened significantly after the crisis across most countries in the region. This decline appears to be largely due to stagnant productivity and weaker capital accumulation, which were associated with common external factors, including trading partners’ slow potential growth, but also decline in global trade and stalled expansion of global value chains. Our estimates suggest that output gaps in 2015 were largely closed in many countries in the region.
Keywords:
WP; output gap estimate; CESEE; Potential output; Output gap; Emerging Markets; core inflation; output gap amplitude; MVF FIN; CESEE economy; Capacity utilization; Inflation; Total factor productivity; Global; Baltics; Central and Eastern Europe
Cover IMF Staff Country Reports
Bulgaria: Selected Issues Paper
International Monetary Fund. European Dept.
This Selected Issues paper examines inflation dynamics in Bulgaria from January 2012 to February 2015 and highlights some stylized facts about inflation in the country. January 2012 to February 2015 is the most relevant period for identifying factors contributing to recent deflation in Bulgaria, as well as their relative importance. Regression analysis suggests that during this period the inward spillover of low inflationary pressure from the European Union to Bulgaria has been the most significant factor, which was further exacerbated by consecutive electricity price cuts in 2013 and fast-falling global commodity prices, especially since late 2014.
Keywords:
ISCR; CR; firm; price; headline inflation; core inflation; micro data; investment-to-capital ratio; firms' assets; inflation outlook; capital structures; cost structure; inflation inertia; data from the Orbis database; Inflation; Debt burden; Price controls; Financial statements; Deflation; Global
Cover IMF Working Papers
Cross-Country Linkages in Europe: A Global VAR Analysis
Ms. Yan M Sun
,
Mr. Frigyes F Heinz
, and
Giang Ho
This paper uses the Global VAR (GVAR) model proposed by Pesaran et al. (2004) to study cross-country linkages among euro area countries, other advanced European countries (including the Nordics, the UK, etc.), and the Central, Eastern and Southeastern European (CESEE) countries. An innovative feature of the paper is the use of combined trade and financial weights (based on BIS reporting banks’ external position data) to capture the very close trade and financial ties of the CESEE countries with the advanced Europe countries. The results show strong co-movements in output growth and interest rates but weaker linkages bewteen inflation and real credit growth within Europe. While the euro area is the dominant source of economic influences, there are also interesting subregional linkages, e.g. between the Nordic and the Baltic countries, and a small but notable impact of CESEE countries on the rest of the Europe.
Keywords:
WP; CESEE country; real GDP; Nordic country; country VAR; country sample; Spillover; Global VAR; regional model; macro-financial linkages; emerging Europe; VAR model; ith economy; growth rate; Credit; Vector autoregression; Inflation; Long term interest rates; Production growth; Baltics; Europe; Western Europe; Global
Cover IMF Staff Country Reports
Republic of Slovenia: Financial System Stability Assessment
International Monetary Fund. European Dept.
and
International Monetary Fund. Monetary and Capital Markets Department
The Slovenian financial system has been hard hit by the crisis. Banks remained highly vulnerable to continued credit deterioration and refinancing risks. Strengthening of financial condition of banks should be the short-term priority. The financial restructuring should be followed by privatization of state-controlled banks. The supervision of financial institutions should be complemented with a macroprudential overview geared toward overall stability of the financial system. The crisis preparedness and management framework should be improved, and risks to systemic financial stability should be identified.
Keywords:
ISCR; CR; bank lending; resolution tool kit; bridge bank; bank borrowing; bank equity; bank resolution tool kit; banking system; state-controlled bank; bank assets; capital market; bank downgrade; bank subsidiary; bank-restructuring transaction; Commercial banks; Stress testing; Loans; Insurance companies; Real estate prices; Global