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Europe > Slovenia, Republic of

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Cover IMF Staff Country Reports
Republic of Slovenia: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper focuses on boosting productivity in Slovenia. Slovenia’s ageing population sets a constraint on the contribution of labor to gross domestic product in the end.Only achieve sustained increases in income and living standards can, therefore, through investment in physical and human capital and, more importantly, through enhancing productivity, historically the key growth driver. This paper summarizes historical trends in growth and productivity in Slovenia, examines the country’s strengths and weaknesses in terms of key factors affecting productivity identified in the literature. Since the scope for future labor contributions to growth in Slovenia is limited for demographic reasons—apart from further improvements to labor quality—the focus of economic growth policies should be on reinvigorating private investment, which has been low over the past decade, and pursuing labor and product market reforms that boost total factor productivity growth.
Keywords:
productivity trend; firm leverage; labor market indicator; I. shift share methodology; EU growth composition; Productivity; Total factor productivity; Labor force; Private investment; Europe; Central and Eastern Europe; Global
Cover IMF Staff Country Reports
Republic of Slovenia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Slovenia
International Monetary Fund. European Dept.
The 2024 Article IV Consultation highlights that Slovenia’s economy recovered well from the pandemic, only to be hit by spillovers from the war in Ukraine, followed by severe flooding in 2023. After a strong recovery in 2021, growth slowed in 2022 because of adverse energy price spillovers from the war in Ukraine and supply chain disruptions. Growth is expected to accelerate, driven by a recovery in domestic demand. Inflation is projected to continue to decline. The outlook remains subject to high uncertainty, with risks stemming from an intensification of regional conflicts, renewed commodity price volatility, and lower trading partners’ demand on the external side and labor shortages and broader capacity constraints on the domestic side. Severe weather events also remain a risk. Given underlying increase in core public spending in recent years, age-related spending pressures, and relatively high public debt, sustained fiscal consolidation and fiscal reforms, including in taxation, the pension, public wage and health systems, are needed to underpin long-term public debt sustainability. Deeper structural reforms would help boost growth and foster income convergence. Longer-term limits on employment growth call for reforms enhancing productivity growth, including improving regulatory quality, building human capital, and deepening the financial sector.
Keywords:
renewed commodity price volatility; money market rate; government finance statistic yearbook; expenditure category; emergency flood relief legislation; Natural disasters; Labor markets; Europe; Global; Middle East
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 Technical Assistance Reports
Republic of Slovenia: Technical Assistance Report-Data-Driven Risk Assessment
International Monetary Fund. Fiscal Affairs Dept.
This short-term expert (STX) visit focused on the use of data, analytics, and tools to help improve risk assessment capabilities. Over the course of the mission, the team conducted four workshops and five one-to-one sessions to provide guidance on ideal organizational arrangements to support data analytics, improvement of data workflows, leveraging the value of country-by-country reports, and development of data analytics/risk assessment models by using data science and big data analytics. The well-engaged SFA staff were convinced by the promising results of the new pilot risk assessment models with a solid level of commitment to apply big data anal
Keywords:
Data; analytics; risk assessment; country-by-country reporting; corporate income tax; organizational arrangements; data science; big data analytics.
Cover Technical Assistance Reports
Republic of Slovenia: Technical Assistance Report-Data-Driven Risk Assessment (Follow-Up)
International Monetary Fund. Fiscal Affairs Dept.
As a follow-up to the November 2022 field-based assignment to help improve risk assessment capabilities, Dr. Ludvig Wier provided additional guidance to the Slovenia Revenue Administration (SFA). This short virtual assignment focused on resolving implementation issues faced by SFA as they develop new modernized approaches to risk assessment for corporate income tax (CIT).
Keywords:
Data; analytics; risk assessment; country-by-country reporting; corporate income tax; organizational arrangements; data science; big data analytics
Cover IMF Staff Country Reports
Republic of Croatia: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper examines the competitiveness of Croatia’s goods exports and predicts its goods export diversification potential. The paper also discusses the goods export competitiveness using Revealed Comparative Advantage (RCA) with cross-country comparison and uses a machine-learning approach to worldwide product-level data to forecast Croatia’s goods export portfolio. Croatia has demonstrated goods export competitiveness beyond the tourism sector. Over the past few decades, its share of exports of goods with comparative advantage has exhibited a positive correlation with Croatia’s real income growth, while negatively correlated with its growth volatility. However, Croatia's export structure indicates its relatively modest status in medium- and high-technology goods compared to other Eurozone countries. A machine-learning-based analysis suggests that Croatia has potential in exporting a higher share of manufacturing goods in its export portfolio, especially technology-intensive ones. Raising productivity is important for Croatia to unleash the capacity for a higher and more resilient growth.
Keywords:
goods export competitiveness; goods export diversification; goods export comparative advantage; goods export structure; Croatia's GHG emission; Greenhouse gas emissions; Climate change; Carbon tax; Natural disasters; Global; Europe
Cover IMF Working Papers
Firm Leverage and Boom-Bust Cycles
Can Sever
This paper explores the dynamic relationship between firm debt and real outcomes using data from 24 European economies over the period of 2000-2018. Based on macro data, it shows that a rise in credit to firms is associated with an increase in employment growth in the short-term, but employment growth declines in the medium-term. This pattern remains similar, even when the changes in credit to households are accounted for. Next, using data from a large sample of firms, it shows that firm leverage buildups predict similar boom-bust growth cycles in firm employment: Firms with a larger increase in leverage experience a boost in employment growth in the short-term, but employment growth decreases in the medium-term. Relatedly, the volatility of employment growth increases in the aftermath of firm leverage buildups. Finally, this paper provides suggestive evidence on the role of a financial channel in the relationship between firm leverage buildups and employment growth. The results show that a rise in firm leverage is associated with a persistently higher debt service ratio, pointing the drag on finances. Consistently, boom-bust growth cycles in the aftermath of firm leverage buildups are not limited to employment growth, but are also pronounced for investment. Moreover, the medium-term decline in firm employment growth as predicted by leverage buildups becomes even larger if aggregate financial conditions tighten. The findings are in favor of “lean against the wind” approach in policy making.
Keywords:
Firm leverage; firm debt; household debt; leverage cycles; employment; investment; boom-bust cycles; ORBIS; leverage buildup; employment growth; leverage cycle; growth cycle; cycles in the aftermath; Business cycles; Credit; Consumer credit; Credit booms; Europe; Global
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: Technical Assistance Report-Revenue Administration Gap Analysis Program—Corporate Income Tax Gap
International Monetary Fund. Fiscal Affairs Dept.
This paper discusses the estimates of tax gaps for corporate income tax (CIT) for nonfinancial corporations in Slovenia by applying the methodology of the IMF’s Revenue Administration – Gap Analysis Program (RA-GAP). The RA-GAP methodology for CIT gap is based on a top-down approach, which estimates the potential tax base and liability from macroeconomic data. The top-down estimation of the CIT gap provides an initial evaluation of the level and change in taxpayers’ compliance; however, further work in some areas is needed to improve the application of the methodology and reliability of results. Assessed CIT for nonfinancial corporations dropped from 2011 to 2012 then rose until 2020; potential CIT roughly followed the same pattern. The estimates for the assessment gap for nonfinancial corporations indicate there may have been an increase in 2012, and then a decline back to the 2011 levels. Under either method, the bulk of the assessment gap appears to be in the manufacturing sector.
Keywords:
CIT productivity; CIT liability; Ra-gap CIT gap methodology; gap estimate; IMF's Fiscal Affairs Department; CIT-efficiency ratio; CIT compliance gap; CIT gap analysis; Corporate income tax; Tax gap; Business enterprises; 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