This statement provides information that has become available since the Staff Report (SM/17/94) was circulated to the Executive Board on April 26, 2017. The information does not alter the thrust of the staff appraisal.
The authorities reaffirmed their fiscal objectives in their 2017 Stability Program. The Stability Program confirms the authorities’ plan to eliminate the structural budget deficit by 2020 through continuing expenditure reduction, mainly on wages, goods and services, and subsidies. Staff supports the intention to eliminate the structural deficit and continues to recommend reform-based expenditure consolidation in these and other areas as described in the staff report.
The external trade surplus declined in early 2017. Data for January-February show that the trade balance of goods and services declined by 0.3 percent of GDP on an annualized basis relative to the same period last year. The overall decline masks a big drop in the trade surplus of goods (-1½ percent of GDP, annualized) driven by rising imports of consumer and investment goods as well as higher international energy prices. The trade balance in services has notably increased, driven by exports of business services, transport, and travel.
The authorities requested modifications to their commitments regarding Nova Ljubljanska Banka (NLB) from the EC. Specifically, rather than selling 75 percent of the bank’s shares in an IPO by end-2017 as planned, they now propose to sell at least 50 percent of the bank’s shares by end-2017 and the rest by end-2018. The authorities stated this would ensure the best possible conditions for the sale and potentially raise the share price while still transferring the majority ownership to private hands by end-2017. The prohibition on any individual private investor acquiring more than 25 percent of the bank’s shares, which staff opposes, remains in place. The EC’s response is expected shortly.
The authorities are making further progress in fostering resolution of NPLs of SMEs. To this end, a handbook for management of nonperforming loans of micro, small, and medium sized companies was issued recently. It was prepared in cooperation between the Bank of Slovenia, the World Bank, and the banking industry in Slovenia within a project financed by the European Commission. The handbook spells out the recommended procedures and best practices in NPL resolution.