On May 10, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with the Republic of Slovenia.
Slovenia has entered a fourth year of steady economic recovery following decisive measures by the authorities to address a looming banking crisis in 2013. Output and employment have risen considerably. The external position has strengthened, reflecting robust exports and strong tourism. The financial system has substantially improved in the past few years.
Rising domestic demand and continuing strong exports will support projected growth of about 3 percent in 2017. Inflation will hover around 2 percent, with core inflation gradually rising toward this level. The external current account surplus will start declining on the strength of domestic demand and higher international energy prices. Over the medium term, economic growth will converge to the estimated potential GDP growth rate of 1¾-2 percent. This low potential growth rate can be raised by policies to increase investment, reduce labor skills mismatches, and boost total-factor productivity growth.
The policy agenda should be geared toward rebuilding macroeconomic buffers and fostering broad-based and sustainable growth. On the fiscal front, the authorities aim to eliminate the structural budget deficit by 2020 and maintain that level afterwards. This will require substantial new fiscal reforms. Implementation of plans to complete the resolution of non-performing bank loans to small and medium enterprises (SMEs) and privatize major banks will support investment and growth, as will measures to improve the functioning of Slovenia’s labor market and step up privatization.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.