Our comprehensive assessment of Slovenia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Slovenia, as well as the latest industry developments that could impact Slovenia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Slovenia before your competitors.
Slovenia Country Risk
The short-term economic outlook has improved in light of accelerating regional economic activity and a slight rebound in domestic demand.
The corporate sector remains overleveraged and will remain a major risk to the banking sector - unless ultimately some form of restructuring takes place, whether on the loans itself to reduce debt servicing costs, or through cost cutting (shedding jobs/trimming investment).
Major Forecast Changes
We have revised our current account forecast from 7.3% to 7.9% in 2016 as a result of our Oil and Gas team's recent downgrades to the Brent crude price forecast. We forecast Brent crude to average USD40.0/bbl in 2016, from USD53.6/bbl in 2017, which we estimate will result in a net saving of around EUR270mn.
Slovenia Operational Risk Coverage (9)
Slovenia Operational Risk
Slovenia Operational Risk
BMI View: Slovenia's strong education system, with high levels of enrolment at all levels, suggests businesses stand to benefit from a solid level of skilled labour availability among the country's workforce. Furthermore, Slovenia's membership of the EU denotes access to a large regional workforce without visa restrictions. Somewhat offsetting these benefits, however, are the high labour taxes and limited labour market flexibility which increase operational costs in the country. As such, we have given Slovenia a score of 56.4 out of 100 on the...
Slovenia Crime & Security
Slovenia Crime & Security
BMI View: Slovenia presents investors with limited risks from a crime and security perspective. The country is generally considered one of the safest in the region with low violent crime rates and benefits from a highly capable and reliable police force. Financial crime is a potential risk area, particularly in conjunction with the high levels of corruption in government which creates the need for additional due diligence. Overall, the low crime rates combined with a lack of domestic terrorism threat and strong regional relations give Slovenia a high score 79.6 out of 100 on the BMI Crime and Security Risk Index. This places the country first out of the 31 Emerging Europe region states and 19th out of 201 states on a global basis.
|Competitive Security Climate Vulnerable To Marginally Higher Risk Of Business Crime|
Slovenia Labour Market
Slovenia Labour Market
Slovenia's labour market supports the country's business environment due to its highly educated workforce and access to the labour pool of 27 European states. Reforms are currently underway at the tertiary level to address the skills shortage stemming from low graduation rates in science and engineering. However, high labour costs offer the most significant detraction to investing in Slovenia, and serve to depress its score of 59.6 out of 100 in the Labour Market Risk Index, placing it ninth out of 30 emerging European countries, in between Lithuania and Latvia, and 42 nd globally, just above Saudi Arabia.
Solid labour availability boosts Slovenia's overall position in the Labour Market Risks Index. Its regional outperformance in this category is underlined by a sizeable labour force with strong basic skills. In addition, female labour participation rates are high by regional standards, which expand the talent and size of Slovenia'...
BMI View: Extensive investment across the transport network over recent years means that Slovenia offers a broad range of supply chain options, ensuring the country is well connected with its key trading partners throughout Europe. The country's utilities infrastructure is also well developed and businesses will benefit from the lack of trade bureaucracy, which ensures speedy transit times. Detracting from these positive factors is the relatively high cost of fuel and electricity, which makes the country less competitive on a regional basis. Overall, Slovenia scores 65.1 out of 100 on the BMI Logistics Risk Index, which...
Slovenia Trade & Investment
Slovenia Trade & Investment
Slovenia faces few trade and investment risks for investors due to its relatively open economy and harmonization of EU regulations. The major risks to trade are posed by the lack of available credit in the banking sector and underdeveloped capital markets. However, the government offers attractive financial incentives to certain industries. In addition, stable institutions and low levels of corruption help to further mitigate these risks. Slovenia's outperformance across the three pillars in the Trade and Investment Risk Index is reflected by its overall score of 70.9 out of 100, placing it fifth regionally after the Estonia, Lithuania, Hungary, and Cyprus and 18th th out of 170 countries worldwide.
Slovenia is a relatively open country for economic activity, due to its market-oriented economy and tariff-free access to the markets of its 26 EU peers. However, risk to investors is posed by the absence of a formal FDI strategy and...
Slovenia Industry Coverage (14)
Passenger car sales have been outperforming commercial vehicles against a positive macroeconomic backdrop in 2015.
A spate of new model launches from leading carmakers has also provided clear impetus to the local passenger car market across 2015.
For 2016, we are expecting commercial vehicle sales to outperform passenger car sales, as companies look towards fleet renewal.
Slovenia is becoming an ever more important production centre for the European market, with output up by 50.8% over H115, at 73,647 passenger cars.
Renault subsidiary Revoz will remain the dominant automaker in Slovenia over our forecast period to 2019.
Slovenia is also home to a well-developed auto parts supply chain,...
Slovenia Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Defence & Security
Slovenia Defence & Security
BMI View: As a result of Slovenia's limited external and internal security threats, as well as its weak economy, the country's defence sector is small on a regional comparison. Although Prime Minister Miro Cerar has announced that his government is committed to raising military spending - and despite an improvement in economic conditions from 2016 onwards - we do not expect the defence budget to grow significantly over our forecast period to 2019, as the country will remain relatively secure, and with Ljubljana continuing to direct the majority of funding towards socio-economic development. Meanwhile, the Slovenian...
Food & Drink
Slovenia Food & Drink
BMI View: Slovenia's food and drink industry will grow tepidly over 2016 on the back of a dim consumer outlook. High unemployment coupled with weak wage growth has contributed to lacklustre domestic demand which is constraining growth in the food and drink industry. Over our forecast period, we will see economically priced categories and private label goods perform well due to the price sensitivity of consumers.
|Food and Drink Spending|
|f = BMI forecast. Source: National...|
Slovenia Freight Transport
BMI View: In 2016, Slovenia's freight sector will witness strong growth across the board as the improved economic outlook for the eurozone will stimulate demand for Slovenian exports and improved domestic consumption will drive a recovery in imports. Air and road freight will post the strongest growth rates, at 7.2% and 5.6% respectively, as they will benefit directly from rising import levels. Meanwhile, rail freight growth will remain constrained by difficulties to find investors for infrastructure expansion, a trend which we believe will continue over the medium term.
We forecast the...
Slovenia Information Technology
BMI View: Domestic recession and then euro depreciation against the US dollar in 2015 made conditions in Slovenia's IT market challenging for vendors, particularly in the hardware segment. The outlook is however brighter over the medium term now the economy has recovered, and this will re-emphasise Slovenia's position as a lucrative IT market in Central and Eastern Europe where high incomes levels and deferred spending from recent years should create opportunities for hardware vendors. Meanwhile, Slovenian enterprise spending on cloud services is another growth area and the country's proximity to major...
BMI View: After five years of industry contraction, the construction sector is once again growing since 2014, along with the economic recovery of the country. A slowly recovering economy, lower unemployment and rising consumer confidence will provide a moderate increase for residential and non-residential construction. While Slovenia's transport sector dominates the country's infrastructure industry, we highlight the rising importance of gas interconnector projects in the energy and utilities sub-sector as some of the most important infrastructure projects going forward. These will receive EU funding related to diversifying energy sources and limiting Russian gas dependence.
We expect the Slovenian construction industry will grow moderately over the forecast period to 2025, at an average annual rate of 5.03%.
BMI View: Our outlook for Slovenia's insurance market is broadly positive. Although comparatively small, the life insurance sector is expected to record steady premium growth during the forecast period, bolstered by supportive demographic trends as well as rising average household income rates. The larger non-life insurance market is expected to see slower growth, led by the dominant lines (motor, health and property insurance). The market is highly consolidated, and moving forward we could see more multinationals entering the Slovenian insurance sector, challenging the incumbent domestic providers. However, present growth rates are not likely to increase sufficiently rapidly to entice major investment.
Slovenia Medical Devices
BMI View: We expect the Slovenian medical device market to grow by a 2014-2019 CAGR of 0.7%, with growth hindered by slow economic recovery and weak import performance in US dollar terms. Slovenia is heavily reliant on imported medical devices as domestic production is characterised by small, specialised manufacturers, many of which engage in exports, principally to neighbouring countries....
Oil & Gas
Slovenia Oil & Gas
B MI View: Slovenia's upstream sector remains close to inexistent, with little to no oil or gas production within our forecast period. While there are glimmers of hope in gas segment attributed to the Ascent-operated Petisovci tight gas project, the initiative is facing continued regulatory and funding headwinds, thereby informing our modest upstream outlook. We acknowledge upside risk to our forecast in the event of its start-up, however, overall volumes are likely to be relatively modest, with imported Russian gas set to dominate supply for the foreseeable future.
Pharmaceuticals & Healthcare
Slovenia Pharmaceuticals & Healthcare
BMI View: Krka's exposure to Eastern European markets will continue to act as a drag on revenue growth. However, strong sales growth in Western Europe will mitigate the impact of revenue declines for the short term. We expect a continued focus on cost containment by European healthcare payers to moderate Krka's growth outlook over the longer term, unless the company looks to geographically diversify its exposure.
Headline Expenditure Projections
Pharmaceuticals: EUR671mn (USD745mn) in 2015 to EUR645mn (USD690mn) in 2016; -3.9% in local currency terms and -7.3% in US dollar terms. Forecasts revised downwards compared to previous quarter.
Healthcare: EUR3.22bn (USD3.58bn) in...
BMI View: Household expenditure is forecast to remain stagnant in Slovenia in 2016. External demand has risen as the eurozone recovery remains on a cyclical upswing, but domestic demand in Slovenia has remained weak. This is largely due to the debt overhang that persists in the banking and enterprise sectors of the economy, which is dragging on investment and employment growth. Although real GDP growth over the short term will be quite low and dependent on external demand as a result, this will help to place Slovenia on a more sustainable medium-term growth trajectory. Unemployment remains persistently high in the country and has failed to make a convincing decline. As a result of high unemployment, wage growth has remained persistently weak, further reducing aggregate household consumption in the economy...
BMI View: The Slovenian market has undergone major consolidation measures in 2016 with Si.mobil acquiring Amis and Telemach acquiring Tus mobil. Furthermore, T-2, a fixed line operator remains in receivership and both operators are eyeing its prospective purchase. Furthermore, the sale of state-owned telecoms giant Telekom Slovenia remains incomplete as the government looks to find a buyer. We believe these consolidation measures will lead to heated competition and a quicker uptake of 3G and 4G LTE services. We have revised our 3G and 4G LTE uptake forecast in light of the new consolidation measures and are now forecasting a higher percentage of 3G and 4G enabled phones to penetrate the market quicker. The country's relatively high income levels have led to it having the highest ARPU and postpaid subscription mix in the region, backed by growth...
BMI View: Slovenia's tourism sector is expected to expand throughout our forecast period, supported by increasing arrivals and growing receipts. This will support the value of the hotel and restaurant industry, creating room for expansion. Strong campaigns by the government and the country's tourism board continue to promote Slovenia to regional source markets and those further afield. A strong emphasis on 'green' and sustainable tourism is expected to boost the country's recognisability.
Over 2016 we expect a steady uptick in arrivals, supported by the government's and tourism board's continuous efforts to promote the country to the region. This trend is further boosted by Slovenia's eurozone membership, which facilitates the ease of...