Transformation in Slovenia Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Functioning of the CPE model •Slovenia – 2 million - 8% of population but 20% of GDP and 29% of exports •huge differences among the JUG republics –redistribution •after 1974 – republics highly independent •differences in the political regime … differences in the functioning of CPE –more orientated towards West –western consumption goods –price flexibility – kind of … several waves of (very) high inflation Functioning of the CPE model •borrowing on international markets in the 1970s –unable to pay debts at the begining of the 1980s •austerity program after 1982 –relaxed later on •1984 restrictions •another program 1988 – Markovic –price liberalization, opening domestic market … •high inflation –dolarization Inflation in Slovenia– Annual Consumer price index - CPI all items (change in %) •1990 reform program – stabilization –devaluation + fix, convertibility on current account, bankruptcies, restrictions –individual republics did not follow –agaist each other •federal government not able implement •runs on banks, hyperinflation, lack of hard currencies •free elections •another program July 1991 – country already falling apart • Gross Domestic Product per capita in Yugoslavia in 1980 and 1989 (all figures in 1972 USD) GDP per person in Austria and Yugoslavia in USD microeconomic situation •self-management socialism –high independence of companies –workers councils –companies „socially owned“ – not state not private –demand for growth of wages –soft budget constraint •relatively low level of private sector –in industry –high in agriculture Share of import value (percent) 1986-96 • Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Political development •1990 centrifugal tendencies •12/1990 referendum – 90% for independence •6/1991 declared independence –YUG army attacked –10 days –postponing independence •1/1992 independence •till 1995 war in ex-Yugoslavia •1993 IMF, 1994 GATT, 1995 WTO, CEFTA 1996 •2004 EU and NATO Political development •1990 Communist party gave up its leading role •4/1990 elections for DEMOS – centre- right –till 1992 toppled •12/1992 – Drnovšek – Liberal democratic party –till 2002 when he became president –Liberal democrats till 2004 •2004 – Slovenian Democratic Party –Janša – later on blamed for corruption •2008 – Social Democrats –economic crisis strongly hit •after 2011 unstable political situation Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Gradualism •proud of •definition problem •initial conditions –price liberated –trade liberated –75% of trade with West! (95% trade/GDP) –+ followed strict monetary and fiscal –shock therapy? •in their view – exchange rate was not fixed –could hardly afford •in their view avoided avoided sharp decline in production ….? • Liberalization Index 1989 and 1997 • • • • • • • • • • • •Liberalization Index – a weighted average of three components: domestic market liberalization (weight 0.3), foreign trade liberalization (weight 0.3), enterprise privatization and banking reform (weight 0.4). Each component, and the average reported in the table, is scored in the range [0, 1]. Cumulative economic growth in Central Europe and Slovenia Gradualism •in practice postponing of reforms –especially privatization •relatively slow way of desinflation •reluctant attitude towards FDI • •it seemed to be working for long time •till crisis 2008 Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Economic policy 1990-2 •high inflation •end of 1990 own currency •1/1991 declared control above taxes •limit payments to federal budget •1990 stabilization program –restructuring of banks and loosing companies, privatization •10/1991 – new currency –floating –depreciations –1992 to managed floating •1991 CB as indepenent institution •+ decline in inflation •1991 new tax system •liberalization of labour market rules – just slightly •opening domestic market •decline in production – Economic policy 1993-6 •slow but steady reforms –1993 foreign trade law –1994 bankcruptcy –till 1994 most prices liberalized + current account convertibility •export boom •excellent fiscal policy •high level of redistribution •agreements with London and Paris clubs • Government deficit and share of government expenditure to GDP Share of total output of branches by selected sectors and industries 1990-2000 (percent of contribution) Economic policy 1997-2007 •1996 asoc. treaty –following way – similar to others –pressure from the EU against restrictions … deregulation •only after 1998 allowed more FDI and inflow of capital •only after 1997 change in indexation of wages in public sector •changes in pension system •improving fiscal balance after 2004 –for accession to eurozone FDI inward (US Dollars at current prices and current exchange rates in millions) General government debt (percent of GDP) •2002 removed restrictions on foreign capital •2004 EU •2004 tolar ERM II •2005 informal inflation targeting •only later on low inflation •2007 eurozone • Development of the exchange rate – Tolar per dollar and Euro (monthly average) Economic policy 2008-2013 •long lasting criticism of slow reforms – restructuring –low level of FDI –government intefering into companies •2008 slump –outside demand –banks •2008-9 fiscal parcels … deficits Net flow of FDI (in millions of USD) General government net lending/borrowing and its prognosis (in % of GDP) Unit labour costs (index 2005=100) •2011 - plans for liberalization – public against Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Cumulated privatisation revenues as a share of GDP Large scale privatization index* 1989-2012 Public assets (% of GDP) Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Bank Funding (Percent of total assets) Non-performing loans (in % of total loans) Non-performing Loans to Total Gross Loans (in %) in 2013 (or the latest) Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions Development of GDP in Slovenia (year to year change in percent) GDP per person in central and eastern Europe (and Slovenia to EU average = 100) Share of the sectors - value added (% of GDP) Unemployment rate (in percent of labour force) and employment (1990=100) – right scale Inflation (CPI) in Slovenia and the Czech Republic 1993-2013 Cumulative growth of price level among the transition countries External trade of goods and services per GDP (in %) Current account balance (percent of GDP) Cumulative FDI inflows per capita, 1989-2004, in US$ Gini coefficients* of inequality of market and disposable incomes; Persons of working age (18-65 years-old), late 2000s Real GDP (1989=100), Slovenia and EBRD 33 Contensts •Situation during CPE period •Political Development •Gradualism •Development of Economic Policy •Privatization •Banks •Main Economic Indicators •Conclusions