Interview with Mag. Andrej Šircelj, Minister of Finance, Slovenia

Over the past two years, the European Union (EU) has taken significant steps to strengthen the bloc’s economic position, and both the European Commission and European Central Bank are now optimistic that its economy is recovering faster than expected. How have the last two years been for Slovenia specifically?

 The outbreak of the pandemic at the beginning of 2020 was a shock to the Slovenian economy, as it was for many countries. Our gross domestic product (GDP) decreased by 4.2 per cent in 2020, which was actually a much smaller drop than other countries experienced and less than we expected. We began fiscal-support programmes as well as monetary-aid measures in the first week that the pandemic hit, which helped mitigate the economic decline. It is estimated that Slovenian GDP would have dropped by double the amount that it did without such measures — among the 23 OECD countries, The Economist ranked Slovenia as the second best at dealing with the crisis. In the third quarter of 2021, the Slovenian economy rebounded and recovered to pre-pandemic levels, with our GDP growing by almost 7 per cent, even higher than had been forecast. We now estimate growth of 4 per cent for 2022 to 2023.

Although today we face different challenges to those we were facing at the beginning of 2020 — such as rising energy prices, inflation, supply bottlenecks and labour shortages — we expect our economy and financial markets to stabilise in the second half of 2022 and through 2023.

The budget approved by the Slovenian parliament for 2022 and 2023 looks to stimulate economic growth and to increase spending in transport, environmental protection and infrastructure. What are some of the targets and priority areas for your ministry within the scope of the budget?

In 2021, our nominal public deficit was around 5.5 per cent of GDP and our public debt was 77.3 per cent of GDP. Our main macroeconomic targets in 2022 and 2023 are to reduce public debt to below 3 per cent by 2024. We are introducing measures that will primarily target the sectors most affected by Covid-19, for example, tourism, entertainment, sports and culture. On the other hand, we have increased investments in highways, railways and hospitals. For us, it is of the utmost importance that we ensure a better quality of health services as well as better services for our older adult population. Regarding inflation trends or increasing prices, the government has adopted measures to lower excise duties and levies on electricity, while also helping people on lower incomes.

What is Slovenia’s position with regard to a potential future common fiscal policy within the EU?

We have no official position as yet. The idea still has to be approved by the European Parliament, and we have only just begun discussions between the member states and our Ministries of Finance, as well as within the Eurogroup of ministers from the euro area. From where I stand, I believe new rules must reflect a new point of view. They should move away from complexity and strive for simplicity and transparency. Furthermore, they need to be realistic.

If we look at current public data, we see that six EU countries have public debt levels that are higher than 100 per cent of their GDP. We need to come up with viable solutions for everyone. Additionally, the new fiscal rules need to cover our common agenda that includes two chief targets, which are to explore and achieve our goals in both the green and digital economies. I believe that one possibility to propose or to have in the near future is a tailor-made approach for each country’s specific goals and objectives. This type of framework would reflect the changing face of Europe.

How is Slovenia working with Middle East and North African countries, particularly with those from the Gulf region, to establish links and opportunities for investment?

We are an open country for all investments and investors, and we are happy to welcome new investors. Slovenia sees cooperation with the Gulf countries as being of significant importance: we share the same challenges, such as climate change, economic diversification and sustainable development, but there are also exciting business and financial opportunities in all our countries. Of course, Slovenia supports the negotiations for a free trade agreement between the EU and the Gulf Cooperation Council. A perfect example of excellent cooperation is Expo Dubai 2020, which is a wonderful opportunity to showcase what Slovenia and many other countries have to offer. We need good cooperation between countries, as this is key to living together in harmony in a global world.

Slovenia’s banking and financial services sector has undergone multiple government recapitalisations and reforms in recent years. What is your expectation for the banking industry in the future?

We have recapitalised and revitalised Slovenian banks so that the state share is now 25 per cent plus one. All other banks are now completely private, and our banking system is robust and stable, with sufficient capital and the capacity to run smoothly and support our citizens throughout the pandemic. We are extremely grateful for this.

Just to give you a few figures, the capital adequacy of the Slovenian banking system is 18.5 per cent and return on equity before taxes is 9.9 per cent. Of course, banks will continue to generate profit and help to stabilise economic growth in the coming years. Our future plans for the Slovenian banking system will be marked by Slovenia’s membership of the EU and its ongoing banking reform process. I believe we need to establish unified banking in Europe, with central supervision, a single solution mechanism and a single deposit guarantee scheme.

The Slovenian and European banking systems will become more robust and more stable in the years to come. Slovenia’s system is characterised by the universal business model of banking and I do not foresee any major changes that will impact its stability. However, our banking system will, of course, become even more digitalised and will incorporate more and more innovative technologies.

From your perspective as Minister of Finance, how attractive is Slovenia for foreign direct investment (FDI)?

In 2020, we received almost €17 billion from FDIs in manufacturing, the financial sector, the insurance sector, the retail trade and the automotive and motorcycle industry. In the future, we will push to foster even more FDI opportunities. We are also working on streamlining administrative procedures to make business simpler and more efficient, which will include our tax administration processes. The Slovenian banking system is ready and willing to support investors in their ventures, not only in our economy but also in our health and education systems.

Do you have any final comments for our readers?

I would like to welcome all future investors to Slovenia. We consider ourselves fortunate to have such a strategic location at the heart of the EU, at the nexus between Eastern and Western Europe. Logistically speaking, we are ideally positioned and that is something in which foreign investors are hugely interested. Slovenia also has very well-educated workforce, friendly people, new infrastructure and excellent transport networks with great connections to regional markets. International residents, investors and tourists all say that we offer a high quality of life, but come see for yourself.