slovenia: solid fundamentals protect during the international crisis november 2011 ministry of...

Slovenia: Solid fundamentals protect during the international crisis

November 2011

Ministry of FinanceRepublic of Slovenia

2

Table of Contents

Country Overview

Key Strengths

Strong Economic Performance over the Past Years

Policy response to global financial crisis

Financing Programme

3

Key Considerations

Euro area member for over four years (joined January 1st, 2007)

Prudent fiscal policy track record and steady competitiveness position

Low government debt with low borrowing requirement in the future

Sound banking system

Solid economic fundamentals and adequate policy response to crisis to mitigate its impact

Government committed to stability and sustained reform

4

Country Overview

5

Slovenia: Member of the Euro area for 4 years

Population of 2 million

Track record of strong macroeconomic performance

GDP per capita 86 % of EU average

Stable multi-party democracy

Joined the Euro area in January 2007

Joined OECD in June 2010

Austria

Slovenia

Hungary

Croatia

Italy

6

A strong sovereign credit in the euro zone

Credit rating (Aa3 / AA- /AA-) Well diversified and open economy

Sustained real convergence

Low public debt burden (38.8 % of GDP in 2010)

ECB eligibility for government paper

Well recognised economic stability

Peer credit ratings

SloveniaAa3 / AA-

/AA-

BelgiumAa1/ AA+/AA+

PortugalBa2/ BBB- /BBB-

ItalyA2/A/A+

Source: Moody’s, Standard & Poors, Fitch (November 3rd, 2011)

Also a strong credit in European Union

Source: Standard&Poor`s, November 3rd, 2011

7

AAA AU; DK; FI; FR; DE; LU; NL; SE; UK

CC GR

BBB BG; LT; CY

AA+ BEAA- SLOVENIA; ES; EEA+ SKA MT; CZ; IT

BBB- HU, PT

A- PL

BB+ RO, LV

BBB+ IRL

8

Strong Economic Performance over Past Years

9

High and sustained degree of real convergence

Source: Eurostat, 31.10.2011

10

Growth led by exports and investments

Source: Eurostat, 31.10.2011

11

Industry, agriculture and services value added, 2010

Slovenia has a highly diversified economy

Comparable to EUmember states

Growth is driven by manufacturing and services

Successful and growing tourism industry

Small agricultural sector

Source: SORS

12

Export driven economy

Focus on high value-added exports

More than two thirds of exports destined for EU

€ 18 bn exports of goods and services in 2010; 51,5% of GDP

Exports of goods jan 2011 Geographic distribution, 2010

Source: SORS

13

Good labour market performance

Source: Eurostat

14

Strong investment over the past years

Source: Eurostat, 21.06. 2011

Current account balance % GDP (2010) Slovenia´s current account balance (% GDP)

Source: Eurostat, 21.06.2011

15

Good financial position and sound banking system

Low external indebtedness of the economy

Lowest household indebtedness in EMU 30% of GDP in 2008 and 33% in 2009

Banking sector assets in GDP only one third of EMU average

Banking system’s cross-border indebtedness has fallen from 46% of GDP in 2009 to about 32% at the end 2010

Comfortable banking system capital adequacy of 11.3% and Tier 1 of 9.6% (March 2011)

Short-term net creditor position of domestic banking system vis-a-vis euro area ???

Banking system’s external debt maturity profile is spread out (bulk more than 2 years)

Source:IMF

0

200

400

600

800

1000

1200

1400

1600

Outstanding gross external debt in euro area % GDP (2009)

16

Banking system still to catch up

Source: Bank of Slovenia Annual Report 2009; EU banking structures; Statistical Office RS, Eurostat, elaboration by Institue of Macroeconomic Analysis

Total Assets of Financial Credit % GDP, 2009

17

Policy response to global financial crisis

18

Global financial crisis and collapse of trade

Source: Eurostat, 22.06.2011

19

External openness strongly affected growth and investment

Source: Eurostat, 22.06.2011

20

Stabilization and gradual recovery in line with major trading partners

Source: Eurostat, 22.06.2011

21

The downturn also reflected in inflation trends

Source: Eurostat

22

Coordinated EU policy response to crisis….

Source: European Commission. Ameco

23

…in line with existing debt levels

Source: Eurostat

Stability Programme submitted to EU

General government deficit to return into the scope of Maastricht criteria (3% of GDP) by 2013

Source: Ministry of Finance 24

Withdrawal of fiscal stimulus and consolidation

The Stabilization Program, approved by the EU Council and last updated in April 2011, foresees a gradual, primarily expenditure driven fiscal consolidation over the medium term. Deficit below 3% of GDP by 2013

— Rationalization and discontinuation of inefficient government programs

— Rationalization of cost of public administration

— Rationalization and better targeting of social transfers

— Shifting investment financing towards EU funds

— Increase in excises’ rates and widening social security contribution tax base

Besides the above and continuing the work on pension reform, the goverment is launching a reform of the health sector in order to achieve a higher efficiency, lower unit cost and more equitable access to the public health services.

The government is preparing a liberalization of the labour market.

25

Functioning of government

At present, Slovenia is in pre-election mode.

Still big support for solving European question on all sides.

The government is preparing a strategy on management and privatization of state assets.

26

27

Financing Programme

2012 borrowing requirement

28

Max. gross borrowing: 4.5 Bn. EUR

Purpose of borrowing:— Gross borrowing for 2012 central government

budget: 2.8 Bn. EUR— Pre-financing of debt due for redemption in 2013

and 2014: 1.9 Bn. EUR

Already executed borrowing:— Pre-financing of part of 2012 repayments executed

in 2011: 0.2 Bn. EUR

Expected structure of borrowing at the end of 2011:— Short term (end of the year) 30 Ml. EUR— Long term Up to 3 Bn.

EUR

29

Further government debt market integration

Established issuer in the Euro debt market

International structure of primary dealers with strong domestic institutions— Abanka; BNP Paribas; Credit Agricole CIB; Commerzbank; Deutsche Bank; Goldman

Sachs; HSBC; JP Morgan; Nova Ljubljanska Banka; ING; Société Générale CIB; UniCredit Banka Slovenija; Jefferies, Barclays Capital.

Newly issued bonds trading on major international trading platforms— MTS Slovenia (www.mtsslovenia.com ), Bloomberg (SLOREP Govt <GO>), Bondvision— Benchmark size issues to ensure liquidity (minimum € 1 bn)— Bonds in new S&P Eurozone Government Bond Index

MTS Slovenia established since March 2007 (www.mtsslovenia.com) — Currently 18 system participants (15 international and 3 from Slovenia) — 10 bonds on the system (http://www.mtsdata.com/content/data/public/rsl/bulletin/ ,

http://www.mtsdata.com/content/data/public/rsl/fixing/ )

Broaden investor base to increase integration of Slovenia’s signature in the Euro area

30

Strong performance and support

Source: MTS Slovenia, Bloomberg, November 3rd 2011; Ministry of Finance

Asia0,2%

Austria / Germany

29,2%

Benelux9,4%

CEE2,5%

France11,9%

Iberia1,2%

Italy7,5%

Other EMU1,8%

Rest of the World0,8%

Scandinavia5,6%

Slovenia15,8%

Swiss2,6%

UK / Ireland11,5%

Distribution by region

Bank41,5%

Central Bank3,5%

Fund Manager32,4%

Insurance Company

14,6%

Pension Fund6,4%

Supranational1,0%

Other0,8%

Distribution by investor type

Name RatingsSize EUR

mln Issue Date Maturity Cpn Mid Price Mid Yield

Bid Spr vs MS (at launch)

Mid Spr vs MS

(current) bps Dur (yrs)

Slovenia 02/12

Aa3/AA-/AA- 1 05.02.2009 05.02.2012 4,25% 100,695 1,386% 165 bps -24,6 0,2

Slovenia 04/14

Aa3/AA-/AA- 1,500 02.04.2009 02.04.2014 4,375% 101,331 3,779% 160 bps 226 2,2

Slovenia 03/15

Aa3/AA-/AA- 1,000 17.03.2010 17.03.2015 2,750% 96,601 3,847% 37 bps 223,2 3,1

Slovenia 02/16

Aa3/AA-/AA- 1,066 17.01.2005 17.02.2016 4,000% 97,778 4,579% - 272,6 3,7

Slovenia 03/18

Aa3/AA-/AA- 1,000 22.03.2007 22.03.2018 4,000% 94,068 5,110% -8 bps 282,5 5,3

Slovenia 02/19

Aa3/AA-/AA- 1,000 06.02.2008 06.02.2019 4,375% 94,470 5,310% -3 bps 287,3 5,8

Slovenia 01/20

Aa3/AA-/AA- 1,500 26.01.2010 26.01.2020 4,125% 90,483 5,598% 68 bps 290,8 6,5

Slovenia 01/21

Aa3/AA-/AA- 1.500 18.01.2011 18.01.2021 4,375% 90,983 5,657% 125bps 296,6 7

Slovenia 09/24

Aa3/AA-/AA- 1,500 09.09.2009 09.09.2024 4,625% 91,704 5,543% 80 bps 271,9 9,3

Slovenia 03/26

Aa3/AA-/AA- 1.500 30.03.2011 30.03.2026 5,13% 90,213 6,167% 130bps 309,6 9,4

31

Strong relative performance in turbulent times

Source: MTS.

32

Favourable state budget debt portfolio

Stable debt service profile Most debt denominated in local currency

Source: Ministry of Finance (financing in 2011 included)

Outstanding debt by type of currency (31.12.10)

EUR: 99.8%

USD: 0.0%

Other: 0.2%

33

Contact details

Republic of SloveniaMinistry of Finance

Treasury Directorate

Boštjan PlešecDirector Generalbostjan.plesec@mf-rs.siTel: +386 1 369  6410

Public Debt Management Department

Marija EberHead of Departmentmarija.eber@mf-rs.siTel: +386 1 369  6442