The economic slowdown continues in Slovenia

Domestic demand will weaken sharply in 2009 as businesses and households cut back on investments and consumption. Industrial output contracted 16.1% year-on-year in October 2009, as the recession in the eurozone slashed demand for Slovenian exports. Serious though that is, it is still an improvement on the contraction of 19.5% experienced in Q1 of 2009.

Massive state support for the banking sector

Slovenia’s financial industry has not escaped the economic crisis either. The banking sector has faced refinancing difficulties since the last quarter of 2008. Both foreign and domestic banks had borrowed abroad in recent years to finance a credit boom that outstripped the growth of domestic deposits. As a consequence, the total amount of short-term debt to be refinanced within a year has reached € 5.5 billion, about a sixth of Slovenian GDP, forcing banks to hold cash and restrict loans to both households and firms. But the government and the Bank of Slovenia took measures at the beginning of 2009 to support bank liquidity: the government used its higher credit rating to borrow €1 billion and deposited most of the proceeds in bank accounts. Household confidence in bank deposits has not been affected, thanks to the removal of the ceiling on the state guarantee for deposits.

Credito y Caución have seen an increase in reported payment problems, but still with no clear pattern emerging in any sectors. However, it is important to be extra careful when dealing with companies in the automotive industry, construction or construction materials, engineering, ICT, iron steel and metal manufacturing, textiles, timber and transport.