Slovenian economic mirror december 2008, No. 12. Vol. XIV Slovenian Economic Mirror ISSN 1318-3826 No. 12 / Vol. XIV / 2008 Publisher: IMAD, Ljubljana, Gregorčičeva 27 Director: Boštjan Vasle, MSc Editor in Chief: Jure Brložnik, MA Matej Adamič (International Environment); Barbara Ferk, MSc, Katarina Ivas, Janez Kušar, Jože Markič, MSc, Tina Nenadič, Jure Povšnar (Economic Developments in Slovenia); Saša Kovačič, Tomaž Kraigher (Labour Market); Slavica Jurančič, Miha Trošt (Prices); Jože Markič, MSc (Balance of Payments); Marjan Hafner (Financial Markets); Barbara Knapič Navarrete, Jasna Kondža (Public Finance); Janja Pečar (Regions 2008 - Selected Socio-Economic Indicators by Region); Ivo Lavrač, PhD (Real Estate Market), Andrej A. Chiaiutta, MSc (Global Competitiveness of Slovenia According to the WEF); Matjaž Hanžek (Mortality Patterns in Europe) Editorial Board: Lidija Apohal Vučkovič, Marijana Bednaš, MSc, Alenka Kajzer, PhD, Rotija Kmet Zupančič, MSc, Janez Kušar, Mateja Peternelj, MSc, Boštjan Vasle, MSc Translator: Marija Kavčič Language Editor: Terry Troy Jackson Data Preparation and Graphs: Bibijana Cirman Naglič, Marjeta Žigman Concept and Design: Katja Korinšek, Pristop DTP: Ema Bertina Kopitar Print: Tiskarna Solos Circulation: 500 copies The contents of this publication may be reproduced in whole or in part provided that the source is acknowledged. Contents In the spotlight . 3 Current Economic Trends................................................................................................................................5 International Environment...............................................................................................................................................7 Economic Developments in Slovenia...............................................................................................................................................8 Labour Market.........................................................................................................................................................................................13 Prices..................................................................................................................................................................................15 Balance of Payments.......................................................................................................................................................19 Financial Markets...................................................................................................................................................................................21 Public Finance..........................................................................................................................................................................................24 Selected Topics..............................................................................................................................................27 Regions 2008 - Selected Socio-Economic Indicators by Region......................................................................................29 Real Estate Market.................................................................................................................................................................................31 Global Competitiveness of Slovenia According to the WEF....................................................................................32 Mortality Patterns in Europe..........................................................................................................................................34 Statistical Appendix......................................................................................................................................37 Boxes Box 1: Economic Growth in Q3 2008..............................................................................................................................................10 Box 2: Pass-through of Higher Energy Prices into Other Price Groups...........................................................................16 Box 3: Cost Competitiveness.............................................................................................................................................................18 Box 4: Stock Exchange in 2008.........................................................................................................................................................23 Slovenian Economic Mirror, December 2008 3 In the Spotlight In the spotlight Due to deteriorating economic conditions and significantly lower forecasts for economic growth in Slovenia's main trading partners, we revised the Autumn Forecast of Economic Trends downward in December 2008, predicting much slower economic growth in 2009 than anticipated in the autumn, as well as a slower revival in 2010. Real GDP growth will total 4.1% in 2008 (instead of the 4.8% projected in the autumn); it will decelerate to 1.1% (3.1%) in 2009, and strengthen to 3.1% in 2010 (4.0%). The greater-than-predicted slowdown of economic growth in 2009 is mainly due to the deteriorating conditions in the international environment and tightening lending conditions. The forecasts for exports and investment activity are, therefore, much lower than the autumn forecasts and final domestic consumption growth will decline as well. As a result of significantly diminished economic activity, employment is also expected to decline in 2009 (-1.3%). Due to a higher number of unemployed, the forecast for the registered unemployment rate is higher compared with the autumn forecast (7.7%; 6.8% in the autumn). Growth of wages in 2009 will also be weaker than projected. Nominal growth of the gross wage per employee will be 2.8 p.p. lower (5.0%); the slowdown will be higher in the private sector, while growth of public sector wages will remain relatively strong as a consequence of the agreement on the implementation of the new wage system. The forecast for inflation is also lower, largely due to lower prices of oil and other commodities. Inflation is thus expected to be at 3.0% (3.6%) at the end of 2009; considering the price movements in 2008, average inflation will drop to 1.1% (3.9%). After slowing gradually in the first ten months of 2008, the lending activity of domestic banks almost stopped entirely in November due to tougher conditions in international interbank markets; it was at its lowest since March 2005. Only general government loans recorded a somewhat greater increase, given that the government net borrowed EUR 80 m in November. Enterprises posted a modest positive net flow of loans, while households even net repaid their debts. Banks partly compensated for the loss of funds from interbank markets with deposits of domestic clients, who were also withdrawing their assets from capital markets in November, where negative trends continued. According to the available preliminary data, economic activity in Slovenia slowed even faster in November. October's y-o-y drop in merchandise exports and in the volume of industrial production in manufacturing even increased in November according to the preliminary data. Merchandise exports were 14.2% lower y-o-y and the volume of industrial production saw the largest drop since 1992 (by 12.0%). In October, a more notable slowdown of activity was also recorded in retail trade (particularly in durable goods) and hotels and restaurants, while activity in construction remained strong. According to business tendency data, the sentiment indicator declined again in December 2008, falling to a new low since the measurements began. The indicators in the labour market are also on a gradual decline. In December, the number of registered unemployed persons increased relative to the previous month for the third month in a row. Employment growth declined in October y-o-y (from 3.0% to 2.7%), after remaining unchanged for four months. Amid a much larger number of persons who lost work and a smaller number of the unemployed who found work, the number of registered unemployed increased in November and December and was at the end of December approximately 3,600 higher than at the end of October. In October, wages increased substantially at the monthly level, but their growth also remained strong y-o-y. The total gross wage per employee increased by 1.7% in October, largely due to wage rises in the private sector (2.0%) as a result of extraordinary payments in certain activities. In the public sector, wage rises were lower (0.9%). At the y-o-y level, growth moderated slightly (9.2%) on account of the strong growth in October2007, but remained much higher than in the same period of2007. Y-o-y inflation dropped further in December (2.1%), while average inflation in 2008 totalled 5.7%. Y-o-y inflation dropped by 1.0p.p. in December. Similar to the last five months, price movements in December were mainly marked by lower prices of oil, reflecting the falling oil prices in global markets. Besides lower prices of commodities, the slowdown of economic activity and lower expectations also contributed to the lowering of inflation. For similar reasons, inflation also continues to decline in the euro area as a whole, where it stood at 1.6% in December. Recording a high level in October, the current account deficit almost doubled in the first ten months of2008 compared with the same period of2007. The October deficit, the highest in 2008, was mainly underpinned by the Slovenian Economic Mirror, December 2008 4 In the Spotlight deficits in trade and factor incomes. In the first ten months of the year, the current account deficit was almost twice as high as in the same period of2007, and was mainly driven by the trade deficit as a consequence of slower growth of exports and deteriorated terms of trade (with unchanged terms of trade, the trade deficit would have been two-thirds lower, by our estimate). In the first nine months of2008, growth of general government revenue (12.8%) almost doubled compared with the same period of 2007 and remained stronger than expenditure growth (9.8%). According to the available data on payments of taxes and social security contributions for the first eleven months, growth of general government revenue started to slow in October and November and was 10.9% higher in the first eleven months than in the same period of2007. Contributions to the EU budget achieved 94% of planned funds by the end of November, but will be higher than anticipated at the end of the year, given that Slovenia's obligations against the EU budget are set to increase in line with the new estimates of statistical aggregates. At the end of November, absorption from the EU budget reached 40% of the foreseen funds and is expected to decline relative to 2007. 5 Slovenian Economic Mirror, September 2009 Current Economic Trends "Ö £ o d > Source: SORS; calculations by IMAD. Merchandise import growth also slowed significantly in October. Y-o-y growth of merchandise imports dropped from 9.3% in September to 3.1% in October, totalling 10.7% in the first ten months of 2008. Based on the available data for nine months, imports from EU countries, accounting for 78% of Slovenia's total merchandise imports, increased by 11.0% year-on-year, and imports from non-EU countries by 12.7%. As with exports, y-o-y growth of imports from the EU moderated only in Q3 (8.9%), while y-o-y growth of imports from the non-EU countries accelerated (13.9%). According to the available data on the structure of imports (SITC), the largest contribution to total merchandise import growth in the first nine months came from imports of oil and oil products (4.9 p.p.), which were highest in the period from May to August, but negative in September due to the falling prices of oil. Imports of machinery specialised for particular industries and imports of road vehicles also contributed significantly to total growth of imports in the first nine months of 2008 (0.7 p.p. each); imports of products from these three groups accounted for more than half of total merchandise import growth. Slika 6: Geographic distribution of merchandise exports 30 EU non-member countries ■ EU 25 -o- o10 3 0 -5 -10 II I II r CO CO CO CO CO CO 0 0 0 0 0 0 a. < S a 3 Q Ll_ < Source: SORS; calculations by IMAD. Terms of trade deteriorated y-o-y in September, largely due to weaker growth of merchandise export prices. Merchandise export prices increased by 2.5% y-o-y in September (against 3.4% in August) and import prices by 6.9% (against 6.6% in August). September saw a considerably smaller contribution of the export prices of electrical appliances and machinery, which have a 40% share in Slovenia's export prices. Amid a more notable slowdown of growth, the contribution of prices of electric energy and milk and milk products declined as well, but their shares are considerably smaller. In the first nine months of 2008, export price growth was lower (index 101.9) than import price growth (index 105.7); the terms of trade deteriorated by 3.6% (against 0.3% in the same period of Figure 7: Dynamics of the terms of trade 110 108 106 104 č 102 9 > 100 98 96 94 I Terms of trade ■ Import prices Export prices Source: SORS; calculations by IMAD. .. 20 5 5 0 10 Slovenian Economic Mirror, December 2008 Current Economic Trends 2008). Given the declining prices of oil and other primary commodities, the worsening of the terms of trade is expected to stop y-o-y in the final quarter of 2008. Growth of trade in services slowed notably y-o-y in October. Growth of service exports dropped from 19.1% in September to 7.7% in October, largely due to the weaker growth of transport service exports, which are closely linked to the dynamics of merchandise exports. Exports of merchanting services also declined. Growth of service exports totalled 17.1% y-o-y in the first ten months of 2008. Total growth of exports was mainly underpinned by growth of travel, road transport and other services. Even though growth of transport service imports decelerated in October, and imports of construction services declined significantly year-on-year, y-o-y growth of service imports totalled 15.5% in the first ten months of 2008. More than three quarters of total y-o-y growth of imports in this period came from travel services and various business, professional and technical services. Figure 8: Expenditure structure of GDP growth Figure 9: Production structure of GDP -15 Households I Govern ment Gross fixed capital formation BChanges in inventories and valuables ■ Exports of goods Imports of goods Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Source: SORS. ■ Agriculture, fishing (A, B) Industry (C -E) IConstruction ( F) a Market services (G-K) Public services (L -P) B Net taxes on goods Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Source: SORS. Note: see the l ist of acronyms. 8 7 4 3 2 0 -1 Box 1: Economic growth in Q3 2008 In line with expectations, economic growth in Slovenia moderated in Q3 2008, totalling 3.8% y-o-y (compared with 5.6% in the first half of the year). The moderation was mainly due to weaker growth of gross fixed capital formation and exports, which were the main drivers of growth in the period of high economic activity. Growth of final domestic consumption remained modest; the contribution of the change in inventories (0.8 p.p.) was only slightly higher than in the first half of the year. Owing to the significant moderation of growth in Slovenia's main trading partners, growth of Slovenia's exports (of both merchandise and services) also recorded a notable decline (from 8.5% to 4.2%). Looking at the import side, imports of services increased at a somewhat faster pace, while merchandise imports reached only a third of their Q2 growth. Total import growth more than halved y-o-y in Q3 in comparison to Q2 (from 9.2% to 4.4%). Investment activity moderated notably in Q3, from 10.2% to 3.5%. The slowdown was seen in all investment categories; investment in residential buildings even declined. Y-o-y final domestic consumption growth dropped slightly compared with Q2 (from 3.5% to 3.2%); private consumption growth fell by 0.8 p.p. to 2.7%, while general government consumption accelerated from 3.3% to 4.6%. Value added growth moderated from 5.2% in the first half of the year, to 3.6%. Broken down by activities, the value added in manufacturing diminished; the strongest growth was still recorded in construction and financial intermediation, while growth in other activities was slowing. Value added in manufacturing declined (-0.5%) for the first time since the final quarter of 1998. The contribution of manufacturing to total value added growth was therefore slightly negative (-0.1%). The growth of value added in construction was equal, as in Q2 (13.9%), but below the level recorded in 2007 (16.0%); its contribution to total growth remained the highest among all activities (1.1 p.p.). Value added growth in financial intermediation was slightly stronger than in Q2 (12.1%). This is the only activity from the group of market services (G-K) in which growth accelerated in Q3. Value added growth declined in all other market services; in hotels and restaurants, value added growth was negative for the second quarter in a row, while public services (L-P) recorded stronger growth. 11 Slovenian Economic Mirror, December 2008 Current Economic Trends Table 2: Selected monthly indicators of economic activity in Slovenia In % 2007 X 08/ IX 08 X 08/ X 07 I-X 08/ I-X 07 Exports1 16.9 -5.8 1.1 7.7 -goods 16.3 -3.9 -0.2 5.7 -services 20.1 -13.4 7.7 17.1 Imports1 18.3 0.2 3.5 11.4 -goods 18.1 0.1 3.3 10.8 -services 20.1 1.2 4.2 15.5 Industrial production 6.2 -1.32 -3.13 0.8 -manufacturing 7.5 -1.42 -3.13 1.0 Construction -value of construction put in place 18.2 -0.32 15.7 19.7 Distributive trade - turnover in distributive trade and the sale and repair of motor vehicles 9.5 -1.52 2.83 12.2 Hotels and restauransts - turnover in hotels and restaurants 0.3 -0.12 -4.03 -3.6 Sources: BS, SORS, calculations by IMAD. Notes: 1balance of payments statistics, 2seasonally adjusted ,3working-day adjusted data Production activity in manufacturing declined further in October. The volume of industrial production declined in comparison with the previous month (-1.4, seasonally adjusted) as well as relative to the same month of 2007 (-3.1%). It is expected to drop further in the coming months, given that the confidence indicator in manufacturing maintained its 13-year low for the third consecutive month. Among manufacturing subsectors, positive y-o-y growth continued only in the chemical, paper and machinery industries (8.4%, 3.7% and 2.2%, respectively). The textile industry posted the largest contraction of production (-22.5%). In the first ten months of 2008, the monthly average of the volume of production in manufacturing was only 1% higher than in the comparable period of the previous year. Figure 10: Production in manufacturing by subsectors 10 -10 -15 -20 -15 ■Oct 08/0ct 07 ■Jul-Sep 08/Jul-Sep 07 The number of persons employed in manufacturing declined considerably in October, but wages increased much faster than productivity. After five months of moderate decline, the number of persons in formal employment dropped by 1.3% (or 3,059) relative to October 2007 and by 0.4% (or 835) relative to September 2008. In the first ten months, manufacturing employed on average 0.2% (or 396) fewer workers than in the same period of 2007. As a result of weak production activity, a further decline in employment may also be expected in the coming months. This is corroborated by data from the business tendency survey, given that the indicator of employment expectations dropped to its all-time low in December, for the second month in a row. Gross wage growth in manufacturing is otherwise relatively high, partly as a consequence of adjustment for high inflation and payments based on good company performance in 2007. In the first ten months, the average real growth of wages (4.8%, deflated by PPI) was already notably higher than productivity growth (1.2%), while in 2007 the situation was just the opposite. Among the subsectors, real wage growth exceeded productivity growth most notably in the leather (DC), wood-processing (DD) and metal (DJ) industries, which recorded negative productivity growth; real growth of wages in the chemical industry (DG), by contrast, lagged substantially behind the strong productivity growth. Figure 11: Wages and productivity growth in manufacturing -Growth of wages, defl. by PPI, Jan - Oct 08/Jan - Oct 07 — Average productivity growth Jan - Oct 08/Jan - Oct 07 D DA DB DC DD DE DG DH DI DJ DK DL DM DN Source: SORS, calculations by IMAD. Note: see the list of acronyms. Construction activity was high also in October. Growth of the value of construction put in place was 15.7% y-o-y, similar to Q2 (16.9%) and Q3 (16.6%). The structure of growth was also similar; the strongest growth was seen in residential construction.1 Growth in civil-engineering was modest, while the value of non-residential construction dropped relative to the same month of 2007. D DA DB DC DD DE DG DH DI DJ DK DL DM DN Source: SORS, calculations by IMAD. Note: see the list of acronyms. 1 In interpreting data on the value of residential construction, bear in mind that these figures exclude the activity of smaller enterprises, where the main activity is judged to be the construction of buildings, which increases the unreliability of the data. 15 10 5 0 5 0 -5 12 Slovenian Economic Mirror, September 2009 Current Economic Trends Figure 12: Value of construction put in place 80 60 ^ 40 5 o 6 ^ o 20 > Construction Buildings Civil engineering -20 Figure 13: Electricity consumption and industrial production in manufacturing ü < 0 g ü < g u < Source: SORS; calculations by IMAD. The data on new contracts and business tendency indicate a slowdown of activity. According to the construction statistics, the value of the stock of contracts was 7.6% lower in October relative to the same month of 2007. In the first ten months, the value of new contracts was 1.8% lower than in the same period of 2007. A similar moderation is also indicated by business tendency data on limiting factors, according to which the share of enterprises citing insufficient demand as a factor limiting building activity, increased (this indicator reached its six-year high in December). Over the last few months, enterprises in construction have also perceived financial constraints. According to business tendency surveys, since June, enterprises have been increasingly facing difficulties in acquiring loans, as well as higher costs of finance. November's electricity balance was among the most favourable in 2008. Electricity production increased by 16.9% y-o-y in November, and by 10.0% in the first eleven months of the year. The rise in November was due to the increased output of hydroelectric and nuclear power plants (a low-base effect, as in 2007 the regular overhaul of the nuclear power plant partly fell on November), while the output of thermal power plants declined. Electricity consumption decreased by 8.0% y-o-y in November, and by 4.6% in the first eleven months of the year. In November, consumption by direct users from the transmission network dropped by 18.4%; consumption from the distribution network (all other electricity consumption including household consumption) recorded by far the largest monthly decline in 2008 (-5.5%). In the first eleven months of the year, electricity exports increased by 36.1% y-o-y and imports by 1.4%. Net electricity exports were, by a factor of 2.7, higher than anticipated in Slovenia's electricity balance (EEB) and accounted for 9.8% of production. 15 10 ■5 0 S o CTI ? -5 -10 -15 ■ Electricity consumption ■ Manufacturing Sources: SORS, ELES; calculations by IMAD. October's figures for retail trade2 and hotels and restaurants indicate a further moderation of growth or a decline of activity in all sectors that are closely related to economic developments. After fluctuating for a few months at a lower level than recorded in early 2008, y-o-y real growth of turnover in retail trade moderated somewhat more notably in October (2.8%). The slowdown was attributable to a decline of turnover in durable trade (non-food products and motor vehicles), where slower growth had already been observed in the previous few months. Similar developments are also indicated by data on the number of new car registrations, which was lower in October than twelve months before (by 1.7%). Due to more favourable developments in the first half of the year, total real growth of turnover in retail trade was still strong (12.2%), on average, in the first ten months of 2008, and exceeded the comparable growth in 2007. Data on new passenger car registrations for the last two months of the year show a further decline in the sale of motor vehicles; in November the number of first car registrations was lower year-on-year almost by a fifth (18.9%) and in December by almost a third (28.1%). The confidence indicator dropped substantially for the second successive month in December and was, according to seasonally adjusted data, the lowest in the whole period since the beginning of measurement in January 1999. Due to a further decline in accommodation and related services (11.4%), real turnover in hotels and restaurants decreased y-o-y in October (by 4.0%) for the fourth consecutive month. The number of tourists' overnight stays was lower y-o-y, given that the number of visits by foreign tourists dropped for the third consecutive month (-7.4%). In the first ten months of 2008, the number of tourists' overnight stays 2 Total retail trade, sale and maintenance of motor vehicles and retail sale of automotive fuels (50+52). 5 0 13 Slovenian Economic Mirror, September 2009 Current Economic Trends was only 1.8% higher y-o-y (against 7.1% in 2007) and the preliminary data for November suggest a further decline. In the first ten months of 2008, real turnover thus dropped most notably in accommodation and related services (by 4.7%), while the decline in the whole hotel and restaurant group was at 3.6%. Figure 14: New passenger car registrations 40 o & ? > 30 20 10 -10 -20 -30 -40 a. < CO CO CO CO a. < Source: Ministry of the Interior. Labour market Labour market conditions started to worsen gradually. Employment growth in October continued, but at a slower pace; the number of persons in employment increased by 0.3% compared to September, which is less than in September and also less than in October 2007. Y-o-y growth declined to 2.7% (from 3.0% in September). The number of employed persons increased in almost all activities, except agriculture, mining, manufacturing and public administration. Both the number of employed and the number of self-employed persons increased. In relative terms, the largest increase relative to September was recorded in the number of persons employed in hotels and restaurants, other community, social and personal services and in business services; in absolute terms, the increase was largest in distributive trades. The number of persons in employment continued to rise in construction, but the increase was smaller than in the previous months. Employment decreased most notably in manufacturing; particularly in the textile industry and in the manufacture of machinery and equipment. The number of registered vacancies and the number of persons hired also dropped in November, for the second month in a row (by 16% each, y-o-y). The number of work permits for foreigners moderated in November, rising to 90,436, which is 130 more than in October. In December, the consumer confidence indicator dropped somewhat further compared with the previous month, to its lowest level since 1996. In December, consumers were even more pessimistic than in November regarding the economic situation at present and in the future, major purchases over the next 12 months and the level of unemployment, but they were more optimistic regarding other indicator components. Figure 15: Business tendency 40 30 20 a JD g 10 o ro 0 tj w "U C _ -10 -20 -30 -40 • Economic sentiment • Retail trade • Service act. Manufacturing Consumers Construction Figure 16: Gains in the number of employees by activity 14 12 10 8 6 s 4 o 4 Jan -Sep 08/Jan -Sep 07 Oct 08/0ct 07 tu ^ (Ô u £ CÜ D U O- > 7z cn O Source: Eurostat; calculations by IMAD. 8 6 4 2 -4 Table 5: Indicators of cost competitiveness Annual growth rates in % 2004-2006 2007 KV I-III 2008 Real effective exchange rate, deflated by unit labour costs 1 0.3 1.6 4.9 Nominal effective exhange rate -0.6 0.8 0.9 Relative unit labour costs 0.9 0.8 3.9 Unit labour cost components (domestic) Nominal unit labour costs 1.9 2.5 7.1 Compensation of employees per employee 6.2 6.3 9.1 Labour productivity,2 real 4.3 3.7 1.8 Real unit labour costs -0.5 -1.5 2.5 Labour productivity,2 nominal 6.7 8.0 6.5 Source: SORS, EUROSTAT, OECD, ECB; calculations by IMAD. Notes: 1against 17 main trading partners; 2 gross domestic product per employee. 4 In Slovenia compared with Slovenia's trading partners. Slovenian Economic Mirror, December 2008 19 Current Economic Trends Balance of payments In October, the monthly current account deficit was at its highest in 2008 (EUR 271.7 m). It reached EUR 1,874.3 m in the first ten months of the year and almost doubled in comparison to the same period of 2007. The higher y-o-y deficit in October was due to higher trade and factor income deficits. The services surplus widened y-o-y, while the deficit in current transfers decreased. Figure 28: Components of the current account balance I Trade balance Current transfers Services balance -Current account I Factor incomes Source: BS. expenditure from travel increased faster than receipts for both private and business trips. The deficit in the group of other services narrowed y-o-y, largely due to higher net exports of construction and merchanting services. As in the whole period, the factor income deficit in October was higher y-o-y due to net payment of interest on foreign loans. In the first ten months of 2008, it totalled EUR 841.4 m, EUR 199.7 m more than in the same period of 2007. The share of net payments of interest on loans, accounting for 70% of the total income balance, rose notably in the period between July and October 2008 and averaged 87%. Net interest on foreign loans paid by domestic commercial banks accounted for 63.1% of all net payments of interest on foreign loans (compared with 60.5% in the same period last year). The share of the BS's net interest payments from liabilities to the Eurosystem also increased, to 13.0% (compared with 10.5% in the same period of 2007). Net interest payments by other sectors, predominantly enterprises, declined y-o-y. The deficit in current transfers narrowed y-o-y in October, due to the surplus in insurance premiums in the private sector. In October, contributions from the state budget to the EU budget exceeded receipts from the EU budget by EUR 40.8 m. The higher contributions were a result of the new statistical estimate of gross national incomes of the EU Member States. In the first ten months of 2008, the current transfer deficit totalled EUR 174.1 m, decreasing by EUR 41.2 m y-o-y, largely due to the surplus in other transfers. The trade deficit in October totalled EUR 251.9 m. Amid slower import growth, the trade deficit widened y-o-y in October (EUR 71.9 m) due to a decline in merchandise exports. With regard to regional structure, the trade deficit with EU countries widened y-o-y in October, and the trade surplus with non-EU countries decreased. Given that growth of exports decelerated faster than growth of imports, the trade deficit increased by EUR 974.7 m y-o-y in the first ten months of 2008. The widening of the merchandise deficit was to a significant extent due to deteriorated terms of trade, which affected the purchasing power of Slovenia's merchandise exports. The trade deficit would have been approximately EUR 580 m lower y-o-y in the first nine months of 2008, by our estimate, had the terms of trade remained unchanged (the actual trade deficit in the first nine months of the year was EUR 878.5 m higher y-o-y). The surplus in the services balance totalled EUR 95.9 m in October. The y-o-y increase (by EUR 16.6 m) was mainly due to higher net exports of construction services. In the first ten months of 2008, the surplus in the services balance rose by EUR 223.8 m y-o-y, to EUR 1,297.5 m. The road transport surplus and the surplus in air transport services widened most notably in this period, the maritime transport surplus was only marginally higher and the surplus in railway transport slightly declined. Net inflows from travel services dropped y-o-y, given that In October, international financial transactions recorded net outflows for the first time in2008, largely as a consequence of net capital outflows from other investments. Loans of domestic banks to the rest of the world strengthened in October (EUR 281.4 m) relative to the previous months, while bank borrowing abroad declined (EUR 71.8 m). Figure 29: Financial transactions of the balance of payments Direct investment Portfolio investment Financial derivatives Other investment -Net financial flow Source: BS. 20 Slovenian Economic Mirror, September 2009 Current Economic Trends Table 6: Balance of payments I-X 2008, EUR m Inflows Outflows Balance1 Balance, I-X 2007 Current account 23,629.7 25,504.0 -1,874.3 -964.9 - Trade balance (FOB) 17,530.3 19,687.0 -2,156.7 -1,182.0 - Services 4,242.7 2,944.8 1,297.9 1,074.1 - Income 1,046.4 1,887.9 -841.4 -641.7 Current transfers 810.3 984.4 -174.1 -215.2 Capital and financial account 5,018.1 -3,306.3 1,711.8 935.9 - Capital account 186.1 -257.7 -71.6 -36.8 - Capital transfers 183.2 -249.5 -66.2 -34.7 - Non-produced, non-financial assets 2.9 -8.3 -5.4 -2.1 - Financial account 4,832.0 -3,048.6 1,783.4 972.8 - Direct investment 925.7 -878.4 47.2 -216.2 - Portfolio investment 650.1 -929.8 -279.7 -1,810.3 - Financial derivates 0.0 5.6 5.6 -23.2 - Other investment 3,223.4 -1,245.9 1,977.5 2,926.9 - Assets 53.3 -1,232.5 -1,179.2 -4,575.0 - Liabilities 3,170.1 -13.4 3,156.7 7,502.0 -Reserve assets 32.9 0.0 32.9 95.5 Net errors and omissions 162.5 0.0 162.5 28.9 Sources: BS. Note: 1a minus sign (-) in the balance indicates a surplus of imports over exports in the current account and a rise in assets in the capital and financial account and the central bank's international reserves. Net capital inflows totalled EUR 1,750.6 m in the first ten months of 2008, compared with EUR 877.3 m in the same period of 2007. Regarding financial liabilities to the rest of the world, commercial bank loans predominated in the first ten months of2008. Commercial banks raised a lower amount of loans (EUR 1,907.5 m) than in the same period of 2007 (EUR 2,282.6 m). The maturity structure also changed, given that short-term loans accounted for more than half of the raised loans, compared with more than a quarter in the same period of the previous year. Most loans were raised in the first half of 2008, while bank borrowing abroad has been slowing notably since July. The inflow from direct investment (EUR 925.7 m) was EUR 86.0 m higher y-o-y in the first ten months of the year, largely on account of higher liabilities to affiliated enterprises abroad. The value of equity capital declined y-o-y. External assets increased again in October, largely due to domestic bank loans to the rest of the world and, to a lesser extent, also to outward direct investment; international assets arising from portfolio investment declined significantly as a result of the sale of debt securities. Most foreign debt securities were, as in September, sold by domestic commercial banks. After the modest investment in foreign securities recorded in the first half of 2008, other sectors have been selling foreign securities since August. In the first ten months of 2008, investment by domestic banks and other sectors in foreign securities thus declined significantly y-o-y. The total decline in the first ten months would have been much higher, had the Bank of Slovenia not substantially increased its investment in foreign debt securities and money market instruments. Within foreign direct investment, in addition to capital investment, Slovenian enterprises financed affiliated enterprises in the form of loans and short-term trade credits. The structure of investment was more balanced than the structure of inward direct investment. After July's increase in investment abroad, foreign direct investment was modest in the period to October. Short-term trade credits, which are linked to the dynamics of merchandise trade, declined again in October after September's increase. In the first ten months of 2008, the volume of short-term trade credits to the rest of the world dropped y-o-y. According to enterprises' direct reports (balance sheets), at the end of October Slovenia had most claims from short-term trade credits on the EU Member States (48.7%). On the side of external assets, exports of capital in the form of portfolio investment predominated in the first ten months of 2008 (EUR 929,8 m; within that, the Bank of Slovenia's currency and deposit claims increased by EUR 1,120.7 m), foreign direct investment (EUR 878.4 m) and trade credits (EUR 720.4 m). Slovenia's gross external debt totalled EUR 40 bn at the end of October; gross external assets in debt instruments amounted to EUR 31.6 bn. Net external debt reached EUR 8.5 bn at the end of October (22.7% of estimated GDP) and diminished by EUR 200 m compared to September. Slovenia is thus still ranked among the least indebted countries in the euro area. Slovenian Economic Mirror, December 2008 Current Economic Trends 21 Financial markets The volume of domestic bank loans to the non-banking sectors stagnated following the relatively strong growth in October. With 0.5%, the growth of euro loans reached only a third of the monthly average in the first eleven months of 2008; foreign currency loans declined by as much as 5.5%, the largest figure since comparable data have been available;5 the contraction of this type of borrowing is largely attributable to increased exchange rate risk. The total y-o-y growth rate declined substantially, falling to its lowest level since February 2006 and was with 18.9%, 3.2 p.p. lower than the month before. This notable decline was also partly due to the strengthened borrowing in November 2007. Banks thus granted only EUR 13.2 m net loans to domestic non-banking sectors in November: In the first eleven months of 2008, these net flows totalled EUR 4,773.1 m, almost a quarter less than in the comparable period of 2007. Figure 30: Net flows and growth of domestic bank loans to domestic non-banking sectors Households (left axis) Enterprises and NFI (left axis) Government (left axis) -----Households (right axis) -Enterprises and NFI (right axis) -Total (right axis) 800 45 40 35 30 25 20 15 10 5 0 -5 Source: BS; calculations by IMAD. Households net repaid all types of loans in the amount of EUR 72.8 m in November and also housing loans, for the first time since February 2005 (EUR 20 m). A detailed comparison of data shows that the decline in housing loans is mainly due to the cessation of foreign currency borrowing, which was an important source of financing household purchases of dwellings in previous years. In November, foreign currency loans were obviously substituted by euro loans, given that net flows of housing loans in euros strengthened somewhat, despite a notable moderation of lending activity compared with the period from July to October. The highest outflows were recorded by consumer loans, which were down EUR 37.0 m (the largest decline since December 2007).6 The y-o-y growth rate of the total volume of household loans dropped to 14.0% in November, hitting the lowest level since comparable data have been available. In the first eleven months of 2008, households net borrowed EUR 967.0 m, almost a third less than in the same period of 2007. Only housing loans were comparable with the same period of 2007, owing to the extremely strong net inflow in the previous months. Figure 31: Net flows and growth of domestic bank loans to domestic non-banking sectors Source: BS; calculations by IMAD. Corporate and NFI borrowing also moderated substantially in November and was, as a result of the limited availability of funds, at the lowest level since data have been available. Net flows of this type of loans reached only EUR 6.3 m, not even 2% of the average monthly net flows recorded in the first eleven months of 2008. Enterprises recorded a positive net flow only for investment loans (EUR 46.9 m), but even these loans reached less than half of the monthly average posted in the first eleven months of 2008; in contrast, enterprises net repaid working capital loans (EUR 49.1 m) and loans for other purposes (EUR 32.9 m). NFI posted a positive net flow of loans largely due to further unfavourable movements in capital markets and continued to borrow mainly to cover liquidity needs. In the first eleven months of 2008, enterprises and NFI thus mainly net borrowed from domestic banks (EUR 3,728.8 m, a quarter less than in the comparable period of 2007). Borrowing abroad stopped in October, after it became an increasingly important source of financing in the previous months. Enterprises and NFI thus net repaid this type of loans in October, in the amount of EUR 38.4 m, the highest figure in the last year and a half. In the first ten months of 2008, the net flow of foreign loans totalled EUR 464.7 m, only slightly over one percent more than in the comparable period of 2007. 50 0 -50 -100 5 Comparable data for loans since January 2005. 6 Net outflows of December 2007 are due to the return of loans for the purchase of NKBM shares. Also in October, banks faced a limited supply of funds in international interbank markets. Even though they 22 Slovenian Economic Mirror, September 2009 Current Economic Trends Table 7: Financial market indicators Nominal amounts, EUR bn Nominal loan growth, % 31. XII 2007 30. IX 2008 30. IX 2008/ 31. VIII 2008 30. IX 2008/ 31. XII 2007 30. IX 2008/ 30. IX 2007 Loans total 26,715.5 31,488.6 0.0 17.9 18.9 Enterprises and NFI 19,378.7 23,107.4 0.0 19.2 20.6 Government 519.2 596.5 15.4 14.9 19.2 Households 6,817.7 7,784.7 -0.9 14.2 14.0 Consumer credits 2,742.5 2,891.0 -1.3 5.4 3.4 Lending for house purchase 2,667.9 3,336.6 -0.6 25.1 27.1 Other lending 1,407.3 1,557.0 -1.0 10.6 10.6 Bank deposits total 12,541.8 13,507.4 1.2 7.7 13.0 Overnight deposits 5,387.7 5,303.6 0.9 -1.6 4.2 Short-term deposits 5,112.4 5,519.6 1.5 8.0 13.4 Long-term deposits 1,286.0 1,824.1 2.8 41.8 43.5 Deposits redeemable at notice 755.6 860.1 -2.4 13.8 18.8 Mutual funds 2,924.4 1,607.8 -8.3 -45.0 -42.7 Sources: Monthly Bulletin of the BS, SMA (Securities Market Agency), calculations by IMAD. Figure 32: Corporate and NFI borrowing in Slovenia and abroad 800 700 600 500 J 400 I 300 200 100 0 -100 Abroad I In Slovenia I CO CO CO CO Source: BS; calculations by IMAD. managed to obtain net funds in the amount of EUR 71.8 m in October, the maturity structure remained unfavourable. Short-term loans recorded a positive net flow, while banks net repaid long-term loans in the amount of EUR 110.7 m. Bank net borrowing abroad totalled EUR 1,905.7 m in the first ten month of 2008, 16.4% less than in the comparable period in 2007. The decline is due to a decline in long-term borrowing (by slightly over 40%), while short-term borrowing strengthened by a good half. posted the highest growth rates, but their growth slowed substantially compared with Q2 and Q3 2007. Short-term deposits, in contrast, began to strengthen again after declining for three successive months. Household deposits thus recorded a net inflow of EUR 965.5 m in the first eleven months of 2008, which is almost twice as much as in the same period of 2007.7 Net outflows of assets from mutual funds were also an important source of financing household deposits in banks in the past eleven months. They moderated somewhat in November, Figure 33: Net flows of bank borrowing abroad CO CO CO CO CO ro Source: BS; calculations by IMAD. After declining in October, the volume of household deposits in banks strengthened again in November. Long-term household deposits with higher interest rates still 7 Disregarding the increased net outflows in November 2007 due to the privatisation of the NKBM, household deposit growth would have been approx. 20%. 23 Slovenian Economic Mirror, September 2009 Current Economic Trends Box4: Stock exchange in 2008 After the main index on the Ljubljana Stock Exchange rose by almost four-fifths in 2007, it was down by more than two-thirds in 2008, dropping to the level of almost five years ago. In the final quarter of 2008 alone, its value declined by just over 40%, which is comparable with the annual declines in developed international capital markets. These negative movements were mainly due to the rapid spillover of the financial crisis into the real economy, but also to strong growth in previous years. According to analysts, individual securities were therefore overvalued with regard to the comparable securities on foreign stock exchanges. The larger decline was also attributable to the very poor liquidity of the Slovenian capital market. The share turnover ratio (measured as a ratio of annual turnover to market capitalisation) on the Ljubljana Stock exchange remains low, reaching 0.11 in 2008, while in developed capital markets this value hovers above 0.50. The volume of market capitalisation on the Ljubljana Stock Exchange fell by 41.9% y-o-y, which is the first y-o-y decline to date. The decrease was mainly due to the lower market capitalisation of shares listed on the Ljubljana Stock Exchange, given that its value fell by EUR 11.3 bn in 2008 (30% of estimated GDP in 2008) and was 57.1% lower than the year before. The decline would have been even greater, had it not been for the listing of new securities on the Ljubljana Stock Exchange. The market capitalisation of shares of investment funds dropped by almost four-fifths, but their contribution to the total decline was less significant, given that their share is low (1.4%). Turnover of securities recorded a much lower value than in 2007; it declined by 42.3%, which is, by our estimate, mainly attributable to the lower value of securities rather than to a lower number of transactions. Turnover of shares more than halved (evenly by all types of listed shares). Turnover of bonds, in contrast, was notably stronger (by a factor of 1.4), which is due to the abolishment of the MMTS and the relocation of trading from the MMTS back to the official market, and partly also to the large decline in the value of shares linked with increased interest in bonds. More developed capital markets recorded a notably smaller decline than the Ljubljana Stock Exchange, between 31.3% (FTSE100) and 42.7% (CAC40). The MSCI WORLD, measured in euros, dropped by 39.1% in 2008. The decline was to the greatest extent due to negative developments in the period from September to November (a more than 25% drop), when the conditions on the capital markets tightened notably after the collapse of the investment bank Lehman Brothers. Figure 34: Market capitalisation on the Ljubljana Stock Exchange Figure 35: Dynamics of the SBI 20 and selected main foreign indices but nevertheless still totalled EUR 29.5 m. In the first eleven months of 2008, they were at EUR 290.4 m, while in the same period of 2007 mutual funds recorded net inflows of as much as EUR 404.3 m. The volume of assets in mutual fund managed by domestic administrators contracted by as much as 45% in the first eleven months of 2008; almost 80% of the total decline was due to a lower value of investment by mutual funds. The largest decline in assets was recorded by riskier stock and mixed mutual funds, while the volume of assets in money market mutual funds with safe and liquid investments almost doubled in this period. Contrary to developed capital markets, the negative movements on the Ljubljana Stock Exchange did not slow significantly in the last month of2008. The SBI20, the main 24 Slovenian Economic Mirror, September 2009 Current Economic Trends index on the Ljubljana Stock Exchange, recorded the lowest decline in the last four months, but it nevertheless totalled 13.9%. The index volatility moderated somewhat relative to October and November, and in December the SBI20 recorded an average daily increase (and decrease) of 1.6%. The market capitalisation on the Ljubljana Stock Exchange declined by 4.1% in December, which is notably less than the main index and largely a consequence of 5.1% growth of the market capitalisation of bonds. In the previous three months, the values of main indices on foreign capital markets also generally declined, but in December most indices increased or recorded only a minimum drop. Among the main world indices, the main index on the Tokyo stock market (NIKKEI 225, 4.1%) recorded the largest increase; only the New York and Paris stock exchange indices recorded declines (DOW JONES, 0.6% and CAC 40, 1.4%), while in this period the value of the MSCI World measured in euros dropped by 5.9%, which is to a great extent linked to the depreciation of certain important currencies against the euro (GBP, USD in JPY). Figure 36: Taxes and social security contributions - Taxes on income and profit - Social security contributions Domestic taxes on goods and services Other taxes Source: MF. 0 Public finance Growth of general government revenue slowed in the first eleven months of2008. According to data on the payments of taxes and social security contributions,8 taxes and social security contributions increased by 10.9% in the first eleven months of 2008 (12.1% in the first nine and 11.9% in the first ten months) relative to the same period of 2007. Growth is slowing in all categories of taxes. Social security contributions are also slightly moderating. Despite the slight slowdown, revenue from personal income tax nevertheless still recorded the fastest growth in the period of eleven months and increased by 23.4% (by 24.7% in the first ten months) relative to the same period of 2007. In November, y-o-y growth of the main category of personal income tax, tax on wages and salaries, was weaker than in the previous two months; in the period of eleven months, revenue from this tax increased by 13.6% y-o-y (against 13.8% in the first ten months). Growth of revenues from other categories of personal income tax also moderated somewhat, but remained high (especially growth of revenues from taxes on income from capital gains and income from property). Personal income tax refunds in the first eleven months were much smaller than in 2007; revenue from personal income tax thus decreased by EUR 61.5 m compared with EUR 163 m in the same period of 2007. The new amendment to the Personal Income Tax Act, which was adopted in December within the package of measures to mitigate the economic crisis, will also contribute to a further decline in revenue from personal income tax in the tax assessment for 2008, as it increases tax relief for investment in research and technological development for sole proprietors, as well as investment in agricultural holdings. 8 Based on the Report on Payments of all Public Revenues, January-November 2008. Revenue from corporate income tax increased by 13.7% in the period of the first eleven months (compared with 14.1% in the first ten months). As a result of the final assessments of the corporate income tax based on annual accounts for 2007, growth in revenue from this tax has been slowing in recent months, given the more even monthly advance payments of the tax. Monthly advance payments have been declining gradually in recent months (from around EUR 92 m in July to around EUR 81 m in November), which shows that in light of the crisis taxpayers are increasingly taking advantage of the (otherwise procedurally complicated) possibility of adjusting advance payments to new tax bases according to the new rate of taxation (according to the currently effective legislation, advance payments are otherwise determined on the basis of tax assessments for the previous year). According to the Act Amending the Tax Procedure Act, adopted as a measure to increase the liquidity of legal persons and thus mitigate the negative impacts of the financial crisis, taxable persons will be able to pay advance payments of the corporate income tax based on the tax base calculation according to the tax assessments for the previous tax period at the (lower) rate of the current tax period. The dynamics of domestic taxes, which rose by 9.3% in the first eleven months (by 11.0% in the first ten months), also suggest a slight slowdown; revenue from value added tax increased by 10.2% and revenue from excise duties by 9.1%. Part of this slowdown can be explained by delayed payments of value added tax and excise duties, as well as by last year's amendments to the Value Added Tax Act and changes in excise duties in 2007, which were not in effect during the whole year. All of these developments were reflected in the dynamics of tax payments in 2007, which were different than in 2008. The change in excise duties for oil products, which was carried out mid-December, will also have a positive impact on revenue from excise duties. Revenue from social security contributions had 25 Slovenian Economic Mirror, September 2009 Current Economic Trends Table 8: Consolidated general government revenues and expenditure 2007 2008 EUR m % of GDP Growth. % EUR m I-IX 08 IX 08/ IX 07 I-IX 08/ I-IX 07 Revenues - total 14,006.1 40.6 8.1 11,214.8 25.6 12.8 - Tax revenues 12,757.9 37.0 8.5 10,284.0 23.4 12.4 - Taxes on income and profit 2,917.6 8.5 6.7 2,607.4 11.4 21.4 - Social security contributions 4,597.9 13.3 8.7 3,730.2 13.1 11.5 - Domestic taxes on goods and servises 4,498.6 13.1 10.3 3,508.9 57.3 12.2 - Receipts from the EU budget 347.9 1.0 -0.1 234.4 52.0 16.7 Expenditure - total 13,915.5 40.4 5.4 10,792.8 24.1 9.8 - Wages and other personnel expenditure 3,276.9 9.5 3.0 2,595.0 13.0 5.8 - Purchases of goods and services 2,212.2 6.4 6.7 1,720.8 21.1 15.4 - Transfers to individuals and households 5,093.3 14.8 4.6 4,097.2 9.3 8.1 - Capital expenditure 1,130.5 3.3 25.4 714.8 92.4 26.9 - Capital transfers 334.3 1.0 -17.4 223.4 197.7 46.1 - Payment to the EU budget 355.9 1.0 23.6 270.9 -11.3 10.1 Soure: MF. calculations by IMAD. the most stable growth, increasing by 11.3% in the first eleven months (compared with 11.6% in the first ten months) relative to the same period of 2007. Based on the dynamics of the first eleven months, we estimate that general government revenue will be somewhat higher at the end of the year than envisaged by the supplementary budgets and financial plans of the national Health Insurance Institute (HIIS) and Pension and Disability Insurance Institute (PDII), but less notably than originally foreseen, due to the slowdown in the last few months. The planned revenue will be exceeded in personal income tax and social security contributions, and also slightly in excise duties. In the first nine months of 2008, general government revenue increased by 12.8% relative to the same period of 2007. According to the consolidated balance9 of the Ministry of Finance (using the cash flow method), general government revenue totalled EUR 11.2 bn. In the first nine months of 2008, it recorded notably stronger growth than in the comparable period of 2007 (6.8%). In 2008, general government revenue was created according to slightly amended tax legislation and tax instruments and in a relatively favourable macroeconomic environment. Its growth was also generated by higher inflation. In the first nine months, general government revenue recorded the largest increase in revenue from personal income tax (25.9%), where revenue from other personal income tax categories (interest, dividends) rose faster than revenue from tax on wages and salaries, while personal income tax refunds were much lower than in the same period of 2007. Revenues from corporate income tax and 9 The consolidated balance includes revenues and expenditures of state and local government budgets and of the pension and health funds. value added tax recorded above-average growth (14.8% and 13.2%, respectively), while growth of revenue from excise duties and growth of revenue from social security contributions were somewhat below average (11.8% and 11.5%, respectively). Figure 37: Consolidated general government revenue and expenditure Source: MF; calculations by IMAD. According to the consolidated balance of revenue and expenditure of the Ministry of Finance for the first nine months of 2008, general government expenditure rose by 9.8% relative to the same period of2007. Consolidated general government expenditure totalled EUR 10.8 bn in the first nine months of the year, posting stronger growth compared with 5.2% in the same period of 2007. 26 Slovenian Economic Mirror, September 2009 Current Economic Trends In terms of the economic structure of expenditure, the largest y-o-y increase in this period of 2008 was seen in expenditure on investment and investment transfers (31%) and expenditure on goods and services (15.4%). Above-average increases were also posted in payments to the EU budget (10.1 %) and subsidies (9.3%). In the first nine months, expenditure on transfers to individuals and households increased by 8.1% y-o-y. The largest rise was recorded in social security transfers (14.2%), largely as a result of the one-off payment of the cost-of-living allowance for pensioners, and other transfers to individuals and households (14.3%), within which free meals for secondary-school pupils were introduced at the beginning of the school year in September and free kindergarten care for the second child in a family. Family benefits and parental allowances also recorded strong growth (13.3 %). Expenditure on pensions increased by 7.1% y-o-y in the first nine months; growth of expenditure on pensions will strengthen further after the adjustment of pensions in November (4.6%). Expenditure on transfers to the unemployed dropped by 7.7% y-o-y. The decline in this expenditure is smaller from month to month. After the disbursement of the first quarter of funds for the adjustment of public sector wages according to the act on the elimination of wage disparities, wages, contributions and other personnel expenditure strengthened somewhat in the first nine months, increasing by 5.8%. Expenditure on interest payments in the first nine month dropped by 5.2% y-o-y. Figure 38: Main consolidated general government expenditure -Wages and other personnel expenditures ................. Expenditure on goods and services Transfers to individuals and households Capital expenditures and capital transfers Payments to EU budget Source: MF. By the end of November, payments to the EU budget reached 94% of the funds envisaged in the state budget. Payments in the whole budgetary period will thus be EUR 40 m higher than planned, given that the European Commission increased Slovenia's obligations to the EU budget on the basis of new estimates of statistical aggregates.10 10 See Slovenian Economic Mirror 11/08. In October, the volume of funds absorbed from the EU budget was smaller than expected, but in November, absorption doubled relative to November 2007. Absorption from cohesion funds strengthened, reaching 65% of planned EU funds. Nearly half of these receipts came from funds for the operative programme of environmental and transport infrastructure development received in November. Absorption of structural funds, on the other hand, remained low, merely at 11% of planned funds. Total absorption reached 40% of the foreseen amount. Judging from the movements recorded in previous years, and given the adopted state budget, absorption in 2008 may be lower than in 2007, which indicates that Slovenia will close the year with a negative net position of its state budget towards the EU budget.11 Figure 39: Planned and absorbed funds from the EU budget Structural policy Common Agricultural Policy Cohesion policy Internal policies Other Pre-accession EU funds 0 100 200 300 400 500 EUR million Source: MF. 11 The data published by the Ministry of Finance (MF) comprise funds returned to the state budget (MF) in the calendar year, while the data released by the European Commission (EC) comprise funds (payments to both the state budget and directly to final recipients) for individual budgetary periods. In 2007, Slovenia's state budget thus posted a negative net position towards the EU budget according to the MF (in the amount of EUR 8.6 m), and a positive net position (EUR 88.5 m) according to the EC (see Economic Issues 2008). Even though the available data by the MF indicate a negative net position of Slovenia's state budget towards the EU budget, Slovenia may remain a net recipient of European funds also in 2008. This will become known when data will be also published by the EC. ■ Funds planned by the state budget for 2008 ■ Funds planned by the state budget for 2007 ■ Total funds received in 2008 (Jan-Nov) Total funds received in 2007 (Jan-Dec) 27 Slovenian Economic Mirror, September 2009 Current Economic Trends u Ü O "O