Considering the major objectives planned by Serbia in the near future, we estimate that there are numerous new opportunities for the cooperation of the Slovenian and the Serbian economy. These include the construction and renewable energy sector and privatisation of Serbian state-owned companies.
Slovenia is one of the rare countries in the EU which can count of the growth prospects above 2%, and carefully works on remaining challenges and obstacles. “I believe that we are on the right path”, says Zdravko Počivalšek Minister of Economic Development and Technology, who sees both industry and tourism as pillars of the further positive prospects of the domestic economy.
Estimations for Slovenia’s GDP growth for 2016 and 2017 are optimistic. Which factors have mostly contributed to these results?
The annual prognosis for growth in the gross domestic product in 2016 and over the next two years shows a continuation of favourable economic trends, while the GDP dynamics will mainly be characterised by national investments related to the extent of drawing the EU funds. The GDP growth forecast for 2016 stands at 2.3%, and for 2017 and 2018 GDP is expected to reach 2.9% and 2.6% respectively. The export is most certainly a major factor in economic growth. Besides the anticipated rise in foreign demand, growth will also continue due to improved competitiveness in the tradeable sector. The basis for improvement in the economic operation will expand since the contribution of domestic consumption will also gradually increase.
The continued improvement in government’s fiscal situation and recently introduced reforms were the main reason behind Moody’s decision to upgrade Slovenia’s outlook earlier in September. What are the remaining challenges?
Moody’s has improved its rating for Slovenia due to the improved situation in government deficit and debt and due to implemented reforms, which may affect the long-term economic and institutional changes. Slovenia’s key advantages are the export-oriented economy and relatively high per capita income.
Although having made a considerable improvement since the crisis outbreak – Slovenia has the highest GDP per capita among countries in transition – the main challenges remain the macroeconomic stability, the economic growth, the competitiveness of the economy, the strengthening of human capital and innovation capabilities, the effectiveness of state and transparency of public sector management, an effective labour market, the human capital development and sustainable environmental and territorial development.
The Ministry of Economic Development and Technology mainly focuses on improving the business environment for companies and investors both from Slovenia and abroad. With the purpose of improving competitiveness in the economy, the operation of the VEM one-stop-shop system was established, where a stable, up-to-date, integrated, generally recognisable and friendly support environment for current and potential entrepreneurs is provided. A one-stop-shop for foreign investors, which will operate within SPIRIT Slovenia, is particularly noteworthy.
One of the major cures for the struggling Slovenian economy during the crisis was to strengthen the healthy parts of the industry. Has this strategy paid off?
Since acquiring its independence, Slovenia has maintained a strong industrial base, which is, with regard to its export structure, strongly linked to the major external trade partners, i.e. Germany, France and Italy. The percentage of industry in the GDP structure ranged from 24% to 26% this entire time, which was more than the EU and EMU average and can be compared to the structure of German economy. After the onset of global financial and economic crisis, the traditionally successful export-oriented industries, such as the metal processing industry, the automotive industry, the manufacture of electrical appliances and devices, and the chemical industry, which reach the highest competitive levels on the global scale, were the ones that acted as a catalyst behind the economic reboot.
On the other hand, you were a vocal advocate for the strong development of tourism. Has this been going well so far?
I believe that we are on the right path. As one of the most important sectors of the Slovenian economy, tourism generates more than 12.8% of Slovenia’s GDP. We are doing our best to develop new, attractive tourist products and to improve our tourist capacities as well as the level of services. According to new trends and circumstances, we are preparing some changes in the tourism and hospitality legislation and are in the process of preparing a new strategic document for tourism development for the 2017–2021 period.
In the Slovenian tourism, positive results were recorded in 2015, where we can talk about the best year ever. In 2015, tourist arrivals in Slovenia increased by 11.5% compared to 2014, exceeding 3.9 million, while tourist overnight stays increased by 7.8%, exceeding 10.3 million. Tourism contributes 37.5% to the export of services in the Slovenian balance of payment. The Government of the Republic of Slovenia defines tourism as one of the most important economic and strategic sectors that generates new jobs and has an extremely positive impact on the balanced regional development.
To what extent did the above mentioned favourable situation on the domestic market affect the Slovenian investments abroad, especially in terms of investments in the region and in Serbia?
Despite a 2% decrease in investments Slovenia made in Serbia in 2015, compared to the previous year, when €1,185.4 million were invested, Serbia remains the second largest recipient of Slovenian direct investments as no less than a quarter of investments are realised on the Serbian market. There are more than 1,500 companies in Serbia registered with capital of Slovenian origin. These companies employ more than 35,000 people. As Serbia is in the process of accession to the EU, thus approaching the single European market, it is becoming even more interesting for the Slovenian economy.
Considering the major development projects and objectives planned by Serbia in the near future, we estimate that there are also numerous new opportunities for the cooperation of the Slovenian and the Serbian economy. These include projects that are of particular interest to the Slovenian companies and investors, e.g. the construction of the €15 billion Belgrade on Water (Beograd na vodi) project, privatisation of 500 Serbian state-owned companies, participation in the construction of the traffic infrastructure and in the field of renewable energy sources.
How do you estimate the overall level of trade relations between our two countries?
The economic cooperation between the two countries is very good, but there are still many untapped opportunities in numerous areas. Serbia is very quickly transitioning into a market economy, and with a market of seven million people it remains very interesting for Slovenian companies. Furthermore, it is Slovenia’s most important trade partner in SE Europe. With regard to the value of trade in goods, which amounted to €1.14 billion in 2015, Serbia was the eleventh most important partner of the Republic of Slovenia. The value of Slovenian export came to €743 million, and the value of the import of goods from Serbia reached €400 million. Slovenia recorded a surplus in the trade balance with Serbia, so the Ministry’s public agency, i.e. SPIRIT Slovenia, is planning regular promotional activities with regard to internationalisation and Slovenian investments made in Serbia.
Bearing in mind that the EU market is quite weak, which countries do you see as the most promising for the Slovenian export and is there room for joint cooperation between our two countries?
Germany remains the main export market for the Slovenian economy, as 2015 was, once again, a record year concerning the economic relations between Slovenia and Germany. In the trade of goods, Slovenia was one of the rare EU Member States to generate a surplus in doing business with Germany. For years, Germany has been Slovenia’s most important trade partner. Furthermore, Slovenia sees potential opportunities to enhance the cooperation with Serbia within the context of economic cooperation with Germany. Considering that Serbia would like to become a centre of trade in the region and that its government plans to generate no less than half of economic growth within the next five years in the scope of industrial policies, whereby its goal is to develop a large automotive industry, it is estimated that this assessment leaves room for cooperation between our two countries in both Slovenia’s and Serbia’s export to Germany and other European countries.
This year, Slovenia is celebrating 25 years of independence. To what extent did our two countries succeed in rebuilding the once broken economic ties?
The gradual intensification of renewed political ties between the countries following Slovenia’s independence, which was gained 25 years ago, resulted in shifts when it comes to resolving numerous bilateral issues, including those of economic cooperation between the two countries. After Slovenia joined the EU, it adjusted its economic cooperation with third states to the common EU foreign trade policies and the rules on international trade cooperation. This resulted in a termination of all trade agreements which Slovenia had entered with third states, which also affected the extent of economic cooperation with Serbia. After joining the EU, Slovenia lost a part of its trade in goods with Serbia. After Serbia began its accession process to the EU, the economic ties between our countries began to improve; today they are good, but there is still major untapped potential on both sides.
How can these ties be strengthened further?
Slovenia will continue to make efforts to assist Serbia in establishing conditions for joining the EU as soon as possible, which will considerably enhance the opportunities to intensify future economic cooperation between the two countries within a common market. The joint meetings of the governments of both countries and regular meetings of mixed committees for economic cooperation are a great contribution and provide good political support in strengthening economic ties between both countries. The most significant driving force for enhancing these ties are most certainly direct meetings and contacts among members of the economic sector.
Where could joint work of the two governments help businesses to further develop the trade and investment opportunities?
The joint meetings of the governments of both countries mainly provide strong political support to direct economy in establishing mutual business ties. Reducing obstacles on both markets, resolving open issues, and establishing a business and investment environment that is as favourable as possible within the current legal frameworks of both countries can, of course, bring the greatest result of joint efforts invested by both governments when it comes to providing support in economic cooperation. Interest from both countries has, thus far, been recognised in the field of institutional improvement and cooperation, and opportunities to cooperate are also seen in the field of civil engineering, energy, tourism, information technology, and creative industry.