Slovenia WT/TPR/S/98
Page 1
I. ECONOMIC ENVIRONMENT
(1) BACKGROUND
1. At the time of its independence in 1991, Slovenia was the wealthiest and most open Yugoslav
Republic (accounting, in 1989, for 17% of total output and 26% of exports of the former Yugoslavia,
though for only 8% of the population).  However, it had suffered from growing obsolescence of
capital stock, declining living standards and increasing macroeconomic imbalances for most of the1980s.  This, combined with the loss of Yugoslav markets, led to a short but deep economic recession
in 1992;  in response, Slovenia swiftly embarked on a reform programme aimed at restoring
macroeconomic stability and establishing a fully functioning market economy.  In less than a decade,
Slovenia largely met these objectives, creating a modern, outward-oriented economy, integrated with
its western European neighbours through trade and investment links.
2. The return to macroeconomic stability was achieved through conservative fiscal and monetary
policies.  For about a decade, Slovenia has run broadly balanced budgets;  domestic and external debt
were maintained at low levels;  monetary targetin g helped contain inflation and restore confidence in
monetary management after the banking crisis of 1992-94;  and the external current account remained
broadly in balance (until 1999).  In parallel, Slovenia deregulated its economy, albeit in a gradualmanner.  The liberalization of price and exchange controls was achieved step by step.  Trade
liberalization was driven by WTO commitments and the preparations for accession to the
European Union (EU).  Privatization occurred mainly through internal buyouts at preferential terms
and a national voucher programme.  A two-year freeze for share transfers from internal buyouts, and
restrictions on foreign portfolio investment provided time for adjustment in newly privatized
enterprises.  At the same time, the method of privatization, by emphasizing the transfer of ownership
of socially owned enterprises to public funds, left over half of the economy directly or indirectly inthe hands of the State, which may have retarded adjustment.  A second phase of privatization is
currently under way to address the unfinished business in that area (Chapter III(3)( iii)).
3. Slovenia’s strong growth performance (4% on average in the 1990s) has translated into
substantial improvements in its social indicators.  While unemployment increased in the early years of
the transition, it fell in tandem with the expanding economy.  It stabilized at around 7% in 2000.  GDPper capita is currently around US$10,000, close to the low end of the level in EU countries
(Table I.1).
1  However, important disparities in regional development remain, as new manufacturing
and services clusters were developed essentially in the capital city (Ljubljana) and the surrounding
areas, while restructuring of older industries took place in other regions.
4. The transition process is gradually changing the structure of output.  The share of agriculture
in the economy dropped from 3.9% of GDP in 1995 to 2.9% in 2000.  At the same time, the share of
industry fell slightly (from 28.4% to 27.7%), while that of services increased (from 50.4% to 52.4%),
mainly driven by transport, financial, and real estate services.
                                                     
1 Measured in Purchasing Power Standards, Slovenia's per capita GDP was 72% of the average of the
European Union in 2000 (EUROSTAT, 2001).WT/TPR/S/98 Trade Policy Review
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Table I.1
Slovenia at a glance, 1995-00
1995 1996 1997 1998 1999 2000
GDP per capita (US$) 9,431 9,481 9,163 9,878 10,109 9,105
Population as of 30 June (thousand) 1,988 1,991 1,987 1,983 1,986 1,990
Growth of population (percentage change) -0.1 0.2 -0.2 -0.2 0.1 0.2
Fertility rate (births per woman) 1.29 1.28 1.25 1.23 1.21 1.22
Life expectancy
  Men 70.8 71.0 71.1 71.2 71.2 71.3
  Women 78.3 78.6 78.7 79.0 79.0 78.9
Share of GDP (per cent)
Agriculture, hunting, forestry and fishing 3.9 3.8 3.7 3.6 3.1 2.9
Industry and construction 32.7 32.6 32.9 33.1 32.7 33.0
  Industry 28.4 27.8 28.0 28.2 27.3 27.7
  Construction 4.3 4.8 4.9 4.9 5.4 5.3
Services 50.4 50. 5 51. 2 51. 3 51.4 52.4
 Wholesale and retail trade 10.5 10.1 10.1 10.0 10.0 10.0
 Hotels and restaurants 2.6 2.7 2.7 2.6 2.6 2.8
 Transport, storage and communication 6.7 6.6 7.0 7.2 7.1 7.0
 Financial services 3.5 3.6 3.7 3.7 3.7 3.9
 Real estate, renting and business  activities 10.1 10.3 10.0 10.3 10.4 10.5
 Public administration, education and health 14.1 14.2 14.7 14.4 14.4 14.9
 Other community and personal activities 2.9 3.0 3.0 3.1 3.2 3.3
Taxes minus subsidies 15.2 15.0 13.9 14.2 14.7 13.6
FISIMa-2.0 -2.2 -2.0 -2.0 -1.9 -1.9
Share in employment (per cent)
Agriculture, hunting, forestry and fishing 10.4 10.1 12.7 11.4 10.2 9.9
Industry and construction 43.3 42.6 40.5 39.7 38.6 38.7
Services 46.3 47.3 46.8 48.8 51.2 51.4
a Financial intermediation services indirectly measured: calculated as the difference between interest received and paid by bank s.
Source: Slovenian Institute of Macroeconomic Analysis and Development, Spring Report  2001 .
(2) RECENT ECONOMIC DEVELOPMENTS
(i) Output and growth
5. Following the recession in 1992, Slovenia rapidly established a robust economic growth path,
expanding at close to 4% annually.2  Real GDP growth has been driven largely by exports of goods
and services (which has grown by 6.2% annually in real terms since 1995) and gross fixed investment,
as Slovenia has strengthened cooperation with neighbouring west European economies.  The
proximity with strong industrial clusters in northern Italy, Bavaria, and east Austria, encouragedcloser trade and investment links between Slovenian enterprises and their European counterparts.
Slovenia's manufacturing sector benefited in particular from that proximity, particularly in terms of
the transfer of technology, knowledge, and capital.  Slovenia's exports of goods and services were the
equivalent of around 60% of GDP in 2000;  two thirds went to the EU.
6. Despite its high dependence on the European market, Slovenia escaped the economic
slowdown experienced by most Central and Eastern European Countries (CEECs) in the wake of the
Russian financial crisis and the slowdown in western Europe in 1998-99.  In 1999, very strong
domestic demand, fuelled by robust private consumption, offset falling exports.  As a result, real GDP
grew by 5.2 percent.  In 2000, the situation reve rsed, as domestic demand slowed following the
                                                     
2 The production index fell to 82.1, its lowest point, in 1992 (1989=100). While the recovery began in
1993, the pre-transition level of production was reached only in 1998.Slovenia WT/TPR/S/98
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introduction of the value-added tax (VAT), and exports picked up due to the recovery of the EU.  Real
GDP grew by 4.6% in that year (Table I.2).  Economic conditions changed in 2001.  The slowdown in
investment, which had started in 2000, turned into a decline in real terms in the first half of 2001.
More importantly, the weakening of the world ec onomy resulted in lower demand for Slovene exports
in western Europe.  Nevertheless, for the year as the whole, exports are still expected to grow – albeit
much less than in the previous year – due partly to past orders and to the expansion into the marketsof south-eastern Europe and Russia.  GDP growth  is expected to be 3.7% in 2001.
3
7. After increases in 1992-94, the unemployment rate fell to 7.4% in 1995 (ILO definition, 14%
according to national statistics) and stabilized at around 7% (12% according to national statistics) in
the following years.4  While economic growth was expected to slightly reduce unemployment in the
first half of 2001, a skills mismatch in a rapidly changing economy and relatively inflexible labourlegislation seem to be preventing a more rapid reduction in unemployment.  The unemployment rate
for the third quarter of 2001 was 5.9%, the same as in the second quarter, but lower than in the first
quarter (6.7%).  Inflation remains stable, although hi gh energy prices and a weak euro pushed it up to
close to 9% in 2000. External factors, which strongly affected price movements in 2000, continued to
have a delayed impact on prices in early 2001, while in the following months prices were increasinglyunder the influence of internal factors.  The average rise in consumer prices was 8.4% in 2001. After
having achieved relatively balanced current accounts until 1998, the succession of external shocks and
high domestic demand prior to the introduction of VAT in mid-1999 resulted in deficits of around 3%
to 4% of GDP, annually.  These deficits were largely covered by foreign loans. In 2001, the current
account deficit is estimated to have declined to around 1.1% of GDP.
Table I.2
Selected economic indicators, 1995-00
1995 1996 1997 1998 1999 2000
Per cent
Real economy
Change in real GDP 4.1 3.5 4.6 3.8 5.2 4.6
Unemployment rate (ILO definition, % of survey labour
force)7.4 7.3 7.4 7.9 7.6 7.0
Registered unemployment rate (% of formal labour force) 13.9 13.9 14.4 14.5 13.6 12.2
Inflationa, annual average 12.6 9.7 9.1 7.9 6.1 8.9
Labor productivity (percentage change) 3.1 4.5 5.1 3.8 4.0 3.5
Private consumption (% of GDP) 58.5 57.5 56.4 55.7 55.8 54.9
Gross national savings (% of GDP) 22.8 23.5 24.1 24.9 24.5 24.6
Gross fixed capital formation (% of GDP) 21.4 22.5 23.4 24.6 27.4 26.7
Per cent of GDP
Public finances
General Government
Revenue 43.1 42.7 42.0 43.0 43.6 42.8
Expenditure 43.1 42.4 43.8 43.6 44.2 44.2
General balance 0.0 0.3 -1.2 -0.8 -0.6 -1.4
Net lending -0.1 0.1 0.0 -0.1 0.0 -0.1
Overall balance 0.1 0.2 -1.2 -0.5 0.7 -1.2
Overall balance excluding privatization receipts -0.2 -0.2 -1.7 -0.9 -0.9 -1.2
Debt 18.7 22.9 23.3 23.8 24.7 24.6
Annual percentage change
Money (end of year)
M1 (= currency + demand deposits) 19.9 17.3 18.4 22.8 19.9 6.9
M2 (=M1 + national currency deposits) 30.8 19.3 32.6 26.0 13.4 11.1
M3 (=M2 + foreign current deposits) 32.3 19.4 23.8 20.9 16.5 17.0
Table I.2 (cont'd)
                                                     
3 IMAD (2001).
4 The ILO definition of unemployment is used in international comparisons, as the registered
unemployment rate (Slovenian Statistical Office definition) is strongly affected by national regulations andclassifications.WT/TPR/S/98 Trade Policy Review
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1995 1996 1997 1998 1999 2000
Interest rates Per cent per annum
Deposit ratee15.4 15.1 13.2 10.5 7.2 10.1
Lending ratef23.4 22.6 20.0 16.1 12.4 15.8
Balance of payments Per cent (unless otherwise indicated)
Trade balance/GDP -5.1 -4.4 -4.3 -4.0 -6.2 -6.3
Merchandise exports (percentage change) 22.2 0.0 0.7 8.1 -5.1 2.1
Merchandise imports (percentage change) 29.8 -1.3 0.1 7.6 -0.1 0.8
Current account balance/GDP -0.5 0.2 0.1 -0.8 -3.9 -3.4
Capital and financial account balance /GDP 2.8 3.0 6.6 1.2 3.4 4.1
External debt (in per cent of XGS c) 28.6 38.2 39.4 44.2 51.3 58.1
External debt service (in per cent of XGS c) 7.1 8.9 8.8 13.8 8.0 9.7
Exchange rate
Tolars per U.S. dollar (end-period) 126.0 141.5 169.2 161.2 196.8 227.4
Nominal effective exchange rate (percentage change of
index)-0.5 -9.7 -5.4 -2.6 -5.5 -8.1
Real effective exchange rate d (percentage change of index) 10.3 -2.8 0.7 3.9 -0.7 -2.1
a Retail prices as a measure of inflation until 1998, after 1998 consumer price index.
b Excludes Slovenia's share of debt associated with the 1988 New Financing Agreement as settled in June 1996.c XGS= exports of goods and services.
d Measured by relative inflation.
e Nominal interest rates for time deposits, 31-90 days.f Nominal interest rates for short-term working capital loans.
Source: IMF (2001), Public Information Notice (PIN) N°01/50, Washington D.C., May; and IMF (2001), IMF Country
Report N°01/76, Washington D.C., May; IMF (2001), International Financial Statistics September; and SlovenianInstitute of Macroeconomic Analysis and Development, Economic Mirror, 2000 edition and Autumn Report 2001.
(ii) Fiscal policy
8. Throughout the past decade, Slovenia has maintained broadly balanced fiscal positions. The
structure of government revenues were changed by the introduction of VAT in 1999,  a more efficient
tax system, and improvements in tax administration.  In recent years, however, the spending-to-GDP
and revenue-to-GDP ratios have both increased, the growth of general government revenue wasslower than growth of general government expe nditure (the first increased from 42.7% of GDP in
1996 to an estimated 43.2% of GDP in 2001, while the share of expenditures increased from 42.4% to
44.5% during the same period.
5  The increase in the expenditure ratio is due to the rapid growth of
interest payments, subsidies, social transfers, particularly pensions, public sector wages, and the cost
of accession to the EU.  State aid, at 2.1% of GDP in 2000, also remained a burden on the budget.
9. While the Government aims to maintain a sound fiscal position in the future, including low
deficits and government debt, several challenges lie ahead.6  The first challenge is the cost of
accession to the EU, which is expected to rise as Slovenia accelerates its preparations.  In its annual
reports on Slovenia's progress towards accession, the European Commission regularly points out the
                                                     
5 Government revenue in 2001 is estimated at 43.2% of GDP (against 42.8% in 2000) and expenditure
at 44.5% of GDP (against 44.2% in 2000).  The deficit would remain at 1.4% of GDP, the same as in 2000.IMF- Budget Memorandum, the Budget Memorandum for 2002 and 2003, Poro čevalec no. 81, 8. October 2001.
6 Under the 2001 Budget Memorandum, the Government's  long-term fiscal priorities were:  (i) reducing
fiscal pressures on the labour market;  (ii) redirectin g public expenditure towards investment (human, research
and development, innovation);  and (iii) ensuring the long- term stability of public finances in the light of the
ageing of the population.  For 2001, the priorities in cluded: (i) increasing economic stability and boosting
structural reforms;  (ii) strengthening human resources and the competitiveness of the economy,(iii) strengthening the effectiveness of public administration;  (iv) preserving the level of social development andthe quality of the environment, while ensuring harmonious regional development;  and (v) intensifyingpreparations for EU and NATO accession.Slovenia WT/TPR/S/98
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need to substantially increase the resources alloca ted to Slovenia's public administration, in order to
build sufficient administrative capacities for accession.7  In several areas covered by these reports,
such as customs, competition policy, and government procurement, the Commission considers that
control functions exercised by the State need to be strengthened.  The second challenge is the ageing
of Slovenia's population, which is expected to increase spending in the health insurance and public
pension systems.  At the same time, the revenue-to-GDP ratio has reached levels that hardly allow forfurther increases in taxes without th reatening Slovenia's competitiveness.
8
(iii) Monetary developments
10. The Bank of Slovenia, which is responsible for monetary policy, has relied on monetary
targeting to control inflation, focusing in the early years of transition (until 1996) on the money base,
and, since 1997, on a wider aggregate (M3), as the financial sector developed.  While inflation hasbeen kept below 10% since the mid-1990s, several factors have maintained pressures on price levels.
These include the pervasive indexation of the economy – including wages, financial controls or
pensions – over past inflation, external shocks (f or example, rising energy prices in 1999-00), strong
wage settlements in fast-growing sectors, the impact  of the depreciation of the exchange rate of the
national currency (the tolar) against the euro, and the recent introduction of the VAT.
11. During the period 1994-98, Slovenia's monetary authorities managed to reduce the incidence
of large capital inflows on monetary management through the use of extensive sterilization and the
maintenance of pervasive capital controls.  Such controls were aimed at reducing the volume of
inflows, increasing the maturities of financing in struments, discouraging the accumulation of external
debt, and allowing some flexibility in exchange rate management.  As the financial sector and the
economy as a whole became more robust to external shocks, Slovenia liberalized most capital account
restrictions in 1999-01.
9  The 40% foreign exchange surrender requirement on foreign loans was
removed, restrictions on cash withdrawals from non-resident accounts and restrictions for portfolio
investment by residents in securities abroad were abolished, the ban on the holding of foreign
currency deposits was relaxed for enterprises, restrictions on physical transfers of financial assets by
residents were fully liberalized, and the regime of custody accounts for purchasing securities by non-
residents was abolished. The period after which non-residents are no longer required to pay apremium on the option to purchase foreign exchange was shortened from one year to six months.  In
addition, the barriers to entry of foreign bank branches were dismantled (Chapter IV(3)(i)).  A few
restrictions remain, notably on portfolio inflows of less than six months and holding foreign currency
deposits abroad by households.
12. The nominal exchange rate of the tolar has depreciated against major European currencies
(and the euro since 1999), helping the competitiveness of Slovenian products in foreign markets.  As
for the future, according to the Slovenian authorit ies, preparations for accession to the European
Union do not require any changes in the current exchange rate regime, at least until Slovenia
participates in the Exchange Rate Mechanism (ERM II).  However, accession requires that Slovenia
                                                     
7 Slovenia received substantial assistance from the EU to prepare for accession, in particular through
the Phare programme.  However, such assistance does not cover the total costs of  necessary preparations.
8 The Government has prepared a full-fledge medi um-term fiscal framework, in which it plans to
eliminate the deficit (of 1.4% of GDP in 2001) by 2005, while reducing the overall expenditure-to-GDP ratio by2 percentage points (from 44% in 2000 to 42% of GDP in 2005).  Other priorities include the rationalization ofspending across Ministries, the reorganization of extra-budgetary funds, and a reform of personal income tax.
9 The Foreign Exchange Law of September 1999 provided the legal basis for such deregulation.WT/TPR/S/98 Trade Policy Review
Page 6
eliminates all capital controls. The Bank of Slovenia has already introduced the timetable for the
abolition of the remaining capital movement restrictions.10
(iv) Balance of payments
(a) Current account developments
13. The absence of major macroeconomic imbalances since the early 1990s is largely reflected in
Slovenia's current account position, which has been broadly in balance from 1993 to 1999 (Chart I.1and Table AI.1).  During that period, Slovenia managed to finance high investment rates (between
20% and 30% of GDP) with high levels of domestic national savings.  Foreign savings, in particular
in the form of foreign direct investment, accounted for only a small share of savings needed to meet
those investments (1% to 2% of GDP).  The saving-investment balance, as reflected by the current
account position, widened (from -0.8% of GDP in  1998 to -3.9% of GDP in 1999, and -3.4% of GDP
in 2000), as the investment rate grew faster than the national savings rate.
11
14. The trade deficit, which amounted to about 5% of GDP in the second half of the 1990s, partly
reflected the investment drive.  Despite the comfortable growth of merchandise exports (by around
5% annually between 1995 and 2000), imports have been growing even more rapidly, due to the
increase in imports of investment goods.  Until 1999, the trade deficit was fully offset by largesurpluses in the “invisibles” balance, i.e. the ba lance of trade in services and unilateral transfers.
However, the deterioration of the trade balance in  1999 and 2000 (a deficit of 6.2% and 6.3% of GDP,
respectively), and a reduction of the surplus of the invisibles balance, resulted in the widening of the
current account deficit.
(b) Capital and financial account
15. In addition to a broadly balanced current account, Slovenia benefited from large surpluses of
the capital and financial accounts, reflecting the su rpluses of its individual components, foreign direct
investment, portfolio investments, and other investme nts.  While these surpluses, on the inflows side,
are testimony to the international attractiveness of the Slovenian economy, its high international
ratings, and good macroeconomic performance, on the outflows side it also reflects the restrictiveness
of capital controls during the period 1995-99, which reduced bank borrowing and portfolio
investments abroad to negligible levels.  Since then, bank borrowing abroad has been deregulated, andhence has picked up.  Regular surpluses of the overall balance (current account, plus the capital and
financial accounts) allowed gross international reserves to increase regularly, reaching about 3.2
months of imports of goods and services in 2000 and 4 months of imports in 2001.
16. Net inflows of foreign direct investment, mainly related to greenfield investment (as
against privatization investment), have been relatively small in relation to GDP (less than 1% of GDPin most years) and Slovenia's high international ra tings.  As explained below, the limited participation
of foreigners in the Slovenian economy is due to a wide variety of factors, in particular capital
controls, the methods of privatisation, and specific restrictions in sectors that generally attract large
FDI inflows (such as banking and insurance).  Since 1999, most of these restrictions have been lifted.
                                                     
10 According to the authorities, the only remaining restriction on capital movements (for natural
persons to open current and deposit accounts abroad), will be abolished on the date of accession to the EU, at
the latest.  Since July 2001, Slovenian legal entities are allowed to freely open current and deposit accounts to
meet their needs abroad.
11 As reflected in Table I.2, gross fixed capital formation increased from 21.4% of GDP in 1995 to
26.7% of GDP in 2000, while gross national savings grew during that period from 22.8% to almost 25% ofGDP.WT/TPR/S/98 Trade Policy Review
Page 8
(3) TRADE AND INVESTMENT PERFORMANCE
(i) General patterns
17. Slovenia's exports and imports of goods and services each account for about 60% of GDP.  In
a short period of time, Slovenia managed to overcome the loss of markets in the former Yugoslavia
and the breakdown of transport and communicati ons to south-east Europe.  Trade flows were
redirected towards the European Union and other associated partners, which now account for over twothirds of Slovenia's trade.  However, pre-transition trade links have not disappeared.  Croatia has
remained Slovenia's third largest trading partner, and trade with other countries in central Europe,
now members of the CEFTA, have been expanding.  In 2000, the decline in trade with countries of
former Yugoslavia (Bosnia Herzegovina, the Former Yugoslav Republic of Macedonia, and
the Federal Republic of Yugoslavia) came to a halt.  Sectorally, trade liberalization, while helping toaccelerate restructuring in industries such as textiles and clothing and industrial machinery, did not
result in a major change in product specialization.  However, the industries that benefited from foreign
direct investment inflows, such as automobile and related equipment (tyres), electronics, and
pharmaceutical products, have increased their share in total imports and exports in recent years.
18. Slovenia's recent trade performance has been strong, overall.  Despite the decline in nominal
trade flows in 1999 (-2.8%;  -5.6% for exports only), the average growth of trade (exports plus
imports) reached nearly 6% in the period 1995-00, with a faster increase in imports (+6.2%) than
exports (+4.7%).
(ii) Geographical and sectoral patterns of merchandise trade
19. In the early years of transition, the share of the European Union in Slovenia's trade increased,
before stabilizing at a high level in the second ha lf of the 1990s.  The implementation of the Europe
Agreement and the accession of Austria (Slovenia's fourth largest trading partner) to the EU werecontributing factors.  In 2000, the EU accounted for almost 68% of Slovenia’s merchandise imports
and 64% of its merchandise exports (against 60% and 61%, respectively, in 1992) (Chart I.2).
Germany is Slovenia’s largest single trading partner, accounting for 27% of exports and 19% of
imports (Tables AI.2 and AI.3).  Aided by the liberalization of trade barriers within CEFTA, trade
with other CEFTA members expanded rapidly;  their share in Slovenia's trade has doubled sinceindependence.  Trade links with former Yugoslav Republics declined for most of the 1990s, but still
account for a sizeable share of Slovenia's trade (nearly 16% of exports).  For the first time in many
years, the decline of trade with this region came to a halt in 2000.  Russia's share of 4% of Slovenia's
imports and 3% of its exports in 1992 also declined until 1999, but 2000 seemed to mark a turn in this
trend.
20. Slovenia's trade remains specialized in capital and intermediate goods, both on the import and
export sides.  The share of heavy industries such as iron and steel, and chemicals, has changed only
marginally since 1992 (Tables AI.4 and AI.5).  Reflecting targeted foreign direct investment in some
sectors (assembly of automobiles, electrical goods, and consumer goods), new industrial products are
gradually making way in the composition of Slovenia’s trade.  The share of textiles and clothing intotal exports has declined by half in a decade.  Overall, manufactures accounted for 90% of Slovenia's
merchandise exports in 2000 (an increase of 4 percentage points since 1992), and 76% of its imports
(an increase of 9 percentage points since 1992).  The share of manufactures has increased at the
expense of that of primary products (both agricultur al and mining products) which has declined since
1992 (Chart I.3).Slovenia WT/TPR/S/98
Page 9
Chart I.2
Direction of merchandise trade, 1992 and 2000
Per cent
1992 2000
(a) Exports
(b) ImportsTotal: US$6,681.2millionAmerica
3.7Asia
3.1Other Europe
9.8
Croatia
14.2
France
9.2Other EU(15)
6.3
Austria
5.1Italy
13.2Russian 
Fed.  3.0
CEFTA
3.9Germany
27.0Other 
1.1
Total: US$8,732.1million
Total: US$6,141.0m illion Total: US $10,114.7million
Source : WTO Secretariat calculations, ba sed on UNSD, Comtrade database.EU(15)
60.9Other 
Europe 
31.3America
3.9Asia
2.3 Other
 Europe
 6.8
Croatia
7.9
France
7.1Other EU(15)
8.5
Austria
7.5Italy
13.6Russian 
Fed.  2.2
CEFTA
7.9Germany
27.2Other 
0.8
EU(15)
63.9Other 
Europe 
29.1
America
4.4East Asia
5.5Other Europe
4.3
Other 
CEFTA  6.2
Austria
8.2Other EU(15)
12.9
France
10.3Italy
17.4Russian Fed.  2.3
Hungary  2.9Germany
19.0Other 
2.2
EU(15)
67.8Other 
Europe 
20.1Croatia  4.4
EU(15)
59.6Other 
Europe 
31.2Bosnia and 
Herzegovina 4.3Bosnia and 
Herzegovina
0.3
America
3.8East Asia
3.1 Other Europe
8.1
Other 
CEFTA  2.8
Austria
8.1Other 
EU(15)
7.1France
8.0Italy
13.7Russian 
Fed.  4.0
Hungary 
2.5Germany
22.7Other 2.2
Croatia 
13.9WT/TPR/S/98 Trade Policy Review
Page 10
Chart I.3
Merchandise trade by sector, 1992 and 2000
Per cent
1992 2000
(a) Exports
(b) ImportsTotal: US$6,681.2millionAgriculture
8.3Other consumer 
goods
13.1
Clothing
10.2
Textiles
4.1
Electrical 
machines
9.2Transport
equipment
13.0
Non-electrical 
machinery 
7.1Other semi-
manufactures
17.5Chemicals
9.1Iron and steel
2.7Mining
5.6Agriculture
5.2Other consumer 
goods
14.8
Clothing
4.5
Textiles
3.3
Electrical 
machines
11.9Transport
equipment
14.3
Non-electrical 
machinery
9.7Other semi-
manufactures
17.1Chemicals
11.0Iron and steel  3.1Mining  4.8
Total: US$8,732.1million
Agriculture
13.5Other consumer 
goods  7.0
Clothing  3.5
Textiles  3.4
Non-electrical 
machinery
9.1Electrical 
machines
7.5
Chemicals
12.4Other mining
4.6Fuels
10.8
Transport 
equipment
9.8Other
4.6Agriculture
9.6Other consumer 
goods  7.4
Clothing  3.5
Textiles  3.4
Non-electrical 
machinery
9.8Electrical 
machines
10.6Chemicals
12.4Other mining 
5.2Fuels
9.1
Transport 
equipment
13.9Other
0.2
Total: US$6,141.0m illion Total: US $10,114.7million
Source :WTO Secretariat calculations, based on UNSD, Comtrade database.Other semi-
manufactures
9.2Other semi-
manufactures
10.6Iron and steel
4.7Iron and 
steel  4.3Other
0.2Slovenia WT/TPR/S/98
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(iii) Trade in services
21. Slovenia’s traditional trade surplus in services  has declined in recent years, due to the
stagnation of receipts (Table AI.1).  Services receipts, which peaked at US$2.1 billion in 1996 (about
one quarter of merchandise exports), fell to US$1.9 billion in 2000 (around one fifth of merchandise
exports).  This fall is partly explained by the slight reduction in tourism receipts, which account for
about half of Slovenia's total services receipts (on average some US$1 billion annually).  At the sametime, imports of services grew steadily. Higher levels of economic development led to an increase of
imports of other services (communication, finance, IT, and insurance), which require more know-how
and a skilled workforce, and contain a higher value added.
(iv) Foreign direct investment
22. While Slovenia, like most of its neighbours in central and eastern Europe, has benefited from
foreign direct investment (FDI) inflows origina ting in western Europe, those flows are relatively
moderate in terms of GDP (1% to 2% annually), in particular given the rapid expansion of bilateral
trade, its geographical proximity to three rich EU countries, and the high level of economic
integration with these countries.  After a strong  increase in 1997, FDI inflows fell significantly in
1998, 1999 and 2000 despite privatization;  there are many reasons for this outcome, including adeterioration of the investment climate in the region in the aftermath of the Russian financial crisis,
and domestic administrative difficulties identified jointly by the Government and the World Bank
(Chapter II(4));  part of the explanation also lies in the method of privatization, emphasizing  internal
buyouts, thereby leaving little scope for foreign in vestors to take ownership. Recent changes in the
privatization policy are expected to reverse this trend (Chapters II(4) and III(3)(iii)).
23. Austria is the main source of FDI in Slovenia, accounting for nearly half of the total stock.
Germany, France, Italy, the United States, and the Czech Republic are also major investors(Table I.3).  FDI has nevertheless contributed to the reorientation of trade towards EU countries,
particularly in the form of outward-processing operations such as in the automotive sector.  It has also
modified the structure of domestic production, by introducing new technologies and activities,
injecting fresh capital in obsolete production processes, improving the quality of products, and
increasing labour productivity.  Sectorally, the bulk of foreign capital has been invested in banking,the automotive and related industries (car production, equipment and tyres), pulp and paper, industrial
machinery, chemicals,  distribution, and other business services.
Table I.3
Foreign direct investment stock by country, end 2000
(US$ million)
Inward FDI Outward FDI
Country Amount Country Amount
Total
of which:2,809 Total
of which:794
Austria 1,279 Croatia 358
Germany 351 Germany 71
France 299 Former Yugoslav Republic of
Macedonia66
Italy 152 Bosnia and Herzegovina 62
United States 109 Poland 56
Czech Republic 105 Austria 28
Switzerland 102 Federal Republic of Yugoslavia 27
United Kingdom 102 Liberia 24
Netherlands 83 United States 22
Croatia 48 Russian Federation 16
Denmark 42 United Kingdom 10
Source: Bank of Slovenia online information.  Available at:  http://www.bsi.si.WT/TPR/S/98 Trade Policy Review
Page 12
24. Outward FDI flows have grown steadily in recent years in line with the growing
internationalisation of the Slovenian economy.  At the end of 2000, the total stock of Slovenian FDI
abroad was estimated at close to US$0.8 billion.  Since the return to peace in the region, a large share
of Slovenian FDI has been directed towards the former Yugoslav Republics;  at present, these
countries account for about two thirds of the stoc k of Slovenian FDI, with Croatia being the single
largest destination (45% of the stock).  The main sectors involved are chemicals, banking, machinery
and equipment, retail trade, and the food industry.
(4) OUTLOOK
25. Medium-term growth prospects appear favourable, if prudent macroeconomic policies are
pursued, and if high levels of investment, contributing to increase potential growth, are maintained.12
While GDP growth in 2000 was fuelled essentially by external demand, the Government expects a
lower contribution of the external sector in 2001 (linked in particular to the economic slowdown in
Europe) and a larger contribution of domestic demand to growth.13  Still, foreign demand grew
considerably faster than domestic demand in 2001 and thus retained its role as the main lever of
economic growth.  Household consumption is e xpected to rebound after the slowdown of 2000, due to
the favourable impact of sustained wage and employment growth on disposable income, and to gainsome strength in 2002.  However, the figures show substantial real fall in domestic investment activity
(gross fixed capital formation is estimated to drop by 1.4% in real terms in 2001).  In this context,
fiscal policy, by keeping the general government deficit at around at 1.4% of GDP, did not offset the
negative effects of the lower investment activity in 2001.  Real growth of imports was relatively
modest (up by 3.3%).  The current account deficit decreased to around 1.1% of GDP in 2001 (down
from 3.4% of GDP in 2000).  As a result of the abov e, real GDP is expected to have grown by 3.7% in
2001.
14
                                                     
12 IMF (2001).  Available online at:  http://www.imf.org/external/country/SVN/index.htm
13 Government of Slovenia (2001a).
14 IMAD (2001).