ECONOMY

Slovenia to balance budget

LJUBLJANA – Slovenia expects to balance its budget, currently running at a deficit of 1.7 percent of gross domestic product (GDP), by 2008, Finance Minister Dusan Mramor told Reuters yesterday. In an interview, he also said it was feasible for the country, the richest of the eight central European countries which are enter the European Union this weekend, to join the bloc’s exchange rate mechanism by the end of this year. Slovenia’s gross domestic product (GDP) per capita, at close to $14,000 is comparable to that of EU members Greece and Portugal and second only to Cyprus’s $18,000 among the 10 newcomers. «These two years (2004 and 2005) are critical because now we are entering the EU. Next year, we have an impact for the whole year while this year only from May,» Mramor said. «We expect roughly the same deficit next year, at some 1.7 percent of GDP (according to EU standards). In the following years, I expect a considerable decline to 0.6 percent and to 0.3 percent and then to zero in 2008,» he added. Growth despite austerity Mramor said Slovenia’s economy should grow despite fiscal austerity, if the international economic situation follows expectations. Especially important is the EU, the country’s main trading partner, accounting for over 60 percent of its exports. «All analyses show that the main reason for the slow growth in Slovenia in 2003 was the slowed growth in Germany and in our other most important partners,» Mramor said. Slovenia reported a 2.3 percent GDP growth in 2003, down from 3.4 in the previous year. The government forecasts 3.6 percent growth in the current year and 3.7 percent next year. Mramor said he sees the country’s textile, leather, food and furniture industries coming under competitive pressure following the country’s membership in the EU. «Probably also the finance sector – banks and insurance companies – will feel great pressure, as competition will increase,» he said. Mramor reiterated that Slovenia hoped to enter the EU’s Exchange Rate Mechanism (ERM-2), the first step to adopting the euro, as soon as possible. «The aim of entering before the end of 2004 is feasible, and we will try hard to make it as soon as possible,» he said. In March Slovenia’s central bank governor, Mitja Gaspari, said the country could enter the the ERM-2 currency mechanism in the third quarter of the current year, due to easing inflation. Slovenia reported 3.5 percent year-on-year inflation in April, down from 5.3 in April last year. The government forecasts 3.3 percent inflation at the end of 2004 and 2.9 percent at the end of 2005. Mramor said the government would try to avoid depreciation of the country’s currency once in the ERM-2. «It could be that the tolar will appreciate (against the euro) but to a very small extent. Only this way we can fulfill the criteria of relative stability of the exchange rate,» he said.