Investor Presentation October 2020 Ministry of Finance Republic of - - PowerPoint PPT Presentation
Investor Presentation October 2020 Ministry of Finance Republic of - - PowerPoint PPT Presentation
REPUBLIC OF SLOVENIA Investor Presentation October 2020 Ministry of Finance Republic of Slovenia Disclaimer By reading these presentation slides, you agree to be bound by the following limitations: The information in this document has been
Disclaimer
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Agenda
3
Country Overview Government account in surplus and Robust Banking System Improving Business Environment and Privatisation Economic Performance Debt Profile Characteristics
Slovenia: Member of the EU, NATO, EMU, OECD
Key Facts Recent Milestones and Political Stability
- A parliamentary Republic
- Joined the EU in 2004 and adopted the Euro in 2007 as the first among new member countries. Among listed other
associations Slovenia is also part of Schengen, EEA and EFTA.
- The Prime Minister of the Republic of Slovenia is Janez Janša
Joined EU and Nato
1991
Chairmaship of the OSCE
2004 2005
Joined EMU and Schengen Agreement
2007 2008 2010
Declaration of Independence
2014 2020
Presidency of the Council of the European Union Joined OECD
1. Source: Eurostat, 1.10.2020
4
Location
- Borders Austria, Italy, Hungary, Croatia and
the Adriatic Sea Territory
- 20,256 sq. Km
Population
- 2.07 Million (1 Jul. 2018)
GDP per capita:
- 88% of EU27 average (2019);
(Slovakia 74%, Portugal 79%, Poland 73%, Hungary 73%, Estonia 84%)(1)
Banks Joined Single Supervisory Mechanism
Slovenia: Highlights
Macro- Economic Strengths
- Export-driven economy with value-added export goods
- Balance of Payments Current Account Balance of 6.6% of GDP in 2019
- Unemployment rate in 2019 at 4.6% (below EA-19 average of 7.6%)(1)
- The lowest private sector debt in EA-19 (private sector debt, non-consolidated of 75.4% in 2019(1)
- One of the lowest gross Household Debt-to-Income Ratio of 45.1% GDP in 2018 (EA average of
93.5% GDP)(1)
- Gross national savings above EA-19 average (25.6% of GDP in 2019)(2)
Key Data
- GDP growth Q2/Q-4 2020:
- 13% (EA-19 -15% and EU-27 -14.4%)(1)
- General Government surplus in 2019:
0.5% of GDP (0.7% in 2018)(1)
- General Government debt in 2019:
66.1% of GDP (70.4% in 2018)(1)
- Capital adequacy ratio end 2019:
18.5% (CET1 17.8%)
- NPL ratio end 2019:
1.1%
Prudent Debt Management
- Treasury Directorate was awarded a title of the Sovereign Risk Manager of the Year 2017 by the
Riskˈ magazine, London
- Established yield curve in Euro Debt Capital Markets
- Effective prefinancing strategy
- Diversified investor base in Europe
- USD liabilities fully hedged back into EUR
5
1. Source: Eurostat, Statistical office of the Republic of Slovenia, 1.10.2020 2. Source: IMF, 1.10.2020
6
Epidemic Situation in Slovenia
Source: Slovenian National Institue of Public Health, 1.10.2020
The Government of the Republic of Slovenia adopted an ordinance declaring the end of COVID-19 epidemic effective from 15 May, based on a joint assessment by healthcare professionals and the Government. Slovenia is thus the first country in Europe to take this step. The first confirmed case of SARS-CoV-2 infection was recorded in Slovenia on 4 March 2020, and up to and including 29th of September, 5.691 confirmed cases of infection were recorded. 50 100 150 200 250
4.3.2020 8.3.2020 12.3.2020 16.3.2020 20.3.2020 24.3.2020 28.3.2020 1.4.2020 5.4.2020 9.4.2020 13.4.2020 17.4.2020 21.4.2020 25.4.2020 29.4.2020 3.5.2020 7.5.2020 11.5.2020 15.5.2020 19.5.2020 23.5.2020 27.5.2020 31.5.2020 4.6.2020 8.6.2020 12.6.2020 16.6.2020 20.6.2020 24.6.2020 28.6.2020 2.7.2020 6.7.2020 10.7.2020 14.7.2020 18.7.2020 22.7.2020 26.7.2020 30.7.2020 3.8.2020 7.8.2020 11.8.2020 15.8.2020 19.8.2020 23.8.2020 27.8.2020 31.8.2020 4.9.2020 8.9.2020 12.9.2020 16.9.2020 20.9.2020 24.9.2020 28.9.2020 Number of cases
Key Policy Reforms
Pension System Reform 1 Privatisation underway 3 Labour Market Reform 2 Strengthened Banking System 4 Bank Asset Management Company 5
Pension reform enhanced sustainability of public finances.The average age of women upon retirement in 2018 was 60 years and 4 months (1 year and 10 months higher than in 2013). For men, the average age in 2018 rose to 62 years and 2 months (1 year and 3 months higher than in 2013) State Asset Management Strategy being implemented by Slovenian Sovereign Holding Labour market reform streamlined employment protection, labour market flexibility, reduced labour market segmentation and equalized labour cost for people under 30 Well-capitalized banking system. Stark reduction in non-performing loans ratio since 2013. NKBM d.d., NLB d.d. and Abanka d.d. privatized Bank Asset Management Company (BAMC) actively restructuring viable enterprises
7
Fiscal rule and Council in place 6
Constitutionally mandated balanced budget in place since 2013 and fiscal rule bylaw in place since July 2015. Fiscal council operational since March 2017. In February 2018 Parliament adopted amendments to the Public Finance Act including final implementing provisions for prudent fiscal planning in accordance to the Fiscal Rule Act
Source: Ministry of Finance, 1.10.2020
May 1996
- Dec. 1999
- Sep. 2000
- Nov. 2000
- Nov. 2002
- Mar. 2003
May 2003 May 2004
- Jul. 2004
May 2006
- Jun. 2006
- Jul. 2006
- Sept. 2011
- Oct. 2011
Dec 2011
- Jan. 2012
- Feb. 2012
- Aug. 2012
- Feb. 2013
- Apr. 2013
May 2013
- Dec. 2014
- Jan. 2015
June 2016
- Sept. 2016
- Jun. 2017
- Sept. 2017
- Apr. 2019
- Jun. 2019
- Jul. 2019
- Oct. 2020
Republic of Slovenia Credit Rating Over Time(1)
S&P Moody' s Fitch
- Actively pursuing structural fiscal consolidation
- Sustainable economic growth
- Completion of the remaining bank privatizations
- Stable Government majority in the Parliament -
decisive political leadership
- Deterioration
- f
economic growth prospects, impairment of structural fiscal consolidation pace
- Substantial government net debt increase due to fiscal
loosening
8
Slovenia Sovereign Rating
- 2. Source: S&P, Fitch and Moody’s, 5.10.2020
1. Selected drivers highlighted by agencies: S&P, Moody‘s and Fitch
Positive Rating Drivers(1) Negative Rating Drivers(1)
Aa1/AA+ Aa2/AA Aa3/AA- A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3/BBB- Ba1/BB+ AA- (Stable Outlook) A (Stable Outlook) A3 (Stable Outlook)
Sovereign(2) S&P Fitch Moody’s Germany AAA AAA Aaa Austria AA+ AA+ Aa1 Czech Republic AA- AA- Aa3 Estonia AA- AA- A1 Slovakia A+ A A2 Ireland AA- A+ A2 Slovenia AA- A A3 Lithuania A+ A A3 Latvia A+ A- A3 Poland A- A- A2 Spain A A- Baa1 Italy BBB BBB- Baa3 Hungary BBB BBB Baa3 Portugal BBB BBB Baa3 Cyprus BBB- BBB- Ba2 Croatia BBB- BBB- Ba2 Serbia BB+ BB+ Ba3
Improved External Rankings of Sloveniaˈs Performance
9
Excessive macroeconomic imbalances no yes Excessive deficit procedure yes
COMPETITIVENESS SCOREBOARDS Δ since 2014 World Competitiveness Yearbook (IMD)
18 places
37th place Global Competitiveness Report (WEF)
35 places
35th place Doing Business (WBG)
14 places
37th place (2020)
Sources: European Commission, World Bank, IMD, WEF (scoreboard year reffers to the date of report), 1.10.2020
no
EU PROCEDURES 2016 2014 2019
Slovenia is no longer experiencing macroeconomic imbalances outlined by European Commission report from March 2018
Slovenia enjoys favorable ESG ratings by a number of ESG rating specialists, showing a strong commitment to sustainable environmental, social policies and governance. The Republic of Slovenia bonds are included in leading ESG indices
ECPI Emerging Markets ESG Government Bond Index Barclays MSCI ES S&P ESG Pan-Europe Developed Sovereign Bond Index
10
Political Leadership
- Slovenian new experienced prime minister Janez Janša was
elected by the National Assembly on 3rd March 2020, i.e. for his third time in his political career.
- The 14th Government of the Republic of Slovenia was
appointed by the National Assembly on 13 March 2020. It consists of four parties and has 48 seats out of 90 seats.
Key Regular Election Dates Current Composition of the Government
Slovenian Democratic Party 44% Party of Modern Centre 25% New Slovenia
- Christian
Democrats 19% Democratic Party of Pensioners of Slovenia 12%
Split of Ministries in the Coalition Distribution of Seats at the National Assembly
Slovenian democratic party 31% Party of Modern Centre 11% Democratic Party of Pensioners of Slovenia 5% New Slovenia
- Christian
Democrats 6% Others 47%
2022
Months Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Presidential Election (October) Local Election (November)
Mayors & Municipal Councils
Parliamentary Election (June)
For 90 Seats at the National Assembly
Adopted Measures for COVID-19 Containment
Key measures focus to assist citizens and economy Package 2. Package 1. Package 3.
- Post epidemic healthcare outcome management
- Protecting potential for economic growth
- Preserving jobs/economy working capacity
- Household revenue stabilisation
- Social protection to vulnerable groups of citizens
Adopted: 28 April 2020 Valid from/to: 1 May – 31 December 2020 Liquidity loans guarantee scheme of the Republic in the total amount of 2 billions EUR to cover 70% of the loan principal for big companies and 80% loan principal for SME companies Adopted: 2 April 2020 Valid from/to: 13 March – 31 May 2020 Compensation for temporary work lay-offs due to extraordinary circumstances, i.e. epidemic (the Republic pays 80% of the salary but not less than the amount of minimum wage in Slovenia, social contributions paid by the Republic to the level of average wage) Provide basic income on a monthly basis and social contributions for self-employed One-off solidarity assistance for pensioners, students and other vulnerable groups (for pensioners with less than EUR 700 per month) Adopted: 20 May 2020 Valid from/to: 1 June – 31 December 2020 Extension of the compensation for temporary lay-offs for companies/industry and tourism by end June 2020 Additional new measure of subsidising short-time work which aims to encourage businesses to restart their production processes and thus help flatten the unemployment curve. The Republic is subsidising up to 50% of the working time under precondition that workers stay at work for at least 50% or 20 hours a week Tourism vouchers to be granted to all Slovenian citizens.
11
Source: Ministry of Finance, 1.10.2020
The Government and National Parliament adopted an intervention Law to stem the COVID-19 epidemic and mitigate its consequences:
1 2 3
Agenda
12
Country Overview Government account in surplus and Robust Banking System Improving Business Environment and Privatisation Economic Performance Debt Profile Characteristics
Suitable Fiscal Framework Including Implementation Law
- f Fiscal Rule and Operational Fiscal Council
At the end of May 2013, MPs supported constitutional change by a large majority: 79 out of 90 Votes Exceptions to the balanced budget rule only under two conditions:
- Extraordinary circumstances that are set down in the
implementing law
- In special cases such as natural disasters and periods of
significant economic contraction
13
Constitutional Change vote in May 2013
79 11 For Against 62 7 For Against
On July 2015 62 out of 90 MPs supported implementation Law of Fiscal rule Implementation Law of fiscal rule vote in July 2015 In line with the EU Fiscal compact the adopted Fiscal Rule defines the following:
- Allows for a maximum structural deficit of 0.5% of GDP only
when the economy faces adverse economic conditions (negative output gap)
- A structurally balanced budget position during times of a
positive output gap to compensate for eventual fiscal stimulus
- Demands a structurally balanced position over the medium
term and as such is more stringent than EU Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, and
- Legal basis for establisment of fiscal council
Source: Ministry of Finance, Government of the Republic of Slovenia, 1.10.2020
Fiscal council is fully operational since mid 2017
(1.8) (6.1) (5.6) (6.7) (4) (4) (3.4) (2.9) (1.9) 0.1 0.7 0,5
(16) (14) (12) (10) (8) (6) (4) (2) 2 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
21.8 34.6 38.4 46.6 53.8 70.4 80.3 82.6 78.7 74.1 70.4 66.1
10 20 30 40 50 60 70 80 90 100 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
14
Government surplus since 2017: GG surplus of 0.5% of GDP in 2019
General Government Balance (% of GDP)(1) General Government Gross Debt (% of GDP)(1)
EA average(2)
- 1. Statistical Office of the Republic of Slovenia (SORS), Ministry of Finance, 1.10.2020
(3)% Maastricht criterion
- General government surplus in 2019 of +0.5% of
GDP
- General government debt reduction by 16.5 p.p. of
GDP to 66.1% GDP in 2019 from the peak year in 2015 (82.6% GDP)
- Rationalization of benefits and reimbursements to
employees in public sector
- Cuts of benefits of labour market, social and family
policies
- Increased VAT rates in 2013 (general rate 22% (2 p.p.)
reduced rate 9.5% (1 p.p)
- Active and prudent debt management operations
Fiscal Consolidation targets Policy Measures
Headline deficit in 2013 of -14.7% due to bank recapitalizations (one-offs 10.7% of GDP). Headline deficit in 2014 of -5.5% due to bank recapitalizations and -3.4% of GDP excluding one-offs.
- 2. European Commission, Ameco database, 1.10.2020
15
Slovenian Banking System
Composition of the Slovenian banking system Ownership structure of the banking system
11 1 3 Banks (incl. 6 subsidiary banks) Branches of foreign banks Savings banks 4 7 Banks under domestic
- wnership majority
Banks under foreign
- wnership majority
Banking System Highlights
- EUR 41.2 bn Banking System Total Assets of 85% of GDP as at end 2019 (one of the lowest shares amongst EA countries(1))
- Loan-to-deposit ratio declined from 161.5% in 2008 to 75.7% at the end of 2019
- Record high after-tax profit of EUR 534.9m in 2019 (EUR 495.2m in 2018)
- Net impairments and provisions decreased from EUR -650.1m in 2014 to +47.1m in 2018 and +48.0m in 2019
- The Capital Adequacy Ratio stood at 18.5% and CET1 17.8% as at end of 2019
- NPLs measured as claims with arrears over 90 days in total claims reduced from 18.1% at the end of November 2013 to 1.1% at the end of
2019
- 1. Source: ECB Statistics, 1.10.2020
Source: Bank of Slovenia, 1.10.2020
- EUR 3.2 bn capital increase at four banks: NLB, NKBM, Abanka and Banka Celje (2013-2014)
- Factor banka and Probanka winding down process concluded in 2015 (market share at that time of about 2%)
- Merger of Abanka and Banka Celje concluded in 2015
- Bank Resolution Authority and Fund established (banks already provided EUR 195m funds)
- Resolution and Compulsory Dissolution of Credit Institutions Act adopted
- NKBM fully privatized in 2016, NLB (75% - 1 share) privatisation finalised in 2019, Abanka fully privatized in 2019
- Merger of NKBM and Abanka concluded in 2020
Overhaul of the Banking System since 2013
Agenda
16
Country Overview Government account in surplus and Robust Banking System Improving Business Environment and Privatisation Economic Performance Debt Profile Characteristics
The Labour Relations Act Aims to Reduce Segmentation and Enhance Flexibility by:
- Limiting possibilities for the use of temporary employment contracts
- Simplifying procedures for concluding and terminating employment contracts and disciplinary proceedings
- Decreasing the difference in rights arising from different forms of employment contracts
17
Enhancing the Business Environment
Improved Insolvency Framework
- Facilitates prompt resolution of non-viable companies and reallocation of resources
Tax collection simplification and reduced tax burden on labour by Changing Personal Income Tax
- Tax collection simplification (pre-filled forms, extended deadlines, extending the instalment payments period,
modernizing the collection of excise duties, electronic refunds, exemptions to small producers, informatisation of all processes of tax filling and collection)
- Reduced tax burden on most productive labor force by reducing tax bracket progression and reducing taxation on
performance bonuses Modernizing Public Procurement to Enhance Accesibility of SMEs
- New legal framework and simplified requirements (electronic execution, mandatory e-auctions and e-reversed
auctions). Cost effectiveness, i. e. savings estimated to 5-10%
Ongoing Privatisation
- 11 out of 15 companies privatized on the basis of a list endorsed by Parliament in June 2013
- Other successful privatisations: Cimos, Letrika and minority shares in 10 companies
- State Asset Management Strategy providing basis for further privatisation, led by the State
Sovereign Holding (SSH)
18
Company on the List Helios d.d. Fotona d.d. Aerodrom Ljubljana d.d. Žito d.d. Adria Airways Tehnika, d.d. Elan d.o.o. Adria Airways, d.d. NKBM d.d. Paloma d.d. NLB d.d. Abanka d.d.
Agenda
19
Country Overview Government account in surplus and Robust Banking System Improving Business Environment and Privatisation Economic Performance Debt Profile Characteristics
50 100 150 200 250 Ireland Iceland Denmark Netherlands Austria Germany Sweden Belgium Finland France United Kingdom EU-27 Malta Italy Czech Republic Spain Cyprus Slovenia Estonia Lithuania Portugal Slovakia Poland Hungary Romania Greece Croatia Bulgaria (20) (18) (16) (14) (12) (10) (8) (6) (4) (2) 2 4 6 (20) (18) (16) (14) (12) (10) (8) (6) (4) (2) 2 4 6 Q1-2008 Q3-2008 Q1-2009 Q3-2009 Q1-2010 Q3-2010 Q1-2011 Q3-2011 Q1-2012 Q3-2012 Q1-2013 Q3-2013 Q1-2014 Q3-2014 Q1-2015 Q3-2015 Q1-2016 Q3-2016 Q1-2017 Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Q1-2020 EU27 Euro Area - 19 Slovenia 5 10 15 20 25 30 5 10 15 20 25 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 EA-19 Slovenia
High Income Country Converging towards the EU Average
The second highest GDP per capita PPP among CEE Countries (88% of the Average of EU-27 as of 2019)
- 2. Source: IMF, 1.10.2020
- 1. Source: Eurostat, 1.10.2020
Gross National Savings (% of GDP)(2) GDP per Capita PPP* in 2019 (EU27 = 100)(1) Real GDP Growth Rate (% chg Q/Q4)(3) Contributions to Real GDP Growth (% chg Q/Q4)(4)
- 3. Source: SORS, Eurostat, Seasonally Adjusted Data, 1.10.2020
20
*Purchasing Power Parity
- Slovenia GDP growth above EA and EU average
- 4. Source: SORS, Original Data, 1.10.2020
(60) (54) (48) (42) (36) (30) (24) (18) (12) (6) 6 12 18 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018 Q2-2018 Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Contribution to growth, Q/Q4 (%) Exports of goods and services Imports of goods and services Private consumption Government consumption Gross fixed capital formation Real GDP growth
21
Strong Current Account Position
- 3. Source: SORS, Eurostat, Original data, 1.10.2020
Exports of Goods & Services (% chg Q/Q4)(3)
- Current account surplus of 6.6% of GDP in 2019
- The current account position is underpinned by external
demand, gains in unit labour cost competitiveness, recovery
- f export market share in world trade
- Export market share in EU and in the global market has
increased since 2013 Current Account Balance (% of GDP)(1)
- 1. Source: SORS, Institute of Macroeconomic Analysis and Development, Bank of
Slovenia, 1.10.2020
- 5.4
- 0.5
- 0.1
0.2 2.1 3.3 5.1 3.8 4.8 6.1 5.7 6.6 (6) (4) (2) 2 4 6 8 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
- 16,00
- 14,00
- 12,00
- 10,00
- 8,00
- 6,00
- 4,00
- 2,00
0,00 2,00 4,00 (30) (25) (20) (15) (10) (5) 5 10 15 20 Q1-2008 Q3-2008 Q1-2009 Q3-2009 Q1-2010 Q3-2010 Q1-2011 Q3-2011 Q1-2012 Q3-2012 Q1-2013 Q3-2013 Q1-2014 Q3-2014 Q1-2015 Q3-2015 Q1-2016 Q3-2016 Q1-2017 Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Q1-2020 Exports (% change) Slovenia Exports GDP EU27 (RHS)
Change in Slovenia‘s Market Shares on the Global Market and in the EU (% chg Y-o-Y)(2)
- 2. Source: UN, SORS, Eurostat, IMAD calculations, 1.10.2020
- 12,00%
- 8,00%
- 4,00%
0,00% 4,00% 8,00% 12,00% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
World EU-27
- EUR 40.5bn exports of goods and services (84.4% of GDP) whilst EUR 36.1bn imports of goods and services (75.3%
GDP) in 2019
- Growth is driven by manufacturing, services and growing tourism industry
- More than ¾ of exports of goods exported to EU
- More than 50% exported to Germany, Austria, Italy, Croatia and France
- Main trading partners: Germany, Italy, Austria and Croatia
- Average high FDI inflows in the last three years (3.1% of GDP)
22
Diversified and Open Economy
Exports of Goods* Geographic Distribution of Exports* Breakdown by Sector* Manufacturing and Services Driven Growth
Source: Bank of Slovenia, SORS, 1.10.2020 Other EU 12% UK 2% Germany 20% USA 2% Italy 12% Netherlands 2% Austria 8% China 1% France 6% Croatia 8% Russia 3% Hungary 3% Czech Republic 2% Serbia 3% Other 17% Agriculture, forestry and fishing 2% Construction 6% Manufacturing 24% Other industry 4% Government and social services 16% Financial and insurance services 4% Trade and transport 21% Information and communication 4% Utilities and
- ther services
20% *Due to rounding, might not add up to 100% Manufactured goods 20% Chemical products 17% Machinery and equipment 40% Fuels and raw materials 8% Food and beverages 4% Other 11%
2 4 6 8 10 12 14 16 18 20 2 4 6 8 10 12 14 16 18 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 EA-19 EU-27 Slovenia France Italy Slovakia 80 90 100 110 120 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Slovenia Italy Slovakia Czech Republic
23
Educated Labour Force and strong Labour Market Performance
Source: Eurostat, 1.10.2020
Unemployment Rate (%)
- Productive and well educated labour force
- One of the lowest unemployment rates in the EU & EA Areas
Real Labour Productivity per Person Employed (2010=100 EU average)
Source: Eurostat, 1.10.2020
- One of the lowest unemployment rates in EU.
Unemployment rate (ILO methodology) end 2019 stood at 4.6% (EA-19 average 7.6%, EU-27 average 6.4%)
- The unemployment rate in Slovenia started to
decrease in 2014
- Total employment exceeded one million people in year
2018 and continued to strenghten in 2019
- Labour productivity in Slovenia, measured as GDP per
employee (108.5 in 2019)
- Sustained improvement since 2013 and above EU
average since 2010 Employment (based on national accounts, 000)
860 880 900 920 940 960 980 1.000 1.020 1.040 1.060 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
(50) (45) (40) (35) (30) (25) (20) (15) (10) (5) 5 10 15 (50) (45) (40) (35) (30) (25) (20) (15) (10) (5) 5 10 15 2008 2010 2012 2014 2016 M1-2018 M3-2018 M5-2018 M7-2018 M9-2018 M11-2018 M1-2019 M3-2019 M5-2019 M7-2019 M9-2019 M11-2019 M1-2020 M3-2020 M5-2020 M7-2020 EA-19 Germany Italy Slovenia France
- Industrial
growth driven by high and medium technology-intensive industries
- Foreign direct investments are the most important in
medium-high and high-tech segments
- f
the manufacturing
- Manufacturing sector represents close to quarter of
gross value added
Source: Eurostat, 1.10.2020 *Industrial production encompasses Mining and quarrying, Manufacturing, Electricity, Gas, Steam and Air conditioning supply
24
Industry Production Performance with Hale Inflation
% change on previous year
Industry Production Index*
Source: Eurostat, 1.10.2020
Annual average rate of change (%)
HICP – Inflation Rate
- Recovery without inflationary pressures
- 1.6% inflation in year 2019 (EA-19 1.2%, EU-27 1.4%)
% change M/M-12 (NSA)
- 1,0
0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0
- 1
1 2 3 4 5 6 7 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 EA-19 Slovenia
Agenda
25
Country Overview Government account in surplus and Robust Banking System Improving Business Environment and Privatisation Economic Performance Debt Profile Characteristics
(150) (100) (50) 50 100 Netherlands Germany Malta Luxembourg Belgium Austria Finland Italy Slovenia Estonia France Latvia Slovakia Spain Portugal Cyprus Greece Ireland 100 200 300 400 500 Luxembourg Cyprus Netherlands Ireland Belgium France Malta Finland Portugal Spain Austria Greece Estonia Germany Italy Slovakia Slovenia Latvia 50 100 150 200 Greece Italy Portugal Belgium France Cyprus Spain Austria Slovenia Germany Finland Ireland Netherlands Slovakia Malta Latvia Luxembourg Estonia
Private sector is one of the least indebted in the Euro Area
Source: Eurostat, 1.10.2020 Source: Statistical Office of the Republic of Slovenia (SORS) , Eurostat, 1.10.2020
Private Sector Debt (% of GDP 2018) General Government Gross Debt (% of GDP 2019)
26
Net International Investment Position (% of GDP 2019)
Source: Eurostat, 1.10.2020
- One of the lowest non-consolidated private sector debt to
GDP ratio among EA countries (75.4% of GDP in 2019)
- Net international investment position of -19.3% of GDP at
the end of 2019
- Net External Debt-to-GDP ratio of 2.5% end Q4/2019 (Italy
51.7%, Spain 74.5%, Austria 16.9% and Germany -17.2%)
- One of the lowest Gross Household Debt-to-Income Ratios
- f 45% in 2018 (EA-19 93.6%, Germany 83.7%, Austria 83.2%,
Italy 61% and Spain 95.2%)
Indebtedness Compared to EMU Countries
Source: Eurostat, 1.10.2020
General Government Debt Dynamics in period 2015-2019
26
General Government Debt Dynamics in EA-19
- 20
- 15
- 10
- 5
5 Ireland Slovenia Netherlands Malta Austria Portugal Germany Cyprus EA-19 Belgium Lithuania EU-28 Finland Slovakia Spain Estonia Italy Latvia Luxembourg Greece France p.p. GDP
One of the fastest pace of general government debt to GDP reduction among Euro area countries since 2015 – the year of general government debt peak for Slovenia
Debt Profile Key Servicing Figures
General Government Debt & Debt Rule Compliance Budget Interest Servicing Cost
28
AWTM, MD and Implicit Interest Rate
Source: Ministry of finance, Eurostat, 1.10.2020
- Key focus of the state treasury was to extend the duration
- f the debt portfolio, hence reducing roll-over risk, while
reducing implicit interest rate at the same time
- Extended modified duration of the debt portfolio (from 4.7 in
2014 to 8.1 end of 2019) while at the same time implicit interest rate was reduced (from 4.4% in 2014 to 2.6% in 2019)
- Since 2014 the long term financing cost of the central
government budget has been reduced significantly. Interest bill
- f 2.9% GDP in 2014 to estimated 1.6% GDP in 2019
- Interest expenses in 2019 estimated to be below 2013 – crisis
year nominal level and well below in % GDP terms
- Well inside the EC Stability and Growth Pact Debt Rule
Key Treasury Objectives Met
256 285 321 351 380 372 368 347 351 326 326 479 511 633 827 1.083 1.029 1.064 978 861 785
0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 200 400 600 800 1.000 1.200
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
% GDP EUR mln Interest % GDP
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 AWTM 5,9 6,2 6,6 6,2 5,7 5,7 6,4 8,0 9,3 9,2 9 MD 5,0 4,9 5,1 5,1 4,5 4,7 5,2 6,7 7,9 7,9 8 Implicit IR (RHS) 4,5 4,3 4,3 4,3 4,3 4,4 3,8 3,7 3,3 3,0 2,6
0,5 1 1,5 2 2,5 3 3,5 4 4,5 5 4 5,5 7 8,5 10
% Yrs AWTM MD Implicit IR (RHS)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Slovenia GG Debt 21,8 34,6 38,4 46,6 53,8 70,4 80,3 82,6 78,7 74,1 70,4 66,1 Debt Rule 76,6 72,9 Euro Area 69,6 80,2 85,8 87,6 90,7 92,6 92,8 90,8 90 87,8 85,9 86,4
10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100
% GDP
Slovenia GG Debt Debt Rule Euro Area
Source: Ministry of Finance, Data as at 1.10.2020
29
Central Government Budget Debt Structure Characteristics
Residual Maturity of Debt
- High majority of outstanding central government debt is
denominated in domestic currency (euro)
- No exposure to FX volatility, as fully hedged
- 27.8% of existing budget debt has residual maturity of
more than 10 years
Below 1 year 9.6% Between 1 to 5 year 26.9% Between 5 and 10 years 35.7% Between 10 and 15 years 14.0% Over 15 years 13.8%
Debt Structure by Type of Currency
USD 3.8% EUR 96.1% Other 0.1%
Share € m Bonds 94,2% 31.530,67 T-bills 3,3% 1.103,16 Loans 2,5% 853,26
Structure by Interest rate
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Indexed (inflation) Indexed (D) Fixed Floating
Source: Ministry of Finance, 1.10.2020
30
Debt Structure by Residence of Investors
- Share of Non-Resident Investors decreased from 80% in 2014 to 60% in 2019 taking into account the secondary
market flows
- Since 2007, i.e. EUR adoption, well diversified domestic EUR investor base and liquidity premium reduced
- About 95% of bond issued in euros under domestic law on EUR Debt capital markets to investors coming mainly from
euro-area countries
- Approx. 5% of existing bond portfolio issued on international USD debt capital markets (no FX exposure, principal and
interest obligation fully hedged into euros)
- On the back of PSPP programme Bank of Slovenia has became significant sole holder of SLOREP bonds (~23%)
Structure of Central Government Debt by Residence of Investors (secondary market) Structure of General Government Debt by Residence of Investors (secondary market)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Residents Non-residents 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Residents Bank of Slovenia Non-residents
EUR Benchmark Size Bonds Issued on Primary Market
31
Source: Ministry of finance, 1.10.2020
Geographic distribution Distribution by Investor Type
Institutionally well diversified investor base by opted for long dated EUR bond issuances (pension funds, insurance companies, fund managers etc...)
Banks 24,7% Central Banks 6,1% Asset & Wealth Managers 47,3% Hedge Funds 4,3% Pension Funds 4,4% Insurance companies 9,6% Others 3,6% USA 12,1% Germany & Austria 23,8% Swiss 3,1% Slovenia 7,3% Other EU 4,4% France 9,4% Rest of the World 2,2% UK & Ireland 21,3% Benelux 3,9% Asia 1,6% Italy 5,8% Scandinavia 5,1%
32
Source: Ministry of finance, 1.10.2020
Government Bonds included in several leading indices, i.e.
Markit iBoxx
IBOXX Euro Eurozone Sovereign IBOXX Euro Overall
BofA Merrill Lynch Global bond index
Euro Government Global 1-10 Year 5-10 Year 7-10 Year
Bloomberg Barclays
Global Aggregate Global Treasury Series-E Euro Govt. Euro Aggregate Treasuries GDP Global Aggregate Developed Market
Bond Indices
SLOREPs meet rating and minimum size requirements.
The Republic of Slovenia bonds are included in over 400 major indices
iBoxx: min. 1y remaining maturity, min. €1bn issue size;
- min. IG rating (average of Moody’s, S&P, Fitch = average
Baa3/BBB- or higher). Bloomberg Barclays Global Aggregate Bond Index: min. 1y remaining maturity, min. €300m issue size (differs per currency); min. IG rating (average of Moody’s, S&P, Fitch = average Baa3/BBB- or higher). BofA Merrill Lynch bond index: min. 1y remaining maturity, min 1.5y original maturity, min. €1bn issue size;
- min. IG rating (average Baa3/BBB- or higher).
Source: Ministry of Finance, 1.10.2020
33
Central Government Budget Debt Maturity Profile
500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 EUR mln
EUR Debt Principal repayments USD Debt Principal repayments
Source: Ministry of Finance, 1.10.2020
Republic of Slovenia Contributions to EU Financial Assistance Programmes
34
Republic of Slovenia contributions to EFSF, ESM and Greece were EUR 1.52 bn as end of 2019 which represents 3.2% of GDP. Programme 2012 EUR million 2013 EUR million 2014 EUR million 2015 EUR million 2016 EUR million 2017 EUR million 2018 EUR million 2019 EUR million EFSF(1) 708.3 898.3 946.8
891.6 891.6 891.6 891.6 881.5
ESM(2) 136.8 273.7 342.1
342.1 342.1 342.1 342.1 376.9
GREECE (LFA(3)) 263.7 263.7 263.7
263.7 263.7 263.7 263.7 263.7
Total (part of general government debt) 1,108.8 1,435.7 1,552.6 1,497.4 1,497.4 1,497.4 1,497.4 1,522.1
% of GDP
3.1 4.0 4.1 3.9 3.7 3.5 3.3 3.2
Republic of Slovenia contributions to EU Financial Assistance Programmes
- 1. European Financial Stability Facility
- 2. European Stability Mechanism
- 3. Loan Facility Agreement
2020 Financing Programme
35
Source: Ministry of Finance, 1.10.2020
In 2020 Slovenia has already provided EUR 6.68 bn financing by issuing long-term euro debt with average weighted issued yield of 0.5% and average weighted time to maturity 8 years.
Estimated Central Government Budget Debt Principal Repayments in 2021 and 2022 EUR 4.79 bn
Central government budget debt principal repayments in 2021 3.352 Central government budget debt principal repayments in 2022 1.258
2020 Central Government Budget Financing Needs (- I. + II. - III. + IV.= V.) EUR 1.58 bn
- I. Surplus of Balance A (Current surplus)
0.42
- II. Deficit of Balance B (Lending and Repayment Account)
0.38
- III. Change (reduction) of the state budget cash position and prefinancing executed in 2019
0.43
- IV. Debt redemption
2.05
- V. (Est) Central Government Budget Financing Needs for 2020
1.58
Covid-19 Financing Needs EUR 2.17 bn
Borrowing needs for Covid-19 fiscal intervention package 2.167
2020 Financing Programme Execution Through Redemption Optics
36
Source: Ministry of Finance, 1.10.2020
500 1000 1500 2000 2500 3000 3500 4000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 EUR mln
Redemptions as at 31.12.2019 SLOREP Jan. 2030 SLOREP Mar. 2032 Tap SLOREP Aug. 2045 Tap SLOREP Mar. 2029 SLOREP Mar. 2023 SLOREP Jul. 2030 SLOREP Mar. 2035 T-bills (18m) T-bills (12m) T-bills (3m,6m)
*Marked Maturity Buckets depict Newly Issued EUR debt (bonds and T-bills) in 2020.
- In June 2020 S&P Affirms ‚AA-‘ Rating with Outlook ‚Stable‘ for Republic of Slovenia
- The new government, led by prime minister Janez Janša, is in office since 13th of March
and has been successfully focusing on limiting the economic repercussions from the COVID-19 pandemic
- According to the latest autumn IMAD report the Slovenian economy will contract by -6.7%
in 2020 before recovering +5.1% in 2021
- Net international investment position improved from -44.0% GDP in 2012 to -19.3% GDP
in 2019
- Banking System well capitalized with CET1 17.8% at the end of 2019
- In 2020 Slovenia has already provided EUR 6.7 bn financing by issuing long-term euro
debt with average weighted issued yield of 0.5% and average weighted time to maturity 8 years.
- Smooth redemption profile, nearly 1/3 of existing budget debt has residual maturity of
more than 10 years, well diversified investor base
37