By: Vida Kocjan
Based on the collected data, the renowned British economic weekly The Economist finds that Slovenia is in second place among the countries that have best managed the economic crisis caused by the new coronavirus epidemic.
Our country stands out in terms of household income growth and business value growth. However, all confirm that the government’s actions at the time of the new coronavirus were correct and timely. Leading Slovenian economists also point out that Slovenia is achieving good results due to an appropriate economic policy.
Slovenia ranks second in terms of performance
The British weekly analysed the results of 23 selected (more developed) members of the Organisation for Economic Co-operation and Development (OECD). Five criteria were used for classification. They compared the values in the last quarter of 2019 and the third quarter of 2020, or in the period for which the latest available data were available. The first criterion was real growth of gross domestic product (GDP), the second real growth of disposable income of households, the third growth of shares according to the most relevant stock exchange index, the fourth criterion was growth of fixed capital formation, and the fifth net growth of public debt in GDP. Following Denmark, Slovenia ranked second.
Praise comes from economic circles at the expense of the Slovenian government, but the opposition party SD expectedly had comments, saying that the data were inaccurate, that Slovenia was not among the winners of the covid-19 epidemic, that it had too many victims, and that unprecedented economic performance cannot be praised, and it will end this period with public debt of around 80 percent of GDP.
Good results are due to appropriate measures
However, others think differently. Former Minister of Finance and Economist Janez Šušteršič said in Tema dneva on Nova24TV that the credit for Slovenia’s achieving such good results lies in appropriate economic policy measures during the covid-19 epidemic; these affected the indicators covered by the Economist comparison. These are mainly economic growth, the income of the population and how much the state has borrowed.
He pointed out that richer countries have recovered incredibly after the recession in 2020, and many were surprised at how many countries have record low unemployment and high economic growth at this time. “This is something we economists expected, but we did not think the pandemic would last as long as it is lasting. We said at the beginning that this is a completely external shock, which has no internal causes in the economy, after normalisation, growth can occur very quickly,” he explained.
Record employment is not self-evident
Although the pandemic is still ongoing, it is clear that a situation has arisen in which it is possible to do business at least approximately normally. The second reason, of course, is that this is a time of pandemic, when countries did not have major reservations about very high funding for jobs or their preservation. “In my opinion, this is the source of high employment in many countries, but not in all,” said the former minister.
Historically record high employment is also in Slovenia, where for the first time so far more than a million people have a job. Unemployment data are also extremely favourable. At the end of December 2021, there were 65,969 unemployed in Slovenia, which was the lowest unemployment in December since 1991. For comparison. In 2007, there were 68,411 unemployed, and in 2008, which is the most successful in the history of an independent state, 66,239.
Extremely good for other indicators as well
Bojan Ivanc, chief economist at the Chamber of Commerce and Industry of Slovenia (GZS), explained to our weekly that Slovenia is ranked so high on the list of 23 more developed OECD member states primarily due to high growth in real income per capita (this is one tenth higher than the pre-crisis level), investment growth (almost 7% above the pre-crisis level) and the stock index growth (growth of 33%). “In the latter, the shares of Krka and Petrol, which represent half of the share index, had a great influence. The Krka share price rose due to better operations during the pandemic and good expectations, while the Petrol price rose mainly due to the liberalisation of the petroleum products market. The real income of the population increased due to the payment of allowances in the public and private sectors as well as payments to pensioners and other groups of the population. These direct fiscal transfers were higher in Slovenia than in other countries,” Ivanc emphasised.
He added that Slovenia’s net public debt, which should not be confused with gross public debt, increased by 7.4 percent in this period, which is half the level of gross debt growth, “and it is a bit illogical and hard to check,” he added. Regardless of this, Slovenia would be ranked among the top five countries on the scale of gross debt instead of net debt (which grew similarly to other countries in the period). GDP was above pre-crisis levels in the third quarter of 2021, similar in half of the countries, but not in all.
“Even according to some other indicators, such as social stratification and unemployment, Slovenia would perform extremely well on the scale, as far as they would be taken into account in this methodology,” said Bojan Ivanc, chief economist at the Chamber of Commerce and Industry.
Orientation for the time after the epidemic
Slovenia is therefore on the right track. The winners of the pandemic will be the countries that will be in the best condition, as the editor of Demokracija Jože Biščak pointed out. Some also point to the high consumption of the state during the epidemic and the related general government deficit. In recent times, the Fiscal Council has also been somewhat more critical, which means that the deficit will have to start decreasing in the post-epidemic period. Former Finance Minister Janez Šušteršič states that “this is normal after such a crisis and is a challenge for the next government”. However, this is not a problem that would deny everything else. He also points out that the fiscal rule, as enshrined in the Constitution, and the fiscal rule that we have joined at EU level allow for spending during an epidemic. It is also perfectly normal for the Fiscal Council to point out the increased spending, as this is its task.
Šušteršič adds: “In contrast to this crisis, we tightened our belts in 2012 because the government had very high deficits and very poor economic results before that, which is why no one wanted to lend money to Slovenia at the time.”
After the rehabilitation of the banks, even then our public debt amounted to about 80 percent of GDP. Over the next ten years, it gradually declined in parallel with economic growth. “Something similar will also be happening now. If it has been able to decline in the last ten years, then now I see no reason why it should not decline in the next ten years after the end of the pandemic.”
The debt was the highest during the government of Alenka Bratušek
In Slovenia, some opposition leaders, most notably Alenka Bratušek, a trained financier and president of the SAB party, are spreading inaccurate data on the amount of public debt. There is even misuse of data. Bratušek publicly spreads that the country’s debt increased the most during the current government. She “forgets” to say that debt, which is expressed in GDP, is important. At the end of 2021, it was estimated at 77.5 percent, in 2020 it was 79.8 percent, and at the time when Bratušek was leading the government, it was 80.3 percent.