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Business news in Slovenia

IMF sees Slovenian financial system as resilient but in need of reform

Ljubljana, 30 January (STA) - Slovenia's financial system is resilient in the face of increased challenges but structural reforms are needed, assessed a mission by the International Monetary Fund (IMF) as part of annual consultations. The Bank of Slovenia noted it holds a similar view on the situation.

Slovenia has proven to be resilient to increased geopolitical tensions and domestic flood-related challenges, said head of the IMF mission Donal McGettigan, adding that the IMF expects a continued recovery of Slovenia's economic growth.

The IMF estimates that economic growth in Slovenia will reach around 2% in 2024, said McGettigan. Inflation is expected to drop below 3% by the end of the year and below 2% in 2025.

Like in other countries, risks remain high, said McGettigan, noting that Slovenia is affected by conflicts in the region, unstable raw material prices and below-expectation growth in partner countries.

He understands the urgency of flood recovery expenditure, but noted that Slovenia should not excessively loosen the fiscal policy. Flood recovery expenditure may also spur inflation, McGettigan said.

Slovenia is in dire need of structural reforms in pension, healthcare, fiscal policy and public sector wages, said McGettigan. The 2023 floods also highlighted the importance of tackling climate change and adapting to its consequences, he added.

The Bank of Slovenia is largely in agreement with the IMF mission. "We share the estimate that Slovenia is currently in a relatively good position and that expected economic growth will stay above the euro average," said the central bank governor Boštjan Vasle.

Inflation is one of the areas that requires further action, said Vasle, adding that future trends are uncertain. Wage negotiations and the impact of labour market developments on wage growth remain a mystery, he said.

Both the Bank of Slovenia and the IMF agreed that the current situation does not allow for a change in monetary policy, said Vasle. "We have to stay ready to respond quickly to potential changes," he said.

The IMF found that Slovenia's bank system is in great condition, said Vasle. He welcomed the IMF's assessment that Slovenia seized favourable conditions in macro-prudential supervision and was able to improve resilience.

Finance Minister Klemen Boštjančič expressed his satisfaction with the constructive discussions with IMP representatives. They acknowledged successful work up to date and warned about needed reforms, he said. "We are in no way running away from that," said Boštjančič. "I dare say that in a year in many areas steps forward will be made," the minister added.

He said that the plans for a fiscal reform are still on track. The changes will be presented in the coming months but not all at once, Boštjančič said.

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