Standard & Poor’s Ratings Services has raised its long-term foreign currency sovereign credit and senior unsecured debt ratings on the Republic of Slovenia to ‘A+’ from ‘A’, and its short-term foreign currency sovereign rating to ‘A-1+’ from ‘A-1’. The upgrade reflects an unwavering adherence to prudent fiscal policies, and the government’s commitment to accelerating privatisation and economic restructuring. The foreign currency outlook is positive.

At the same time, Standard & Poor’s affirmed its ‘AA/A-1+’ local currency ratings on

  • Slovenia. The local currency outlook is stable.


“Slovenia’s commitment to fiscal prudence is reflected in general government deficits of 1.3% of GDP on average between 1998-2002, and a moderate debt burden of 29% of GDP in 2002,” says Standard & Poor’s credit analyst Beatriz Merino. “Standard & Poor’s expects the general government deficit to gradually improve further, reaching balance by 2007. The general government debt is also projected to follow a downward trend, to some 22% of GDP by 2007, reflecting small deficits and the use of privatisation revenues to alleviate the debt burden.”

External indicators improved significantly in 2002, reflecting a record current account surplus of close to 2% of GDP, and net foreign direct investment (FDI) inflows amounting to 8% of GDP. Although small deficits are expected in the near future, these will be largely financed by FDI inflows, expected at 3% of GDP on average, underpinning Slovenia’s net creditor position, forecast at 27% of exports in 2003.

Although Slovenia is a relatively young democracy, multiparty coalition governments have traditionally agreed on core issues, while a preference for gradual reforms and consensus has supported a remarkably stable political and macroeconomic environment. The country’s institutional and legal infrastructure has also been strengthened significantly in recent years, within the framework of preparations for EU membership, which was strongly endorsed by the Slovenian electorate in a referendum on March 23.

Slovenia’s well-diversified, small, and open economy supports the second-highest GDP per capita among EU candidates, at an estimated US$12,745 in 2003. Expected progress with privatisation and economic reforms will support the competitiveness of the Slovenian economy and its capacity to face heightened competitive pressures within the EU single market. An expected recovery in external demand and investment will underpin economic growth of 4-4.5% from 2004, following average GDP growth of 3.3% in 2002-03.

Inflation, which stood at 7.5% in 2002, remains Slovenia’s main economic concern. Reducing price growth further will require increased competition in the economy, particularly in regulated industries, through privatisation and restructuring. Strengthened coordination between government and central bank policies, as well as the ongoing dismantlement of indexation practices, are expected to lower inflation to 5.5% in 2003 and to about 4.3% in 2004.

The positive foreign currency outlook reflects Standard & Poor’s expectation of sustained progress with disinflation, privatisation, and economic restructuring.

“Longer-term positive improvements in Slovenia’s creditworthiness hinge mainly on the pace at which the country makes progress in reducing inflation and bringing down the state’s role in the economy to foster a more competitive environment,” says Merino.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit analysis system, at