Higher taxes, high inflation, lower wages and pensions, excessive government spending – including on selected NGOs that they have put on a pedestal; high budget deficit, halted investments because the money for this year’s projects is already running out. The ruined healthcare service, a mass of illegal migrants, political takeover and subjugation of the national media outlet, the siphoning off of taxpayers’ money to selected electricity companies, including Gen-I, and low economic growth are leading us into recession. This is the balance sheet of the “one year’s management” of the government coalition led by Robert Golob.
According to the latest data, Slovenia recorded by far the biggest fall in industrial production in April, of almost 8 percent, while in the EU production increased by 1 percent. The economic sector warns that such a drop in industrial production in Slovenia is a warning sign of insufficient action in the area of energy. At the same time, the Slovenian Chamber of Commerce and Industry has been warning of downward trends since the beginning of the year, noting that industrial production in some sectors has fallen by as much as 10 percent to more than 20 percent since November last year. Output shrank in 13 out of 21 manufacturing industries. Such a decline in industrial production is a sign that the future does not look bright for us either.
The economic climate is getting worse
The Institute of Macroeconomic Analysis and Development (Urad Republike Slovenije za makroekonomske analize in razvoj – UMAR) has announced that the economic climate has deteriorated even further in June. The deterioration is due to negative contributions from confidence indicators in services and among consumers, and to some extent also in manufacturing and construction. The economic climate has also deteriorated on average in the second quarter compared to the first quarter, and sentiment is also much weaker relative to the second quarter of 2022.
The mood in the Slovenian economy thus deteriorated for the sixth consecutive month in June and has remained below its long-term average since January. Ironically, on the very day the Institute of Macroeconomic Analysis and Development’s report was published, Prime Minister Robert Golob said in the National Assembly that Slovenia was experiencing economic growth, allegedly driven by construction, tourism and information and telecommunication services. Slovenia is reportedly ahead of forecasts in these three areas. However, the said Institute proved Golob wrong, as the value of the confidence indicator for the construction sector fell by one percentage point in June, and by almost the same amount compared to the same period of the previous year.
The budget deficit is rising
Last week, the Ministry of Finance published data on the government’s general budget deficit, which was 3.33 times higher in the first half of this year than it was in the same period last year. Public spending in the first half of this year was 413 million euros higher than the revenue. In the same period last year, this figure amounted to 124 million euros. However, we have already heard reports from circles close to the government that the government is running out of money for planned projects. Among other things, work on infrastructure projects is being halted, and quite a few mayors have remained largely silent about the fact that this is also happening in their municipalities. One of these is also the Mayor of Osilnica, Alenka Kovač, who ran as a candidate on the Freedom Movement party (Gibanje Svoboda) list in the last elections. Her main goal is to complete the project of building a home for the elderly in Osilnica, which ran aground a few years ago. The previous Janša government found a solution for the facility, but the current one has apparently destroyed it. The project to build the 3a development axis from Ljubljana to Kočevje has also been practically halted, and no progress has been made on other infrastructure projects. According to some mayors, they were also told by the Minister of Infrastructure, Alenka Bratušek, that the current government would not start any new projects, and that work would only take place where it was ongoing and could not be stopped.
So, the state of public finances is alarming, and ministers are hiding from the cameras. We saw this just last week, when no one was there to explain where Slovenia is heading. Least of all Prime Minister Robert Golob.
We’re falling in all rankings
MP Suzana Lep Šimenko recently drew the government’s attention to the fact that Slovenia has dropped four places in the competitiveness rankings of the International Institute for Management Development in Lausanne. Namely, Slovenia is in the bottom third of the 64 countries on the list, ranking 42nd. Slovenia’s ranking is strongly influenced by inflation, and the country also performs very poorly in the categories of public finances and taxes. The most notable drops in the data or competitiveness rankings are in government effectiveness, or the so-called government competence category. In terms of economic performance, Slovenia dropped from 26th place last year to 36th this year. Slovenia also fell in the categories of domestic economy, international investment, employment, and prices.
In terms of government effectiveness, Slovenia dropped from 42nd to 45th place. The country also dropped in the rankings for public finances, tax policy, institutional framework and business legislation. In addition, it dropped from 41st to 50th place in the category of public finances, and it ranks 51st in tax policy. In the managers’ assessment of public financial management, Slovenia ranked 55th. When it comes to the impact of taxes on work incentives and promotion, Slovenia ranked 62nd out of 64. We also fell to 46th place in terms of business efficiency and 36th for infrastructure.
Golob misled the companies
The difficult business climate in the economy is also constantly highlighted by Slovenian business associations. But the fact is that they are still very cautious about bringing attention to this, obviously fearing revanchism. The owner of Costella, a company from Kostel that bottles drinking water, has explained very clearly in recent days how they do business. The owner of the company is Joc Pečečnik, who revealed that the company would stop 90 percent of production and will restart full production when their contract to buy electricity, which was signed last year, expires next year. Pečečnik said that at this time, electricity would be too expensive for them, and they would be operating at a loss. Last November, the company followed Robert Golob’s call for the companies to enter into long-term power purchase agreements to secure a better price, as electricity would become even more expensive. Soon afterwards, prices started to fall. Thus, those who followed Golob’s call remain prisoners of their contracts with suppliers and have to pay the price of the electricity they paid when they signed until their contract expires. This is a very illustrative example of how this is being dealt with in large companies, and so far, a lot of management teams have remained silent. They will not be able to remain silent forever. That is why insiders are warning of a hot autumn.
Above-average inflation and rising indebtedness
Inflation reached 6.9 percent in May, and while price inflation is slowing down year-on-year, it is still higher in Slovenia than in the European Union. In the last month, the most expensive services in Slovenia on an annual basis were healthcare services (up almost 13 percent), food (up 12 percent) and restaurant and hotel services (up 9 percent). However, the cost of routine maintenance of homes continues to rise above the average. All of the factors mentioned above contribute significantly to a lowering living standard and are becoming a social problem, as Professor Matej Lahovnik pointed out in a commentary recently published in one of the newspapers. He added that, although the Ministry of Agriculture claims that food prices are lowering – on the basis of the staple food inventory, “in reality, retailers are only making sure to not make those foods that are included in the sample of measurements more expensive than the other retailers.” He also warned that bringing inflation down would be more complicated than many people thought.
By the end of the year, the deficit is forecast by the finance ministry to rise to 2.621 billion euros, which would represent four percent of gross domestic product (GDP). This means that the government will finance the higher spending with additional borrowing. This would amount to another 44.61 billion euros. At the end of the first quarter of 2023, the debt stood at 42.2 billion euros, or 69.5 percent of GDP, up by 946 million euros in nominal terms, or 2.3 percent year-on-year. These figures do not bode well either, especially as interest rates on the international financial markets are rising, increasing the amount of interest payments borne by all taxpayers.
Young people are leaving
Citizens are, of course, noticing the worsening situation in the country, and opinion polls are also showing declining support for the government. Young people are increasingly choosing to leave the country. At the same time, left-wing activists are still trying to sell us the thesis that citizens are worried about climate change. The latter is also supposed to be an appeal to politicians for more ambitious climate action, which is now the mantra of those who want to divert attention from much more serious issues. Young people aged between 18 and 24 are said to be the most concerned about climate change. According to the Delo newspaper, this data is based on a survey conducted by the Legal Centre for the Protection of Human Rights and the Environment (Pravni center za varstvo človekovih pravic in okolja – PIC), a centre which, among other things, massively supports the migration of peoples and, as such, supports illegal migrants. The latter, however, have so far been repeatedly confirmed as coming to the EU mainly for social transfers. They are looking for rights and care little about anything else.
A very credible response to such “concerns” of certain NGOs was recently tweeted by Matej Lahovnik, a professor at the Faculty of Economics in Ljubljana: “Young people in Slovenia are worried about high taxes and consequently low net wages and unaffordable housing, which are influenced by domestic politics, and not about climate change, which is beyond Slovenia’s control.”