Economic and Political Environment
Slovenia became the first 2004 European Union entrant to adopt the euro (on 1 January 2007) and has become a model of economic success and stability for the region. With the highest per capita GDP in Central Europe, Slovenia has excellent infrastructure, a well-educated work force, and a strategic location between the Balkans and Western Europe.
Privatization has lagged since 2002, and the economy has one of highest levels of state control in the EU. Structural reforms to improve the business environment have allowed for somewhat greater foreign participation in Slovenia's economy and have helped to lower unemployment.
In March 2004, Slovenia became the first transition country to graduate from borrower status to donor partner at the World Bank. In December 2007, Slovenia was invited to begin the accession process for joining the OECD. Despite its economic success, foreign direct investment (FDI) in Slovenia has lagged behind the region average, and taxes remain relatively high. Furthermore, the labor market is often seen as inflexible, and legacy industries are losing sales to more competitive firms in China, India, and elsewhere. In 2009, the world recession caused the economy to contract - through falling exports and industrial production - by more than 8%, and unemployment to rise above 9%. Although growth resumed in 2010, the unemployment rate continued to rise, topping 10%.
Key economic indicators:
- Population: 2,000,092 (July 2011 est.)
- GDP (purchasing power parity): $56.81 billion (2010 est.)
- Per capita GDP: $28,400 (2010 est.)
- Real GDP growth: 1% (2010 est.)
- Unemployment: 10.6% (2010 est.)
- Public debt: 35.5% of GDP (2010 est.)
Currency:
Euro
The Banking Environment
Slovenia’s banking and financial system
The bank count fell from 25 at 31 December 1999 to 19 at 30 June 2004. Over the same period, the number of savings banks plunged from 6 to 2. The state-owned controlling stake remains in two banks, while the number of banks controlled by foreign owners was 6 at 30 June 2004.
Both residents and non-residents may open accounts in Slovene tolars and in foreign currencies, though reporting on foreign currency transactions is obligatory.
Central bank: Bank of Slovenia
Cash Management Features
Taxation
Slovenia has concluded several agreements on avoidance of double taxation, which are taken account of in the direct taxation on non-residents.
Interest (except interest on national securities, on government debt and payable to the government or central bank), dividends and royalties payable to non-residents are taxed at 25%.
Corporate income is taxed at 25%. Deductions from the taxable base are allowed for investments into equipment and into employment of specified categories of persons. For tax purposes, the comparable uncontrolled price method and an interest rate set by the finance minister are applied to transactions between related parties. Thin capitalisation issue: interest payable between related parties is not deductible in the amount paid on the excess loan, which is defined as the difference between four times the creditor’s loan over its share in the debtor’s capital.
Reporting to the central bank
All international payments, transactions between residents and non-residents, and sales/purchases of foreign currency shall be reported to the central bank.
Payment system
The Slovene inter-bank payment system comprises two domestic payment systems: SIBPS (the real-time gross settlement system) and Giro Clearing (multilateral net settlement system). Both are owned and operated by the Bank of Slovenia.
SIBPS has been in place since April 1998 and serves for the settlement of large-value and urgent inter-bank and customer payments in real time. Payments are settled via settlement accounts held by participants of the system with the Bank of Slovenia.
Giro Clearing was introduced in October 1998 and is a multilateral net payment system. It represents the second pillar of the new domestic payment infrastructure. Net positions arising from the clearing cycles are settled via SIBPS, this requiring every participant in the Giro Clearing to be a SIBPS participant as well.
Giro Clearing processes credit payments up to the amount set by the Bank of Slovenia. Currently, inter-bank/customer payments of SIT 2 million (EUR 8,900) and over shall be settled via SIBPS. The main reason for this threshold is to reduce risks present in the net settlement systems.
In the future, the threshold might be modified based on risk analyses and policy decisions.