Slovenian economic mirror No. 4, Vol. XXII, 2016 Slovenian Economic Mirror ISSN 1318-3826 No. 4 / Vol. XXII / 2016 Publisher: IMAD, Ljubljana, Gregorčičeva 27 Responsible Person: Boštjan Vasle, MSc, Director Editor in Chief: Matevž Hribernik Authors of Current Economic Trends (listed alphabetically): Jure Brložnik, Urška Brodar, MSc, Janez Dodič, Marjan Hafner, MSc, Katarina Ivas, MSc, Slavica Jurančič, Mojca Koprivnikar Šušteršič, Tanja Kosi Antolič, PhD, Janez Kušar, Jože Markič, PhD, Helena Mervic, Tina Nenadič, MSc, Mitja Perko, MSc, Jure Povšnar, Ana T. Selan, MSc, Dragica Šuc, MSc, Ana Vidrih, MSc. Authors of Selected Topics: Rotija Kmet Zupančič, MSc (Business results of companies in 2015) Urška Lušina, MSc (Indebtedness of the corporate sector) Mateja Kovač, MSc (Value added in the agriculture, forestry and fishing sectors in 2015) Editorial Board: Marijana Bednaš, MSc, Aleš Delakorda, MSc, Lejla Fajic, Alenka Kajzer, PhD, Rotija Kmet Zupančič, MSc, Janez Kušar, Boštjan Vasle, MSc Translator: Marija Kavčič Data Preparation and Graphs: Bibijana Cirman Naglič, Marjeta Žigman Concept and Design: Katja Korinšek, Pristop DTP: Bibijana Cirman Naglič Print: Demat d.o.o. Circulation: 80 copies © The contents of this publication may be reproduced in whole or in part provided that the source is acknowledged. Contents In the spotlight................................................................................................................................................................3 Current economic trends..............................................................................................................................................5 International environment...............................................................................................................................................7 Economic developments in Slovenia.............................................................................................................................8 Labour market..................................................................................................................................................................12 Prices..................................................................................................................................................................................14 Balance of payments.......................................................................................................................................................16 Financial markets.............................................................................................................................................................17 Public finance....................................................................................................................................................................18 Selected topics Business results of companies in 2015.........................................................................................................................23 Indebtedness of the corporate sector..........................................................................................................................24 Value added in the agriculture, forestry and fishing sectors in 2015....................................................................26 Statistical appendix.....................................................................................................................................................29 The Economic Mirror is prepared based on statistical data available by 8th June 2016. On 1 January 2008, the new classification of activities of business entities NACE Rev. 2, which replaced NACE Rev. 1.1, came into force in all EU Member States. In the Republic of Slovenia the national version of the standard classification, SKD 2008, took effect. It includes the entire European classification of activities but also adds some national subclasses. All analyses in the Slovenian Economic Mirror are based on SKD 2008, except when the previous classification, SKD 2002, is explicitly referred to. For more information on the introduction of the new classification see the SURS website http://www.stat.si/eng/skd_nace_2008.asp. All current comparisons (at the monthly, quarterly levels) in the Slovenian Economic Mirror are made on the basis of seasonally adjusted data, while year-on-year comparisons are based on original data. Unless otherwise indicated, all seasonally adjusted data for Slovenia are calculations by IMAD. Slovenian Economic Mirror, No. 4/2016 3 In the Spotlight In the spotlight In the first quarter, economic growth in the euro area strengthened to 0.6% (seasonally adjusted) and GDP was up 1.7% year-on-year. The main driver of GDP growth was domestic demand, particularly private consumption and investment. For the second quarter, confidence indicators (ESI, PMI, Ifo) indicate a moderation of GDP growth in the euro area. Similar to other international institutions, the OECD did not significantly revise its expectations about economic growth in the euro area for 2016 (1.6%) and 2017 (1.7%) in its latest forecast. GDP growth in Slovenia continued in the first quarter owing to a notable strengthening of exports. GDP was 0.5% higher than in the previous quarter (seasonally adjusted) and 2.5% higher than in the same period of 2015. The main factor of the increase remained growth in exports, which exceeded the expectations, boosted by rising foreign demand amid the still favourable competitiveness position of the tradable sector. This was also reflected in the growth of value added in manufacturing and some market services. The recovery of domestic consumption eased slightly owing to a fall in construction investment. Developments in other segments of domestic consumption were more favourable, as private investment and private consumption on the domestic market increased again. The labour market situation continues to improve. In the first quarter the number of employed persons rose slightly again. Further growth was recorded for most private sector activities, notably distributive trades, transportation, accommodation and food service activities, and manufacturing. The number of registered unemployed declined significantly again in May amid a stronger outflow into employment and a smaller inflow into unemployment. A total of 102,289people were registered as unemployed at the end of the month, a 9.0% lower figure than one year earlier. The year-on-year wage growth in the first quarter was the highest in five years. In the last two quarters, average gross earnings in the private sector rose significantly (seasonally adjusted) particularly owing to good business performance. In the public sector, they maintained the level reached at the end of the year as a result of December's promotions in the general government. In May consumer prices remained down year-on-year. The decline was still mainly due to lower oil prices and - in the absence of cost pressures - lower prices of durables. Prices of other goods were similar to one year earlier, while services prices continued to rise. The decline in domestic nonbanking sector loans is slowing amid the increased borrowing of the corporate sector abroad; the quality of banks' assets is improving. The decline in corporate and NFI loans is easing gradually, while the volume of household loans rises. Corporate and NFI net deleveraging abroad moderated considerably in March, for the most part owing to stronger short-term borrowing. The share of non-performing claims continued to decline, totalling 8.2% at the end of March. As overnight deposits increased the most, the maturity structure of deposits deteriorated further. In the first quarter the general government deficit on a cash basis was significantly lower than in the same period of 2015. Amid further GDP growth and a higher total amount of wages, revenue was slightly higher year-on-year despite the lower inflows from the EU budget. Expenditure was down, primarily as a result of the beginning of the implementation of the new financial perspective of the EU and hence lower expenditure on investment and lower payments into the EU budget. In 2015 company performance improved significantly for the second consecutive year, and the indebtedness and over-indebtedness of the corporate sector declined further. The total net profit reached EUR 1.6 billion last year, a figure that lagged only behind the exceptionally high figures seen before the crisis in 2006 and 2007. The improvement was again due to both main components of the business result: the net operating profit rose further while the financial loss declined sharply. Company performance was favourably affected particularly by the rising revenues from exports and the lower cost pressures related to the low prices of commodities. Furthermore, corporate sector has recorded intense deleveraging since 2010. At first it arose from the winding up of over-indebted companies, while since 2012 it has been primarily due to an actual reduction in surviving companies' debts. The analysis shows that the ability of companies to repay their debts improved significantly in the last three years. Slovenian Economic Mirror, No. 4/2016 4 In the Spotlight In the first quarter GDP growth in the euro area strengthened further and exceeded the expectations. I GDP in EMU (right axis) ESI for EMU (left axis) a 0.2 Source: Eurostat, EC. Exports remain the main driver of economic growth in Slovenia. ---Domestic consumption -Exports of goods and services -GDP 125 83 120 7 115 110 105 100 95 90 85 80 75 a a a a Source: SURS; calculations by IMAD. The labour market situation continues to improve amid a further strengthening of economic activity in most sectors. -Employed according to SRE (left axis) -Registered unemployed (right axis) ^ 170 8 160 150 140 S 130 f 120 o 110 £ 100 i i i i i % i ij i i i Source: SURS, ESS; calculations by IMAD. Year-on-year wage growth in the first quarter was the highest in five years. - Total ----Private sector Public sector a a Source: SURS. The decline in the volume of loans to domestic nonbanking sectors is gradually slowing. 1000 500 0 -500 -1000 -1500 -2000 -2500 -Households Enterprises and NFIs (N (N ro ro ul ul Source: BoS; calculations by IMAD. As the receipts from the EU budget declined year-on-year, growth in general government revenue was modest. Tax revenues and social contributions Other revenues ■ Receipts from the EU budget • Total revenue 250 E 200 150 .£ 100 ? 50 S 0 S -50 g -100 -150 -200 -250 -300 Q1 Q4 Q2 Q3 2015 Source: MF, Bulletin of Government Finance; calculations by Q1 2016 IMAD. current economic trends 7 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends International environment Figure 1: Quarterly GDP growth rates in main trading partners ■ Q2 15 BQ3 15 BQ4 15 BQ1 16 -Q1 16 EC forecast ¡5 13 Source: Eurostat; EC forecast (May 2016). In the first quarter economic growth in the euro area accelerated and exceeded expectations. According to Eurostat's estimate, GDP rose by 0.6% (seasonally adjusted) and was 1.7% higher year-on-year. GDP growth in the euro area and in most of Slovenia's main partners was somewhat higher than the spring expectations of the European Commission. The main driver of growth was domestic demand, particularly private consumption and investment. Figure 2: Economic Sentiment indicator (ESI) for Slovenia's main trading partners ■ EMU -Germany -Austria----Italy----France Source: EC. Note: The figure 100 is the long-term average. For Q2 2016 data for April and May are available. Confidence indicators indicate a moderation of economic growth in the euro area in the second quarter. The values of the Economic Sentiment Indicator (ESI) and the Purchasing Managers Index (PMI) remain similar to previous months. The Ifo Economic Climate Index for the second quarter fell to its lowest level in a year but remained above the long-term average. Table 1: Indicators related to the international environment average change, in %* 2015 IV 16 V 16 V 16/IV 16 V 16/V 15 I-V 16/I-V 15 Brent USD, per barrel 52.35 41.58 46.74 12.4 -27.1 -33.6 Brent EUR, per barrel 48.33 38.20 42.69 11.7 -27.5 -32.2 EUR/USD 1.110 1.134 1.131 -0.2 1.4 -0.1 3-month EURIBOR, in % -0.020 -0.249 -0.257 0.8 24.7 -23.9 Source: EIA, ECB, EMMI Euribor; calculations by IMAD. Note: * in Euribor change in basis points. 8 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Economic developments in Slovenia Figure 3: Merchandise trade - real a 5 5 5 5 5 Source: SURS. After the interruption at the end of 2015, real merchandise exports rose noticeably in the first quarter; imports1 also increased. We estimate that exports were up in most product groups, notably transport equipment and machinery and miscellaneous manufactured articles.2 The growth of merchandise imports was mainly underpinned by higher imports of consumer goods. Table2: Selected monthly indicators of economic activity in Slovenia in % 2015 III 16/II 16 III 16/III 15 I-III 16/I-III 15 Merchandise exports, real1 4.4 -2.83 2.2 5.1 Merchandise imports, real1 3.5 -5.43 1.7 1.2 Services exports, nominal2 7.5 -2.53 9.9 9.2 Services imports, nominal2 2.6 -5.43 0.5 6.4 Industrial production, real 5.6 -0.73 4.44 5.74 -manufacturing 6.0 -1.03 5.84 7.14 Construction -value of construction put in place, real -25.2 -8.53 -36.3 -30.7 Real turnover in retail trade 1.1 0.43 0.64 0.64 Nominal turnover in market services (without trade) 4.5 -0.53 2.44 3.44 Sources: BoS, Eurostat, SURS; calculations by IMAD. Notes: 'External trade statistics; deflated by IMAD, 2balance of payments statistics, Seasonally adjusted, 4working-day adjusted data. Figure 4: Trade in services - nominal -Exports of services -Imports of services a a a a Source: BS; calculators by IMAD. Nominal exports of services rose further in the first quarter; imports3 were also up after the fall at the end of 2015. Year-on-year export growth in the first quarter was largely due to higher exports of transport services and stronger non-resident spending in Slovenia. The year-on-year growth of imports mainly stemmed from higher imports of technical services, trade-related business services, financial services and transport services. 1 According to the national accounts statistics. 2 Estimated on the basis of the available data for the first two months of 2016. These are exports of SITC sections 7 (machinery and transport equipment) and 8 (miscellaneous manufactured articles). 1 According to the national accounts statistics. Slovenian Economic Mirror, No. 2/2016 Current Economic Trends 9 Box 1: Gross domestic product, Q1 2016 In the first quarter GDP growth continued particularly owing to a significant strengthening of exports. GDP was up 0.5% (seasonally adjusted) and was 2.5% higher year-on-year. Export growth exceeded the expectations, while the recovery of domestic consumption slowed particularly owing to a decline in construction investment. The strong growth of exports was reflected in a further increase in value added growth in manufacturing and some market services. The favourable export trends are related to the strengthening of economic growth in some main trading partners, while since 2011 exports have also been positively affected by competitiveness gains (for more see Business Results of Companies in 2015 in the Selected Topics chapter). The decline in construction investment to the lowest level on record was reflected in a steep fall of value added in construction, which is mainly related to last year's completion of the absorption of EU funds under the previous financial perspective. The absorption of funds under the new perspective is still very modest, not only as a result of the usual slower dynamics in the early years of the programming period but also delays in preparations for the absorption under the new perspective. Other segments of domestic consumption recorded more favourable developments. Private investment rose significantly again, particularly investment in transport equipment. Private consumption on the domestic market also continued to rise. With further improvements in labour market conditions, consumption of durable goods in particular continued to increase. Consumption of other goods and services, which account for the largest part of household consumption, also recorded further growth. This is also indicated by value added growth in distributive trades, other service activities and accommodation and food service activities. Value added growth in the latter was, in our estimation, also significantly underpinned by stronger growth in non-resident spending in Slovenia, which has already been indicated by current data on their arrivals and overnight stays. The moderation of year-on-year growth in private consumption is estimated to be largely due to the decline in Slovenian tourists' spending abroad. Government consumption was higher year-on-year, reflecting growth in all main categories. Changes in inventories contributed slightly more to economic growth than in previous quarters. Figure 5: GDP levels in Slovenia and its main trading Figure 6: Expenditure structure of change in GDP, partners Slovenia Slovenia -Germany -------France a a a a a a Source: Eurostat; calculations by IMAD. I Private consumption I Gross fixed capital formation I Exports of goods and services - Real GDP growth (right axis) ■ Government consumption ■ Chang.in inventories, valuables ■ Imports of goods and services 6 a a Source: SURS. 4 2 .t 0 Figure 7: Production volume in manufacturing according to technology intensity —Low-technology industries -Medium-low technology industries ----Medium-high and high-technology industries -Manufacturing, total a a a a Source: SURS; calculations by IMAD. After easing at the end of last year, the growth of production volume in manufacturing strengthened in the first quarter. Production volume in medium-low-technology industries, which on average significantly exceed the levels from the same period of 2015, increased the most again. In some industries (particularly the metal and rubber industry) production volumes were also favourably impacted by low commodity prices. Year-on-year, production volume was also up in most low-technology and some more technology intensive industries. Among the latter, it was smaller in the manufacture of transport equipment (after last year's increase) and in the chemical industry (after last year's fall). Growth prospects for manufacturing remain favourable, as according to data on business trends, most enterprises surveyed expect further growth in demand, production and employment. 10 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Figure 8: Value of construction put in place -Construction ----Residential buildings Non-residential buildings ----Civil-engineering works 5 5 5 5 5 5 Seasonally adj. index, 2008=100 The decline in construction output deepened in the first quarter. Construction activity has plummeted in the twelve months to March. As a result of lower government investment, the value of construction put in place for civil-engineering works fell notably. Only the construction of residential buildings had strengthened since mid-2015, but remained close to the lowest levels recorded in the last few years. Figure 9:Turnover in retail trade -The sale of automotive fuels -The sale of food, beverages and tobacco products 105 ----The sale of non-food products 95 90 85 OOOO Source: SURS; calculations by IMAD. Distributive trades recorded further growth in the sale of vehicles and other durable and semi-durable non-food products. After the decline in the second half of last year, turnover also rose in wholesale trade and the sale of food products. Turnover in the sale of automotive fuels declined further. Turnover was up year-on-year in most trade segments, the most, by nearly a quarter, in the sale of motor vehicles, owing to a surge in the sale of new passenger and freight vehicles4. 80 Figure 10: Concentration indices for the retail sale in non-specialised stores with food predominating 4500 4050 3600 3150 2700 2250 1800 1350 900 450 0 HHI -High concentration threshold ♦ Share of the 3 largest suppliers in net sales revenues on the domestic market (right axis) 100 90 80 70 60 50 ; 40 30 20 10 0 With rising sales in discount stores, the concentration ratio in stores selling food fell again in 2015. Between 2007 and 2015, discount retailers increased their combined share in total sales revenues on the Slovenian market from 6.5% to 21.2% (in the last year by 1.6 percentage points). The increase was a consequence of the expanding network of their stores, but also changes in buying behaviour of Slovenian consumers, which were also due to the economic crisis. This led to a decline in the shares of the three largest suppliers in total sales revenues and in the concentration ratio, measured by the Hirschman-Herfindahl Index, which came close to the threshold between moderate and high levels of market concentration (1,800) in 2015. Source: AJPES; calculations by IMAD. Note: HHI - Hirschman-Herfindahl Concentration Index. 4 After last year's increase of around 10%, the number of first passenger car registrations was up 6.8 % year-on-year in the first quarter; the number of new goods motor vehicles and trailers was up around one-third. 11 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Figure 11: Nominal turnover in market services than trade) -Total -Transport and storage (H) ----Communication activities (J) ----Professional-technical activities (M) Administration and support service activities (N) (other 8 120 115 ----Accommodation and food service activities (I) g 110 x- 105 1 100 Í 95 if 90 S 85 1/1 80 75 5 5 5 5 Source: SURS; calculations by IMAD. Last year's strong growth in nominal turnover in market services decelerated in the first quarter. Amid further growth in turnover generated on foreign markets, the slowdown was mainly attributable to transport and information-communication services; activity in architectural and engineering services5 also remained low. With higher sales on the domestic market attributable to growth in production activity, turnover increased further in legal-accounting and management consultancy services. Strong turnover growth in employment services, which mainly provide workers to the manufacturing sector, continues. The favourable developments in the accommodation and food service activities were boosted mainly by increased spending of foreign tourists. Figure 12: Business trends Economic sentiment oi 30 c I 20 3 10 i 0 ? « -10 _ Oi Ü-20 I " -30 "f -40 ^ -50 o -60 ----Retail trade — Construction -Manufacturing Service activ. ----Consumers* CN CN CO CO .1 i g t i = i = i = i Source: SURS; calculations by IMAD. Note: *Because of methodological changes, since January 2016 data on consumer confidence are not comparable with previous data. Economic sentiment remains roughly unchanged for more than one year, at levels that exceed the long-term average. In the twelve months to January 2016, confidence increased only in service activities and declined only in construction. 5 According to SKD 2008, these are: M 69 - Legal and accounting activities; M 70.2 - Management consultancy activities; M 71 - Architectural and engineering activities; N 78 - Employment activities. 12 Slovenian Economic Mirror, No. 4/2016 Current Economic Trends Labour market Figure 13: Employed persons by activity ■ Q1 2015 BQ2 2015 BQ3 2015 BQ4 2015 BQ1 2016 1.2 .S 1.0 JZ ? 0.8 O W T5 0.6 U w il 0.4 ID ^ * 0.2 c o w ¡5 0.0 w ¡5 -0.2 t to a -0.4 Manufacturing Construction Market services Public services Source: SURS; calculations by IMAD. Table 3: Indicators of labour market trends Growth in the number of employed persons6 strengthened slightly in the first quarter. According to our estimate, this was attributable not only to growth in activity but also higher confidence in the continuation of economic recovery, which is reflected in higher expectations with regard to hiring over the next months. Further growth was recorded for most private sector activities, particularly distributive trades, transportation, accommodation and food service activities, and manufacturing.7 In public services, the number of employed persons was higher year-on-year in the health sector and education, where it rose the most in pre-school education owing to larger generations of children. The number of employed persons8 was also up year-on-year (by 0.9%) according to the Labour Force Survey data. change, in % 2015 III 16/II 16 III 16/III 15 I-III 16/I-III 15 Persons in formal employment2 0.9 0.31 0.8 0.6 Registered unemployed -6.1 -1.71 -6.7 -5.6 Average nominal gross wage 0.7 0.11 2.4 2.3 - private sector 0.5 -1.01 2.3 2.1 - public sector 1.2 0.11 2.9 2.8 -of which general government 1.0 0.01 3.9 4.1 of which public corporations 1.5 0.01 0.7 -0.2 2015 III 15 II 16 III 16 Rate of registered unemployment (in %), seasonally adjusted 12.3 12.4 11.8 11.6 Sources: ESS. SURS; calculations by IMAD. Note: 'seasonally adjusted, 2 Persons in paid employment, self-employed persons and farmers. Figure 14: Employed according to SRE and registered unemployed -Employed according to SRE (left axis) -Registered unemployed (right axis) 170 150 a 3 130 E Ï? 100 o Source: SURS, ESS; calculations by IMAD. Registered unemployment continued to decline in May. The decline was mainly due to the stronger outflow from unemployment into employment, which was also up year-on-year in the first five months. The inflow into the unemployment register was smaller, largely owing to a smaller inflow of people who lost work and first-time jobseekers.9 At the end of May, the number of unemployed was down 9.0% year-on-year; the number of registered unemployed totalled 102,289. The number of unemployed also dropped further according to the Labour Force Survey data, by 0.8%. 6 According to the Statistical Register of Employment; these are persons in paid employment and self-employed persons except farmers. 7 The sector where most employment services workers were assigned according to our estimate. Year-on-year growth in the number of these workers is otherwise slowing, which could be a consequence of increased direct hiring. 8 The number of employed persons (excluding unpaid family workers); these are formally employed workers (in paid employment), those employed through student agencies and in other forms of work, and self-employed. 9 In the first four months, the number of unemployed declined the most precisely in the 15-29 age group, by 4,279, while the number of those over 30 fell by 3,734. 13 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Figure 15: Average gross earnings per employee 118 116 114 112 110 108 106 104 102 100 - Gross earnings per empoloyee ----Private sector -Public sector ---- of which, general government sector ------- - of which, public corporations a a a a Source: SURS; calculations by IMAD. In the first quarter, growth in average gross earnings per employee strengthened further. After stagnating since mid-2014, earnings in the private sector rose notably for the second consecutive quarter owing to higher basic earnings and good business performance in the previous year. Earnings also increased in the public sector, as a result of December's promotions of public servants; in public corporations, earnings have remained unchanged in the last year. Both sectors recorded the highest year-on-year growth of earnings in five years. In the private sector, growth was up year-on-year in almost all activities. This year, earnings again rose the most in industry and, after four years, in most market services. 14 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Prices Figure 16: Inflation in Slovenia and in the euro area -Slovenia HICP 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 ----Slovenia HICP - core inflation -Euro area HICP ----Euro area HICP - core inflation (N (N ro ro ul ul to Source: Eurostat. Note: Core inflation excluding energy and unprocessed food. In May prices remained lower year-on-year. The decline was due to the falling energy prices; in the absence of cost pressures, prices of durable goods remained lower too. Prices of food and semi-durable goods remained similar year-on-year, while growth in services prices increased slightly in May. Under the impact of lower energy prices, prices also continued to fall year-on-year in the euro area. On the other hand, prices of services, food and semi-durable and durable goods remained higher year-on-year. Figure 17: Industrial producer prices and import prices -PPI (domestic market) ----PPI (foreign market) -Import prices Source: SURS. Amid a further year-on-year decline in commodity prices on global markets, import prices and industrial producer prices continued to fall in April. Table 4: Consumer price growth in % 2015 V 16/IV 16 V 16/V 15 Total -0.5 0.9 -0.4 Food 1.5 1.8 -0.3 Fuels and energy -6.7 1.5 -7.0 Services 0.7 1.0 1.9 Other1 -0.1 0.3 -0.2 Total excluding food and energy 0.3 0.7 0.8 Core inflation - trimmean2 0.0 0.6 0.4 Administered prices3 -9.8 2.4 -10.1 Tax impact - contribution in percentage points -0.2 0.0 0.2 Source: SURS, Ministry of Economic Development and Technology; calculations by IMAD. Notes: 1 Clothing, footwear, furniture, passenger cars, alcoholic beverages, tobacco, etc.; 2The trimmean approach excludes the share of extreme price changes in each month. The optimum share is determined as a difference between the moving average and the calculated trimmed mean in the period of the last five years. 3 The calculation includes prices formulated on the basis of price mechanisms according to the Price Control Act, and prices under direct government control (oil derivatives, railway transport, school books, tolls). 15 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Figure 18: Price competitiveness (real effective exchange rate and its components) -Nominal effective exchange rate -Real effective exchange rate* deflated by the relative HICP 105 ! 104 % 103 .£ 102 £ 101 f 100 m 99 g~ 98 £ 97 x 96 I 95 ----Relative HICP iij|j|jijijijijiji Source: ECB; calculations by IMAD. *An increase means a deterioration in price competitiveness, or vice versa. Price competitiveness remains favourable, despite the deterioration at the beginning of the year. With the euro appreciating against the currencies of most main trading partners,10 the nominal effective exchange rate is rising. Amid domestic deflation, relative consumer prices11 continue to decline, which has mitigated the growth of the real effective exchange rate. This was still slightly lower year-on-year in the first four months as a whole, while in most euro area countries it already increased year-on-year in the same period. The main reason for the more favourable movements in Slovenia is, alongside a larger decline in relative prices, lower growth in the nominal effective exchange rate due to the geographical structure of Slovenia's external trade.12 10 In the first four months, the euro appreciated year-on-year against the Chinese yuan, South Korean won, Polish zloty, Hungarian forint, British pound and the Swiss franc; it depreciated against the Croatian kuna, Czech koruna, Japanese yen and, in the first two months, against the US dollar. 11 Prices in Slovenia compared with those in Slovenia's trading partners. 12 As in Slovenia intra-euro area trade accounts for an above-average share of external trade, it is less susceptible to exchange rate volatility. 16 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Balance of payments Figure 19: Components of the current account of the balance of payments Merchandise trade Services trade Primary income ^^B Secondary income c -Current account cc 5,000 4,000 3,000 2,000 1,000 » -1,000 ° -2,000 The current account surplus widened further in the first quarter and totalled 7.8% of estimated GDP in the twelve months to March. The year-on-year widening was almost entirely due to the rising surplus in external trade in goods and services, particularly as a result of favourable export trends and relatively weaker domestic consumption. The contribution of the terms of trade was positive again. Owing to the falling prices of energy and other goods, import prices declined even faster than export prices. a a a a Source: BoS; calculations by IMAD. 0 Figure 20: Financial transactions of the balance of payments Direct investment ^^M Portfolio investment Financial derivatives ^HOther investment -Financial transactions £ oc 12,000 D Ç 10,000 £ 8,000 0 ti 6,000 ro 1 4,000 S 2,000 g 0 5 -2,000 £ -4,000 o m-6,000 D m -8,000 c g -10,000 The financial account of the balance of payments recorded a net outflow again in the first quarter. The private sector was net financing the rest of the world, mainly by short-term trade credits and financial investments in foreign securities. The government increased deposits in foreign accounts and repaid a portion of foreign loans. Among inflows, the borrowing of the Bank of Slovenia from the Eurosystem increased. a a a a Source: BoS; calculations by IMAD. Table 5: Balance of payments I-III 2016, in EUR m Inflows Outflows Balance Balance, I-III 15 Current account 7,873.2 7,169.9 703.3 443.1 Goods 6,026.5 5,470.6 555.9 350.4 Services 1,362.2 901.0 461.2 400.5 Primary income 333.3 469.8 -136.6 -125.6 Secondary income 151.2 328.4 -177.2 -182.1 Capital account 137.3 112.7 24.6 30.0 Financial account 212.0 477.0 265.0 398.0 Direct investment 381.3 112.3 -269.0 -360.3 Portfolio investment -152.7 464.2 616.9 625.1 Other investment -4.4 -92.1 -87.7 131.9 Net errors and omissions 0.0 -462.9 -462.9 -75.1 Source: BoS. Note: The methodology of the Slovenian Balance of Payments and International Investment Position statistics follows the recommendations in the sixth edition of the Balance of Payments and International Investment Position Manual published by the International Monetary Fund. On the current and capital accounts, the term »inflows" means total receipts and the term "outflows" means total expenditures; "balance" is the difference between inflows and outflows. On the financial account, "outflows" mean assets, while "inflows" mean liabilities abroad;"balance"is the difference between outflows and inflows. In financial inflows and outflows, the increase is recorded with a plus sign and the decrease with a minus sign. 17 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Financial markets Figure 21: Changes in the volume of loans to domestic non-banking sectors H Households Enterprises and NFIs Government -1,000 £ 500 -Total £ -1,000 £ -1,500 -2,000 -2,500 IV 2011 IV 2012 IV 2013 IV 2014 IV 2015 IV 2016 Source: BoS; calculations by IMAD. Domestic non-banking sector loans are falling at a slower pace; the quality of banks' assets is improving.13 The contraction in the volume of corporate and NFI loans is gradually easing, while the volume of household loans is rising. This is also a consequence of growth in new loans extended to households; the decline in new loans to non-financial corporations has come to a half in the last few months. After increasing in previous months, corporate and NFI net repayments abroad eased significantly in March. In the twelve months to March they totalled just above EUR 420 million, which is almost 60% less than one year before. This significant decline was mainly due to stronger short-term borrowing, while net repayments of long-term loans remained relatively high despite the moderation. The share of non-performing claims, which continues to decline, amounted to 8.2% at the end of March. 0 -500 Table 6: Financial market indicators Domestic bank loans to non-banking sector and household savings Nominal amounts, EUR m Nominal loan growth, % 30. IV 15 31. XII 15 30. IV 16 30. IV 16/31. III 16 30. IV 16/30. IV 15 Loans total 22,622.7 21,741.8 21,091.3 -0.1 -6.8 Enterprises and NFI 12,020.9 10,966.1 10,359.8 -0.3 -13.8 Government 1,775.8 1,919.7 1,868.4 -0.9 5.2 Households 8,826.0 8,855.9 8,863.0 0.4 0.4 Consumer credits 2,074.5 2,032.2 2,047.9 0.8 -1.3 Lending for house purchase 5,444.8 5,524.6 5,559.2 0.3 2.1 Other lending 1,306.7 1,299.1 1,255.9 -0.1 -3.9 Bank deposits total 15,482.5 15,879.4 16,240.9 0.2 4.9 Overnight deposits 7,911.8 8,962.9 9,620.3 1.1 21.6 Term deposits 7,570.6 6,916.5 6,620.6 -1.1 -12.5 Government bank deposits, total 2,392.4 1,644.2 1,052.3 -9.6 -56.0 Deposits of non-financial corporations, total 4,647.5 5,331.9 5,395.5 0.6 16.1 Sources: Monthly Bulletin of the BoS, SMA (Securities Market Agency); calculations by IMAD. Note: NFI - Non-monetary Financial Institutions. Figure 22: Changes in the volume of deposits by domestic non-banking sectors Households Enterprises and NFIs Government • Total 2,000 -1,500 IV 2011 IV 2012 IV 2013 IV 2014 IV 2015 IV 2016 Source: BoS; calculations by IMAD. As regards sources of finance, banks continued to repay foreign liabilities, while non-banking sectors were increasing deposits. The sum of bank debt repayments abroad in the last twelve months totalled between EUR 1.5 billion and EUR 1.5 billion, almost three-quarters more than in the same period last year. With a smaller amount of foreign liabilities scheduled to mature in the next periods and solid inflows of deposits by non-financial corporations and households, this will not represent major pressures on bank liquidity. Of non-banking sectors' deposits, only government deposits saw a significant decline. Owing to the low deposit interest rates, overnight deposits are rising in particular (and, to a lesser extent, deposits redeemable at notice) and already account for as much as 57.5% of all domestic non-banking sectors' deposits. 13 The transfer of assets to the BAMC excluded. 18 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Public finance Figure 23: General government balance on a cash flow basis ■ General government balance ■ Primary general government balance -200 -400 -600 D -800 -1,000 -1,200 -1,400 -1,600 -1,800 The general government deficit on a cash basis14 in the first quarter was lower than in the same period of 2015. The main factors in the year-on-year deficit decline (from EUR 655 million to EUR 539 million) were the strengthening of economic activity, a higher total amount of wages and the end of the previous and the beginning of the implementation of the new financial perspective of the EU (and thus lower public investment and payments into the EU budget). 2011 2012 2013 2014 2015 Q1 2015 Q1 2016 Source: MF, Bulletin of Government Balance; calculations by IMAD. Table 7: Consolidated general government revenue and expenditure on a cash basis Q1 2015 Q1 2016 Q1 2015 Q1 2016 Category EUR m Y-o-y growth, in % EUR m Y-o-y growth, in % Category EUR m Y-o-y growth, in % EUR m Y-o-y growth, in % REVENUES TOTAL 3.635,8 0,0 3.684,3 1,3 EXPENDITURE TOTAL 4.290,6 0,0 4.223,5 -1,6 Tax revenues* 1.912,9 3,8 1.949,2 1,9 Salaries, wages and other personnel expenditures** 923,7 0,5 924,6 0,1 Personal income tax 501,0 1,5 514,9 2,8 Expenditure on goods and services 502,5 -5,5 536,3 6,7 Corporate income tax 101,0 -2,2 119,9 18,7 Interest payments 497,2 10,1 489,5 -1,6 Taxes on immovable property 17,0 164,3 17,7 4,3 Reserves 46,2 125,0 27,5 -40,5 Value added tax 749,9 5,6 774,2 3,3 Transfers to individuals and households 1.564,2 0,1 1.604,8 2,6 Excise duties 345,4 7,8 304,0 -12,0 Other current transfers 372,3 -11,9 369,5 -0,8 Social security contributions 1.339,5 2,7 1.395,1 4,1 Investment expenditure 213,2 -2,9 131,4 -38,4 Non-tax revenues 161,2 -38,7 166,1 3,0 Payments to the EU budget 171,1 5,2 139,9 -18,3 Receipts from the EU budget 207,9 -1,0 157,3 -24,3 BUDGET BALANCE -654,8 -539,1 Other 14,3 0,3 16,7 16,3 PRIMARY BALANCE -160,1 -54,8 Source: MF. Bulletin of Government Finance; calculations by IMAD. Note:* Unlike tax revenues in the consolidated balance of public finance, tax revenues in this table do not include social constributions.** Labour costs include social contributions by the employer. Figure 24: Revenue growth and contributions individual categories to growth Tax revenues ■ Social security contributions ■ Non-tax revenues ■ Receipts from the EU budget ■2 ■ Capital and transferred revenues and donations received • TOTAL REVENUE (right axis) of Q1 Q2 Q3 Q4 Q1 2015 2016 Source: MF, Bulletin of Government Finance; calculations by IMAD. General government revenue in the first quarter was slightly higher year-on-year. Its 1.3% growth arose from higher inflows of social contributions and taxes, particularly: VAT (owing to the introduction of fiscal cash registers and the strengthening of private consumption), personal income tax (owing to wage and employment growth) and corporate income tax. The payments of excise duties were down year-on-year owing to their partial postponement from March to the first days of April. The growth of tax revenues was therefore more modest. The strong receipts of EU funds in the first two months, which were related to the previous financial perspective, were followed by modest receipts in March, so that the inflows from the EU budget were lower than in the first quarter of 2015. 14 According to the consolidated general government budgetary accounts on a cash basis. 19 Slovenian Economic Mirror, No. 2/2016 Current Economic Trends Figure 25: Expenditure growth and contributions of individual categories to growth Wages and oth. pers. exp.* I Interest payments Current transfers I Payments to the EU budget Exp. on goods and services ■ Reserves & Capital exp. and capital transfers • TOTAL EXPENDITURE (right axis) 8 6 0 ï Q2 Q3 Q4 Q1 2015 2016 Source: MF, Bulletin of Government Finance; calculations by IMAD. Note: * Labour costs include social contributions paid by the employer. In the first quarter general government expenditure was slightly lower year-on-year. The bulk of the 1.6% decline stemmed from lower expenditure on investment (owing to the beginning of the implementation of the new financial perspective of the EU) and lower payments into the EU budget. Slight declines were also recorded for interest expenditure (owing to the more favourable structure of public debt with regard to the interest rate) and transfers into reserves.15 Transfers to households and expenditure on goods and services were higher after the year-on-year decline in the first quarter of 2015 and a partial removal of austerity measures from 2012.16 4 2 Figure 26: Receipts from the EU budget, January - April 2015 and 2016 ■ Total receipts (Jan-April 2016) «Total receipts (Jan-April 2015) 0 10 20 30 40 50 60 70 80 90 100 In EUR m Source: MF; calculations by IMAD. Slovenia's net budgetary position against the EU budget was positive in the first four months (EUR 39.0 million). Slovenija received EUR 199 million from the EU budget in this period. The bulk of receipts were cohesion policy funds from the previous financial perspective (20072013), which were already reimbursed to the state budget in the first two months. However, Slovenia is late in preparations for the absorption from the new financial perspective (2014-2020). In May 2016 the fourth revision of the Operational Programme for the implementation of the EU Cohesion Policy was adopted; the introduction of ex-ante conditionalities,17 i.e. pre-conditions to taken into account during the implementation of operational programmes, also poses a problem. All this is reflected in lengthy preparations and protracted procedures, particularly in infrastructure and environmental projects. 15 Owing to the transfers of some initial resources to the new water protection and climate change funds in the first quarter of 2015, the transfers into reserves were lower year-on-year in the first quarter of 2016. 16 In 2016, child benefits in the 5th and 6th income brackets, social assistance in cash, the census for obtaining state scholarships, care supplement to pensions and subsidies for school meals were raised. There was also an extraordinary adjustment of pensions (by 0.7%). 17 For the implementation of the operational programme, 7 general and 21 thematic ex-ante conditionalities were introduced, which should be taken into account in strategies, resolutions and other documentation. selected topics Slovenian Economic Mirror, No. 3/2016 23 Selected Topic Business results of companies in 2015 In 2015 company business performance improved significantly for the second consecutive year. The total net profit in the accounting period reached EUR 1.6 billion, a figure that lagged only behind the exceptionally high figures reached before the crisis in 2006 and 2007. The improvement was again due to both main components of the business result: the net operating profit rose further while the financial loss declined strongly. Figure 27: Companies' net profit in the accounting period and its main components 1 ■ Net financial profit/loss ■ Net operating profit/loss ♦ Net profit/loss 5,000 4,000 3,000 2,000 £ D 1,000 _c 0 -1,000 -2,000 -3,000 (N(N(N(N(N(N(N(N(N(N(N(N Source: AJPES; calculations by IMAD. Companies' performance was favourably affected by rising revenues from exports and lower cost pressures. After declining during the crisis, the net operating profit strengthened noticeably in 2014 and 2015. The improvement on the revenue side arose not only from strong growth in sales revenues abroad (particularly on the EU market), but was also underpinned by sales revenues on the domestic market, which ceased to decline. Another factor in the improvement was lower cost pressures. The share of labour costs in value added has dropped notably since 2009. Under the impact of lower commodity prices on the world market, the burden of costs of goods, material and services on operating revenue has also eased since 2012. Business performance improved across most activities, but the greatest contribution to the higher total net operating profit in the last two years came from manufacturing and trade. 1 The business result in the accounting period is the result of companies' ordinary operating activities (operating result), financing (financial result) and extraordinary activities. As the third component is relatively less important for the overall performance, it is not shown separately. In 2006 the Slovenian Accounting Standards were changed, but in our estimation the differences were not so great as to make year-on-year time comparisons impossible (see also the explanations in the introduction in Kmet Zupančič et al, 2007). Data for individual years pertain to commercial companies that were active in a given year, meaning that they were obtained from the balance sheets for the current year. Figure 28: Sales revenues on the domestic and foreign markets -Revenues from sales on the foreign market (left axis) -Revenues from sales on the domestic market (rigth axis) 20 \ \ 50 45 40 2008 2009 2010 2011 2012 2013 2014 2015 Source: AJPES; calculations by IMAD. Figure 29: Unit labour costs and the costs of goods, material and services per operating revenue -Costs of goods, material and services/operating revenue (left axis) -Labour costs/VA (right axis) 2008 2009 2010 2011 2012 2013 2014 2015 Source: AJPES; calculations by IMAD. After persisting at high levels for seven years, financial loss declined by four-tenths in 2015. The main reason was the lower financial expenses related to impairments and provisions, which had been relatively high in previous years owing to the tightened economic situation. Financial expenses from bank loans also continued to contract last year, not only as a result of corporate deleveraging but also a decline in interest rates. The share of debt in total liabilities decreased to 55.2% in 2015 and was 10 percentage points smaller than its 2008 peak. 35 65 30 60 25 55 15 10 Slovenian Economic Mirror, No. 3/2016 24 Selected Topic Figure 30: Breakdown of financial expenses and financial revenues Other financial expenses Financial expenses related to impairments and write-offs Finanical expenses from financial liabilities —♦—Financial revenues 2008 2009 2010 2011 2012 2013 2014 2015 Source: AJPES; calculations by IMAD. Figure 31: Share of debt in total liabilities and the ratio of interest to operating revenue Share of debt in total liabilities (right axis) -Interest/operating revenue 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 70 60 50 40 30 20 (N (N (N (N O O O ^ ^ O O O O O (N (N (N (N (N (N (N (N (N Sou rce: AJPES; calculations by IMAD. Indebtedness of the corporate sector Corporate deleveraging continued in 2015. The indebtedness and the debt overhang2 of Slovenian companies peaked in 2009 on most indicators;3 since then they have declined, notably in the last three years. 2 The debt overhang is financial debt that exceeds five times EBITDA (in companies where FV>5) or total financial debt (in companies where EBITDA<0). EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) is free cash flow from business operations. 3 Financial debt, debt overhang, financial leverage and the total debt/ EBITDA ratio peaked in 2009; total debt, bank debt and the ratio of total debt to total liabilities had already reached their peaks in 2008. The decrease in total debt4 was primarily due to bank debt reductions, particularly in 2014 and 2015. After the onset of the crisis, bank debt was shrinking primarily as a result of the winding-down of companies,5 whereas its decline since 2012 has also been due to the intensive deleveraging of surviving companies and the transfers of claims to the Bank Asset Management Company (BAMC). Figure 32: Corporate sector indebtedness and debt overhang ^^m Debt overhang - GD - IC < 1 ^^m Debt overhang - GD - IC >1 -Total debt ---Financial debt Total debt overhang -■■•■-Bank debt 70 60 50 i ; 40 I 30 ) j : 20 10 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: AJPES; calculations by IMAD. Note: GD-IC companies with interest coverage (EBITDA/interest expenses). Figure 33: Change in corporate sector bank debt* 8 7 6 5 4 J! 3 cc D 2 LU 2 C ~ 1 0 -1 -2 -3 Surviving companies Failed companies New companies All companies together 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: AJPES; calculations by IMAD. 4 Total debt comprises financial (including bank) liabilities, operational and other liabilities of companies. 5 In this analysis, the term 'winding-down' is used for failure to submit annual financial statements. * New companies - an increase in debt between two consecutive years, as a result of the arrival of new companies (i.e. companies established in the second of the two consecutive years); failed companies - a decline in debt between two consecutive years, owing to the winding-down of companies; surviving companies - debt change in companies that operated in both years; all companies - total debt change between two consecutive years (new companies + failed companies + surviving companies). 0 10 0 Slovenian Economic Mirror, No. 4/2016 25 Selected Topic Since 2009 the ability of companies to repay their debts has been improving, notably in 2013-2015, so that all indicators recorded the most favourable figures in the entire period analysed (i.e. since 2006). A significant factor in the movement of some indicators was, alongside deleveraging, companies' EBITDA, which has on average already been rising for six years, particularly in 2014 and 2015. Figure 34: Corporate sector's ability to repay debts Total debt/total liabilities ratio (in %) --Interest coverage ratio, right axis -Financial debt/EBITDA, right axis Figure 36: Financial leverage by enterprise size, measured by the number of years 64 60 56 54 52 50 48 16 12 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: AJPES; calculations by IMAD. Note: Financial debt/EBITDA -financial leverage, which shows how long a company will have to repay its financial debt with the cash flow generated. The ability to repay debts, measured as financial leverage, improved last year across all enterprise size classes and in most sectors, except the energy sector, where it remained almost unchanged. In 2015 financial leverage was lowest in manufacturing (2 years), communication activities (2.4 years) and the energy sector (3.6 years) and highest in holding and leasing companies (61.5 years) and real estate activities (11.7 years). Figure 35: Financial leverage in selected activities, measured by the number of years 80 70 60 50 40 30 20 10 0 12008 2013 2014 2015 .....I III III III Ii. -.1 III ll III 8 7 6 5 4 3 2 1 0 Micro Small Medium-sized Large Source: AJPES; calculations by IMAD. After peaking in 2009, the debt overhang dropped most notably in 2015. In 2015 the debt overhang declined across all enterprise size classes and most sectors, with the exception of communication activities where it rose by almost 22%. The debt overhang in these activities nevertheless remains low (EUR 0.3 billion). Around 44% of the debt overhang in all companies together was debt with an interest coverage ratio (IC) below 1, which indicates that the company is unable to finance debt with its current operations. Figure 37: The share of financial debt and debt overhang in total financial debt and debt overhang of the corporate sector by selected activity,* 2015 ■ Share of financial debt in total financial debt ■ Share of debt overhang in total debt overhang 25 20 £ 15 10 o 5 c ? 2 "OU 'F.- ¡5-g £ £ • £ o u Source: AJPES; calculations by IMAD. ~ O £ < * Selected activities, according to the following three indicators: (1) share of financial debt in total financial debt; (2) share of debt overhang in total debt overhang; and (3) financial leverage. 9 62 58 8 2 5 0 Slovenian Economic Mirror, No. 3/2016 26 Selected Topic Table 8: The structure of debt overhang in selected activities, by enterprise size (in %), 2015 Micro Small Medium-sized MSP total Large Companies with debt overhang - total Manufacturing (C) 6.3 8.0 14.9 8.1 12.5 9.9 Energy (D+E) 2.8 1.2 0.3 2.0 14.5 7.1 Construction (F) 15.6 4.0 3.4 11.0 0.5 6.7 Wholesale and retail trade, repair of motor vehicles and motorcycles (G) 12.7 9.1 11.4 11.7 10.8 11.3 Transportation and storage (H) 1.3 0.8 0.2 1.0 24.0 10.4 Accommodation and food service activities (I) 4.5 2.2 5.8 4.2 1.2 3.0 Information and communication (J) 2.9 3.3 1.4 2.7 1.4 2.2 Real estate activities (L) 17.8 13.5 14.3 16.2 3.8 11.2 Professional- technical activities (M) 16.3 3.6 5.3 11.6 7.5 9.9 Holding and leasing companies (part of K) 10.8 47.8 37.1 23.5 20.8 22.4 OTHER (A, B, part of K, N, R, S, O-Q, U) 9.1 6.5 5.8 8.0 3.1 6.0 Companies with debt overhang - total 36.1 13.3 9.7 59.2 40.8 100.0 Source: AJPES; calculations by IMAD. Note: MSP - micro, small and medium-sized enterprises. Table 9: Concentration of the financial debt of over-indebted companies in the total corporate sector, 2015 First 10 First 30 First 50 First 100 First 500 All companies Financial debt, in EUR bn 5.8 8.7 10.0 11.6 15.2 19.8 Share in financial debt of all companies 21% 31% 36% 41% 54% 71% Share in total debt of all companies 12% 18% 21% 24% 31% 41% Share in financial debt of all over-indebted companies 29% 44% 51% 58% 77% 100% Share in total debt of all over-indebted companies 22% 34% 39% 45% 59% 77% Source: AJPES; calculations by IMAD. Note: GD - company. Among over-indebted enterprises, micro, small and medium-sized enterprises predominate; these enterprise have had higher debt overhang than large enterprises6 in the whole period since 2011. In 2015 their share in the total financial debt of companies with debt overhang totalled 52%; their share in the total debt overhang was 59%. Broken down by sectors, in 2015 three-quarters of the debt overhang7 was concentrated in holding and leasing companies,8 the wholesale and retail trade and the repair of motor vehicles, real estate, transportation and storage, manufacturing and professional-technical activities. The concentration of the financial debt of over-indebted companies in the total corporate sector is relatively high. In 2015 the ten most indebted companies, which employed 16% of the total workforce of over-indebted companies and generated 28% of their value added, accounted for around 30% of the financial debt of over-indebted 6 After 2009, large companies managed to reduce their debt overhang faster and to a greater extent (by 60%) than micro, small and medium-sized enterprises (by 34%). 7 The total debt overhang totalled EUR 13.4 bn. 8 The activities of holding and financial leasing companies were singled out in the analysis because of their significant contribution to indebtedness and over-indebtedness; according to the classification of activities (SKD), these activities otherwise belong in the category of financial intermediation (K), which is usually included in the group of other activities, as it is not sufficiently covered in the AJPES database (it does not include data for banks and insurance companies). companies. Of the most indebted companies, 50 (with a 28% share of the workforce and a 44% share of value added) accounted for almost half of the financial debt of over-indebted companies. Value added in the agriculture, forestry and fishing sectors in 2015 In 2015 value added in the agriculture, forestry and fishing sectors (A activities) increased in real terms for the second consecutive year, in particular in forestry. After significant fluctuations at the beginning of the century, it was more stable over the next few years, before declining during the drought years 2012 and 2013. The decline was then followed by relatively strong growth in 2014 (10%) and 2015 (8.6%).9 This was to a great extent due to the increased sanitation felling in the aftermath of the sever ice storm in early 2014. The share of the forestry sector in total value added from A activities rose to more than one-third, while the share of the agricultural sector fell below two-thirds. The share of the fishing sector remained modest, below 1%. 9 The data for 2015 growth are derived from the quarterly accounts by SURS. As the annual accounts for 2015 have not been published yet, detailed data on annual growth by sector are not yet available. Slovenian Economic Mirror, No. 3/2016 27 Selected Topic Table 10: Value added from A activities, 2000-2015 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Agriculture, forestry and fishing, in EUR m 547.0 667.8 628.5 659.2 628.0 598.6 626.0 733.9 646.9 639.4 709.5 750.4 Crop and animal production, hunting and related service activities 450.0 544.0 476.9 477.1 447.7 432.0 453.0 531.3 443.3 426.5 470.7 Forestry and logging 94.4 120.9 148.5 179.2 177.6 162.5 168.7 198.5 199.3 208.1 234.1 Fishing and aquaculture 2.6 3.0 3.1 2.9 2.6 4.0 4.3 4.1 4.2 4.8 4.7 Structure, in % Crop and animal production, hunting and related service activities 82.3 81.5 75.9 72.4 71.3 72.2 72.4 72.4 68.5 66.7 66.3 Forestry and logging 17.3 18.1 23.6 27.2 28.3 27.1 26.9 27.0 30.8 32.5 33.0 Fishing and aquaculture 0.5 0.4 0.5 0.4 0.4 0.7 0.7 0.6 0.6 0.8 0.7 Share in value added, total, in % A activities (Agriculture, forestry and fishing), total 3.3 2.6 2.3 2.1 1.9 1.9 2.0 2.3 2.1 2.1 2.2 2.3 Source: SURS, national accounts; for 2015 quarterly accounts; calculations by IMAD. Figure 38: Value added from A activities, according to the structure, in 2000-2015 -Agriculture, forestry and fishing, total ---Crop and animal production, hunting and related service activities -------Forestry and logging ---Fishing and aquaculture —i—Total 180 160 140 120 100 80 60 40 20 0 Figure 40: Agricultural production in Slovenia and the EU average, 2000-2015 -Crop production Slo ----Animal production Slo -Crop production EU ----Animal production EU tNtNtNtNtNtNtNtNtNtNtNtNtNtNtNtN Source: SURS; calculations by IMAD. tNtNtNtNtNtNtNtNtNtNtNtNtNtN Source: Eurostat, Economic accounts for agriculture; calculations by IMAD. Figure 39: Value added and the structure of value added from A activities, 2005-2015 -Agriculture, forestry and fishing, total ---Crop and animal production, hunting and related service activities -------Forestry and logging ---Fishing and aquaculture —•—Total 180 160 140 120 100 80 60 40 20 0 Figure 41: Agricultural production in Slovenia and the EU average, according to the structure, 2000-2015 -Crop production Slo ----Animal production Slo -Crop production EU ----Animal production EU tNtNtNtNtNtNtNtNtNtNtNtNtNtNtNtN Source: SURS; calculations by IMAD. tNtNtNtNtNtNtNtNtNtNtNtNtNtN Source: Eurostat, Economic accounts for agriculture; calculations by IMAD. Slovenian Economic Mirror, No. 3/2016 28 Selected Topic Agricultural production, which generates the bulk of value added from A activities, increased for the second consecutive year in 2015. After extremely poor harvests in 2012 and 2013 and a slightly better harvest in 2014, agricultural production rose by 4% in 2015 and was one of the highest in ten years. Crop production rose more than animal production, owing to the increased outputs of grapes, fruit, vegetables and industrial plants. In the EU as a whole, agricultural production fell last year as a result of a decline in crop production. In previous years, Slovenia recorded less favourable developments by this comparison: agricultural output was on a declining trend, while in the EU it was rising. In Slovenia, A activities contribute more to total value added than in the EU as a whole. In 2015 the share of value added from A activities accounted for 2.3% of total value added, which was more than at the beginning of the crisis (1.9%), but less than in 2005 (2.6%). The average share in the EU was one-third lower than in Slovenia in 2014: it was the lowest in Luxemburg, the United Kingdom, Germany and Belgium (below 1%) and the highest in Romania and Bulgaria (above 5%). Figure 42: Share of value added from A activities in total value added in EU Member States, 2014 6 5 4 Ï 3