Press release from the Governing Board of the Bank of Slovenia of 6 March 2012
1) The Governing Board of the Bank of Slovenia discussed current economic and financial developments, and approved the release of the February 2012 Report on Economic and Financial Developments and the December 2011 Report on International economic relations (External Statistics).
According to SORS estimates, GDP declined by 0.7% in the final quarter of 2011. As the debt crisis worsened in the second half of 2011, the decline in economic activity in the majority of euro area countries also brought a decline in exports and industrial production in Slovenia. Government austerity measures, the ongoing rise in unemployment and the uncertainty surrounding future developments, with the real decline in labour costs, which is vital in re-establishing the competitiveness of the economy, all acted to reduce domestic final consumption. As access to foreign funding deteriorated, the banks tightened their financing conditions for the economy and continued to reduce lending. A new package of ECB measures improved the confidence on financial markets, but the anticipated gradual recovery in the Eurozone economy in the second half of the year will also depend to a great extent on the effects of fiscal consolidation.
The general government deficit remained high last year, despite cuts in government spending. The government plans to reduce the state budget deficit to 3% of GDP this year, which will require cuts in public spending and more efficient budget planning. Fiscal consolidation will in the short term lead to a further decline in domestic demand, but is necessary to ensure the long-term sustainability of public finances, to achieve sustainable economic growth and to maintain sovereign credit ratings.
Inflation as measured by the HICP stood at 2.8% in February, higher than the average rate in the euro area. The rise was primarily the result of a short-term increase in the contribution made by services prices and renewed growth in energy prices, but inflation is nevertheless expected to fall in the coming months. The main risks of a rise in inflation come from rises in oil prices on global markets and price pressures in sectors with limited competition, in particular municipal services and public transport.
2) The Governing Board of the Bank of Slovenia discussed current operations of banks, developments on the capital markets and developments in the area of interest rates.
The banking system’s balance sheet increased by EUR 22 million in January. The banks primarily increased short-term deposits with banks abroad and the stock of loans to non-financial corporations, and reduced cash-in-hand and balances at the central bank. Despite the monthly increase of EUR 70 million in loans to non-financial corporations, the stock of loans to non-financial corporations was down 6.2% in year-on-year terms. Growth in loans to households slowed in January. On the funding side, the banks reduced their liabilities on the domestic interbank market, but made no debt repayments abroad. The stock of deposits by non-banking sectors increased, primarily as a result of an increase in household deposits. The banking system’s own funds increased by EUR 53 million in January. The banking system generated a pre-tax profit of EUR 24 million in January, up 7.7% on last January. The reason for the increase was a decline in impairment and provisioning costs.
3) The Governing Board of the Bank of Slovenia discussed currency counterfeiting issues in 2011. A total of 1,174 counterfeit banknotes were identified during the year, down 54.9% on 2010. The total value of the euro banknotes and coins counterfeits was EUR 92,543 down 87.6% on 2010. The majority (86.0%) of the euro banknotes counterfeits in 2011 comprised 100-, 50- and 20-euro banknotes. In 2010 also the counterfeit 500-euro banknotes were detected. The number of eurocounterfeits idetified in Slovenia does not represent a major problem for the moment.