Lake Bled in Slovenia

Slovenia Politics August 2018

Slovenia: Marjan Sarec set to lead minority government; radical economic reforms unlikely

Following a two-month political stalemate, Slovenia’s parliament nominated election runner-up Marjan Sarec—head of the List of Marjan Sarec (LMS) party—to be the country’s prime minister on 17 August. Sarec’s centre-left LMS party will lead a minority government, in coalition with the Social Democrats, the Modern Centre party, the Party of Alenka Bratusek and the Democratic Party of Pensioners of Slovenia. Together, the coalition will control 43 out of 90 parliamentary seats but have struck a deal with left-wing party Levica to support the government on key legislation. Among Sarec’s economic policy priorities are reforming the pension system to minimize the burden of the rapidly-ageing population on the budget, upgrading the national health system, speeding up the judicial process, and cutting red tape. It is unlikely, however, that there will be bold economic policy making, with thorny coalition politics constraining any attempts at radical reforms.

One of the primary tasks of the newly-formed coalition will be to sell Slovenia’s largest bank, Nova Ljubljanska Banka, after the previous cabinet missed a deadline enforced as part of a 2013 aid deal with the European Commission. The sale will also prove as a litmus test on the minority government’s ability to pass legislation. However, as Tajana Striga, Economist at Signalitics Research, points out, plans to sell the bank could be thwarted by opposition from the coalition’s supporters: “Levica which is holding nine seats in Sarec’s slim majority in the parliament opposes the sale. We believe that the market will carefully watch Sarec’s ability to circumvent that issue which will serve as a precedent in his further attempts of tackling radical reforms”.

Sarec inherits a strong economy that has enjoyed rapid growth, while maintaining fiscal discipline. Strong export growth has been a key driver of Slovenia’s rapid expansion, along with healthy private consumption buoyed by a tight labor market that has fuelled robust wage growth. Commenting on Slovenia’s growth prospects, Velimir Bole, Economist at Institute EIPF, states: “Without potential problems on the export markets strong growth could be considerably prolonged, especially because there is a lot of room for additional growth in still modest domestic demand.” However, Bole elaborates that challenges are still facing the Slovenian economy including, “[the] implementation of crucial health sector reforms and keeping the fiscal balance strong […] especially because pressures on public wages and pensions have been building up for some time.”

Slovenia GDP Forecast

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest