REPUBLIC OF SLOVENIA: Strong Credit in Euro Zone

1. REPUBLIC OF SLOVENIA: Strong Credit in Euro Zone Ministry of Finance Republic of Slovenia

2. AGENDA • COUNTRY OVERVIEW • KEY STRENGTHS • STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS • POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS • FINANCING PROGRAMME

3. AGENDA • COUNTRY OVERVIEW • KEY STRENGTHS • STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS • POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS • FINANCING PROGRAMME

4. Hungary Austria Italy Slovenia Croatia Slovenia: Member of the euro area for five years Country Overview • Population of 2 mn • Track record of strong macroeconomic performance • GDP per capita 87% of EU average • Stable multi-party democracy • Joined the euro area in January 2007 • Joined OECD in June 2010 • Euro area member for over three years (joined 1 January 2007) • Prudent fiscal policy track record and steady competitiveness position • Low government debt with low borrowing requirement in the future • Sound banking system with low exposure to toxic assets • Solid economic fundamentals and adequate policy response to crisis to mitigate its impact • Government committed to stability and sustained reform

5. A strong sovereign credit in the euro zone Country Overview • Single A credit rating (A2/A+/A) • Well diversified and open economy • Sustained real convergence • Low general government debt burden (45% of GDP in 2011) • ECB eligibility for government paper • Well recognized economic and political stability BelgiumAa3/AA/AA SloveniaA2/A+/A SpainA3/A/A ItalyA3/BBB+/A- Source: Mood’y/Standard & Poors/Fitch (3 January 2011)

6. AGENDA • COUNTRY OVERVIEW • KEY STRENGTHS • STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS • POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS • FINANCING PROGRAMME

7. Key Strengths Key strengths • „A“ rating country with low general government debt (45% 2011) • Strong growth in the past and big convergence to EU levels • Good labor market performance • Low indebtedness of household and stabile housing market • Good structure of secondary market with relative high liquidity (monthly turnover around 1,5 billions EUR) • Stabile debt profile (yearly refinancing risk around 1,5 billions EUR)

8. AGENDA • COUNTRY OVERVIEW • KEY STRENGTHS • STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS • POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS • FINANCING PROGRAMME

9. High and sustained degree of real convergence Strong Economic Performance over Past Years • The Republic of Slovenia has the highest GDP per capita among CEE countries ... • … and the gap vs the other EU countries was closing fast and will continue to do this in the future • The real GDP growth outpaced that of the euro areafor the last 10 years. Source: Eurostat

10. Slovenia has a highly diversified economy Strong Economic Performance over Past Years • Comparable to EU, member states, growth is driven by manufacturing and services, successful and growing tourism industry, small agricultural sector. • Focus on high value-added exports • More than two thirds of exports destined for EU. • EUR 23 bn exports of goods and services in 2010; 66% of GDP • Main trading partner: Germany, Italy, France, Austria; also majority of FDI from same countries Source: SORS

11. Good labour market performance Strong Economic Performance over Past Years • The unemployment rate in Slovenia is lower than in many EU core countries like France and Finland. • Even with global crisis were able to not increase unemployment rate due to focus on job saving measures. • In terms of total employment Slovenia ranks #9 in the EU 27. Source: Eurostat

12. Competitiveness and convergenceto EU levels Strong Economic Performance over Past Years • Slovenia remained in the group of euro area countries with relatively greater losses in cost competitiveness during the crisis • Stagnation of labor productivity in last year; need to increase labor productivity to continue convergence to EMU levels. Source: Eurostat

13. Strong market share Strong Economic Performance over Past Years • Current account strongly depend on external factors but stable • During the crisis able to defend market position in EU area Source: Eurostat, October 2010 (provisional data)

14. Good financial position, sound banking systemand housing market Strong Economic Performance over Past Years • Low external indebtedness of the economy • Lowest household indebtedness in EMU 30% of GDP • Banking sector assets in GDP only one third of EMU average • Banking system’s cross-border indebtedness of about 46% of GDP • Comfortable banking system capital adequacy of 12.1%and Tier 1 of 9.9% (September 2011) • Short-term net creditor position of domestic banking systemvis-a-vis euro area • Banking system’s external debt maturity profile is spread out(bulk more than 2 years) • Banks have low exposure to toxic assets Source: Eurostat

15. AGENDA • COUNTRY OVERVIEW • KEY STRENGTHS • STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS • POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS • FINANCING PROGRAMME

16. Global financial crisis Policy response to global financial crisis • Substantial decrease of investment in Slovenia during last two years • Saving rate remain high, above 15% on annual level • Problem of huge decrease of loans to non-financial corporation Source: Eurostat

17. Stabilization and gradual recovery in linewith major trading partners Policy response to global financial crisis Source: Eurostat

18. Coordinated EU policy response to crisis …… in line with existing debt levels. Policy response to global financial crisis • Budgetary stimulus aims at limiting the impact of decline in external demand on productive capacity and jobs. • Three types of policy measures: • Slowing down the impact of the crisis on enterprises; • Enhancing enterprise financial liquidity and safeguarding existing jobs; • Increasing expenditure in research and education to improve the growth potential of the economy. • Budgetary policy economic support package in 2009 equivalent to 1.6% of GDP. Most of the measures of temporary nature. • Additional support to small and medium size enterprises in the form of borrowing guarantees of up to EUR 1.2 bn. Financial system support measures include: • Full retail deposit guarantee • Guarantees for bank borrowing (EUR 12 bn) up to 5 years,pricing according to EU/ECB guidelines • On-lending to banks, insurance, reinsurances, pension companies • Capital injections • Purchase of claims (Banks) Measures other than deposit guarantee are subject to relevant supervisory institution’s endorsement. Measures to be gradually phased out with normalization of financial markets and in accordance with EU decisions. Source: European Commission. Ameco

19. Fiscal consolidation and policy response Policy response to global financial crisis • 2010 and 2011 adopted budgets foresee full withdrawal of fiscal stimulus by the end of 2010; however, Slovenia will act in line with EU and EMU policies and recommendations. • Gradual, primarily expenditure driven fiscal consolidation over the medium term. Deficit below 3% of GDP by 2013 • Rationalization and discontinuation of inefficientgovernment programs • Rationalization of cost of public administration • Rationalization and better targeting of social transfers • Shifting investment financing towards EU funds • Increase in excises’ rates and widening social security contribution tax base • Government proposal of further modernization and reform of pension system to contribute to long-term sustainability of public finances is to be submitted to the parliament for discussion and to be passed into law. • Gradual fiscal consolidation over the past years • 2009 deficit reflects strong economic downturn on tax revenue (automatic stabilizers) and discretionary policy to offset the impact of the crisis. • Fiscal policy to reduce deficit below 3% of GDP by 2013. Source: Eurostat

20. Policy response under new government-in-office Policy response to global financial crisis • Committed to limit the general government debt on level 45% of GDP; putting debt ceiling in the Constitution • Ceiling the public spending to 45% of GDP • Lowering the labor cost by introduction of social contribution cap, changing the personal income brackets • Introduction of tax havens for new business, 40% tax deduction for investment • Solving the banking problem (credit crunch) • Additional de-bureaucracy of public services • Pension reform • Health reform • Lowering the price of dwellings • Centralization of public borrowing on financial markets… Source: Eurostat

21. AGENDA • COUNTRY OVERVIEW • KEY STRENGTHS • STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS • POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS • FINANCING PROGRAMME

22. The borrowing requirement Financing programme 2012 • The max. gross borrowing: EUR 4.7 bn • Purpose of borrowing: • Gross borrowing for 2012 central government budget:EUR 2.8 bn • Pre-financing of debt due for redemption in 2013 and 2014: EUR 2.9 bn • Already executed borrowing: • Pre-financing of part of 2012 repayments executed in 2011: EUR 1.0 bn • Central Government Budget financing EUR 0.6 bn • Expected structure of borrowing at the end of 2012: • Short term (end of the year): EUR 250 mn • Long term Up to EUR 2.5 bn • Established issuer in the euro debt market • International structure of primary dealers with strong domestic institutions: • Abanka; Barclay Capital; BNP Paribas; Credit Agricole CIB; Commerzbank; Deutsche Bank; Goldman Sachs; HSBC; ING; Jefferies; JP Morgan; Nova Ljubljanska Banka; Société Générale CIB; UniCredit Banka Slovenija • Newly issued bonds trading on major international trading platforms: • MTS Slovenia (www.mtsslovenia.com), Bloomberg (SLOREP Govt <GO>), Bondvision • Benchmark size issues to ensure liquidity (minimum EUR 1 bn) • Bonds in new S&P Eurozone Government Bond Index • MTS Slovenia established since March 2007 (www.mtsslovenia.com): • Currently 17 system participants (14 international and 3 from Slovenia) • 9 bonds on the system (http://www.mtsdata.com/content/data/public/rsl/bulletin/, http://www.mtsdata.com/content/data/public/rsl/fixing/) • Broaden investor base to increase integration of Slovenia’s signature in the euro area

23. Strong performance and support Financing programme

24. Strong relative performance in turbulent times Financing programme • Most debt denominated in local currency • Outstanding debt by type of currency (31.12.11) • EUR: 99.8% • USD: 0.0% • Other: 0.2% Source: MTS.

25. Republic of SloveniaMinistry of Finance Treasury DirectorateBoštjan PlešecDirector Generalbostjan.plesec@mf-rs.si Tel: +386 1 369 6410 Public Debt Management DepartmentMaja PraprotnikHead of Departmentmaja.praprotnik@mf-rs.si Tel: +386 1 369 6440 Your contacts