...That said, there are risks that Slovenia s role could be diminished should long-standing border disagreements with Croatia fail to be resolved in a timely manner. The recent bilateral agreement to solve a long-standing dispute over debt left over from the breakup of Yugoslavia is a positive step, and the ratification of Croatia s EU accession in ---- has boosted diplomatic and business ties between the neighbouring states. With this in mind, the downside risks are limited. ...We maintain that Slovenia s political institutions are robust and the social environment open, so the system should be more than capable of managing any potential rise in social discontent resulting from a slowdown in economic growth. Overcoming the abrupt government change in ---- will demonstrate political maturity, while the EU anchor will also ensure that the country s pro-market policy direction remains largely unchanged, with political debate to centre around moderate left and right-wing parties.
...Although the EU will remain a policy anchor for Slovenia over the long term, massive economic pressure will be a major test for the country s political institutions. A structural shift in policy and/or governing institu- tions is unlikely, though we caution that failure to develop a long-term growth model will raise challenges to governance, potentially exacer- bating political party divisions. Despite near-term economic pressure, the long-term political outlook for Slovenia is relatively benign, with a low likelihood of a major structural or policy change within our ---year forecast period. The country will continue to benefit from a high degree of integration with Euro-Atlantic institutions, being one of only two states in the Central and Eastern Europe (CEE) region to hold full membership of NATO, the EU, the eurozone and the Schengen Agreement. Western integration reflects Slovenia s high degree of institutional development, with an established liberal democracy, advanced civil society and minimal ethnic ten- sions underpinning our broadly positive core political scenario. ...The aggregate rating is particularly boosted by a high characteristics of so- ciety component score of --.- out of ---, which is supported by high income equality, low poverty levels and a high rate of ethnic homogeneity. Crucially for Slovenia, there are few weak points in the country s social or political structure, and this is accounted for in the con- sistently high component ratings it receives in our Long-Term
...We forecast Slovenia to emerge from recession in ----, although the pace of growth will flatten in the second half of the year, primarily due to base effects. Net exports will remain the mainstay of growth, although household consumption will increasingly contribute over the coming years. ...
