Annual report 2012

Impact of the macroeconomic environment on operations


An expected drop in GDP of 2 % in 2012, a sharp fall in domestic household and government consumption and investments in fixed assets, a significant deterioration in the mood of consumers and the adverse conditions on the labour market     were reflected in falling demand for telecommunication services and an increase in the price-sensitivity of consumers. The aforementioned trend is expected to continue in 2013 due to the continued contraction in economic activity and an expected decline in GDP of 1.4 %, a drop in private and government consumption, deteriorating conditions on the labour market and modest nominal growth in wages. In the uncertain conditions, households will continue to adapt the structure of spending to their diminished purchasing power and increase the level of precautionary savings. 

Primarily energy and food prices contributed to higher inflation in 2012. Core inflation remains low, as movement in prices remains very subdued in the context of weak economic activity and the drop in spending. In the context of forecast growth in energy prices, measures to improve energy efficiency will contribute to the reduction in Telekom Slovenije’s operating expenses. 

Key macroeconomic indicators in Slovenia

  2009 2010 2011 Projection (autumn 2012)
2012 2013 2014
GDP (real growth in %) -7.8 1.2 0.6 -2.0 -1.4 0.9
GDP in EUR million (current prices) 35,556 35,607 36,172 35,700 35,495 36,129
Registered unemployment rate, in % 9.1 10.7 11.8 11.9 13.1 13.1
Labour productivity (GDP per employee) -6.1 3.5 2.2 -0.6 0.9 1.4
Inflation (year-end rate) 1.8 1.9 2.0 3.3 1.9 1.8
Inflation (annual average) 0.9 1.8 1.8 2.8 2.2 1.8
Private consumption (real growth in %) 0.1 1.3 0.9 -3.0 -3.6 0.2
Government consumption (real growth in %) 2.5 1.5 -1.2 -3.4 -6.9 -1.9

Source of data: SORS, BS, ECB, IMAD calculation and forecasts.

South-Eastern Europe

With the exception of Croatia, the GDP of the countries of South-Eastern Europe is at the level of emerging countries, and in some of these countries as much as six times lower than Slovenia’s GDP. These countries still represent the potential for economic growth in the future. The economic crisis has had a varying impact on changes in GDP in individual countries. 

Key macroeconomic indicators in the countries of South-Eastern Europe

  Average GDP growth (change in %) Year-end GDP growth (change in %) Average inflation (change in %)
2010 2011 Forecast 2012 Forecast 2013 2010 2011 Forecast 2012 2011 Forecast 2012
Albania 3.5 3.1 0.6 1.3 5.5 3.8 0.5 3.5 2.1
Bosnia and Herzegovina 0.7 1.3 0.1 0.4 No data available No data available No data available 3.7 1.9
Kosovo 3.9 5.0 3.8 4.1 No data available No data available No data available 3.6 1.0
Macedonia 2.9 2.9 0.3 2.0 3.8 0.9 1.8 3.9 3.5

Source of data: SORS, BS, ECB, IMAD calculation and forecasts.

As late as 2011, Macedonia was still protected against the effects of the euro area crisis primarily due to its prudent fiscal policy, the absence of major imbalances and a financial system that is not dependent on the capital of parent banks. The effects of the crisis were felt more strongly in 2012 owing to negative external events.  Economic growth has slowed due to declining demand for exports, a decrease in foreign direct investment and a decrease in transfers from migrant workers abroad.

Kosovo still relies on assistance from the rest of the world, which is the third main source of revenue (following employment and government transfers). There is still a notable decline in demand for basic consumer goods, which increases the level of uncertainty in the sales of services on the telecommunications market as well. The largest employers are by far the government, local institutions and state-owned companies, while primarily banks and insurers account for major private companies.

The economy of Bosnia and Herzegovina has been relatively stable in recent years, although domestic consumption has remained weak, primarily as the result of fiscal austerity measures, a decrease in transfers from migrant workers abroad andslow growth in lending. Indicators point to a significant deterioration in the economy in 2012, which has also affected public finances. The newly approved 24-month Stand-By Arrangement with the International Monetary Fund (IMF) in the amount of USD 520 million is aimed at easing external shocks emanating from the current crisis in the euro area.

Growth in Albania , which was higher than in other countries in the region in 2011, slowed in the first half of 2012 primarily due to weak indicators from the key European markets of Greece and Italy. Growth is likely to slow even further in the coming years due to Albania’s strong trade and investment links with and assistance from migrant workers living in the aforementioned countries.