Finance Minister Andrej Bajuk has assessed that the International Monetary Fund (IMF) has underestimated Slovenia's economic growth in its projections. Slovenia's growth will top 5.4% this year and will definitely also exceed the IMF's projections for next year, Bajuk said on the margins of the annual meetings of the IMF and the World Bank in Washington.
The governor of the Slovenian central bank, Marko Kranjec, meanwhile noted that the officials he had met in Washington were mainly interested in Slovenia's high inflation, while he also announced that the next IMF mission would visit Slovenia in late 2008.
The pair held a number of bilateral meetings on Saturday, and took part in the session of the International Monetary and Financial Committee. On Sunday, they are due to attend a session of the Development Committee, an IMF and World Bank forum designed to build consensus on development issues among governments.
The IMF has forecast that Slovenia's economy will expand by 5.4% this year and then slow down to 3.8% in 2008. Bajuk believes both projections are wrong. "Slovenia has the advantage of being a rather small economy which can adapt quickly, while we are not a subject of in-depth analysis." "Such analyses by the European Commission however indicate that Slovenia's economic growth will be higher than just 5.4% this year. It will definitely be above the IMF's projections next year as well," Bajuk said, but admitted it was hard to make predictions.
According to the minister, the latest IMF and World Bank meetings are concerned with the US mortgage market crisis. He admitted that the crisis had some impact on the Slovenian financial sector indirectly, as banks had some more difficulties getting loans from abroad.
This view was echoed by the governor of Banka Slovenije, who believes that "sooner or later this will reflect on the price of loans that banks charge to Slovenian borrowers, which will also affect the corporate sector". Kranjec could not predict though when loan prices would increase. Bajuk lauded the response of the European Central Bank to the crisis, while he also said that the depreciation of the US dollar had not affected Slovenia much, because two-thirds of its exports end up on the euro area markets.
It is not exchange rates that Kranjec has been debating with his counterparts in Washington, given that these are now a responsibility of the European Central Bank, but rather bilateral problems, such as inflation, economic trends and borrowing. "When it comes to Slovenia they are mainly interested in the high inflation, because it affects the competitive edge of our exports, the state of the budget, macroeconomic stability and so on," Kranjec said.
The central banker believes that now that its economic growth is high, Slovenia should transform its budget deficit into surplus. The central bank can no longer intervene on the market by changing interest rates, but Slovenian banks can adjust through various surcharges to the interest rates fixed by the European Central Bank.
Commenting on the global imbalances as shown in high surpluses of some countries on the one hand and deficits on the other, Kranjec said the euro area was not affected as strongly as the US economy in relation to China, for instance. He nevertheless believes Slovenia could be affected indirectly.
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