Page 128 - SE Outlook Regions 2022

Fitch forecasts a budget deficit of 7.4% of GDP in 2021, as positive
revenue trends are largely offset by COVID-19 related support
measures, which have totaled €2.8bn or 6% of GDP, since the start of
the pandemic.

The budget deficit is expected to narrow to 5.6% of GDP in 2022 and
3.7% of GDP in 2023 driven by expenditure control as no
revenue-raising measures are planned.

The public debt-to-GDP ratio is expected to drop gradually to 73.4% in
2025 from a high of 79.8% in 2020, compared with 65.6% in 2019.

The reduction of the debt will be driven by stronger nominal growth,
falling interest costs and the use of cash buffers.

Slovenia's gross external debt position stood at €51.7bn at
end-September, up from €47.8bn at end-2020, according to data from
Slovenia’s central bank.

According to the latest Banka Slovenije data, the gross external debt of
the general government as of end-September decreased slightly to
€24.77bn, from €24.96bn at end-2020.

On the rating side, Fitch once again affirmed Slovenia's rating at ‘A’ with
stable outlook in December 2021, reflecting its expectations of a
sustained economic recovery.

Erste said that yields have been showing a dynamic pattern in 4Q21;
after rising during November, they started to gradually stabilise in
previous weeks. The 10-year yield has currently been maintaining
levels around the 0.15% mark, while also showing some spread
widening vs. Germany (currently around 50bp, i.e. +15bp compared to
3Q21). Looking ahead, given the anticipated moves in the benchmark
yield curve, Erste sees yields heading up while keeping an overall
steady spread vs. Bunds (expected in the 40-50bp range).

The central bank of Slovenia said that the situation on the financial
markets remains good, amid continuing economic policy support. A
slight increase in volatility is evident, which is attributable to uncertainty
on the part of market participants in connection with the duration of the
increased inflationary pressures, the rise in COVID-19 case numbers,
and the expectation that global central banks will begin gradually
scaling back their accommodative stance. Financing conditions remain
highly favourable for the government sector and for private-sector
issuers alike. The yield on 10-year Slovenian government bonds is
currently around 0.20%, approximately 50 basis points above the
German benchmark.

The government said that Slovenia needs to borrow €5.05bn in 2022 to
finance the budget needs. Besides financing the budgetary costs,
Slovenia needs to finance maturing debt of nearly €2.3bn.

128 SE Outlook 2022 www.intellinews.com