REPUBLIC OF SLOVENIA: Strong Credit in Euro Zone

Ministry of FinanceRepublic of Slovenia

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AGENDA

COUNTRY OVERVIEW

KEY STRENGTHS

STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS

POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS

FINANCING PROGRAMME

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AGENDA

COUNTRY OVERVIEW

KEY STRENGTHS

STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS

POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS

FINANCING PROGRAMME

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Slovenia: Member of the euro area for five years

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

Country Overview

Austria

Slovenia

Hungary

Croatia

Italy

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

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A strong sovereign credit in the euro zone

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

Source: Mood’y/Standard & Poors/Fitch (3 January 2011)

Country Overview

AAA DK; FI; DE; LU; NL; SE; UKAA+ AU; FRAA BEAA- EEA+ SLOVENIAA CZ; SK; SPA- MT; PLBBB+ IRL; ITBBB BG; LTBBB- HUBB+ CY; ROBB PT; LVCC GR

ItalyA3/BBB+/A-

SpainA3/A/A

SloveniaA2/A+/A

BelgiumAa3/AA/AA

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AGENDA

COUNTRY OVERVIEW

KEY STRENGTHS

STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS

POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS

FINANCING PROGRAMME

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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)

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AGENDA

COUNTRY OVERVIEW

KEY STRENGTHS

STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS

POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS

FINANCING PROGRAMME

High and sustained degree of real convergence

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.

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Strong Economic Performance over Past Years

Source: Eurostat

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Slovenia has a highly diversified economy

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

Strong Economic Performance over Past Years

Source: SORS

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Good labour market performance

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.

Strong Economic Performance over Past Years

Source: Eurostat

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Competitiveness and convergence to EU levels

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.

Strong Economic Performance over Past Years

Source: Eurostat

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Strong market share

Current account strongly depend on external factors but stable

During the crisis able to defend market position in EU area

Strong Economic Performance over Past Years

Source: Eurostat, October 2010 (provisional data)

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Good financial position, sound banking systemand housing market

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 system

vis-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

Strong Economic Performance over Past Years

Source: Eurostat

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AGENDA

COUNTRY OVERVIEW

KEY STRENGTHS

STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS

POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS

FINANCING PROGRAMME

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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

Policy response to global financial crisis

Source: Eurostat

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Stabilization and gradual recovery in linewith major trading partners

Policy response to global financial crisis

Source: Eurostat

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Coordinated EU policy response to crisis …… in line with existing debt levels.

Budgetary stimulus aims at limiting the impact of decline in external demand on productive capacity and jobs.

Three types of policy measures: 1. Slowing down the impact of the crisis on enterprises;2. Enhancing enterprise financial liquidity and safeguarding

existing jobs;3. 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 relevantsupervisory institution’s endorsement.Measures to be gradually phased out with normalization offinancial markets and in accordance with EU decisions.

Policy response to global financial crisis

Source: European Commission. Ameco

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Fiscal consolidation and policy response

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 inefficient

government 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.

Policy response to global financial crisis

Source: Eurostat

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Policy response under new government-in-office

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…

Policy response to global financial crisis

Source: Eurostat

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AGENDA

COUNTRY OVERVIEW

KEY STRENGTHS

STRONG ECONOMIC PERFORMANCE OVER THE PAST YEARS

POLICY RESPONSE TO GLOBAL FINANCIAL CRISIS

FINANCING PROGRAMME

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The borrowing requirement

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

Financing programme

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

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Strong performance and support

Financing programme

Name Ratings Size EUR mn Issue Date Maturity Cpn Mid Price Mid YieldBid Spr vx

MS (at lunch)

Bid Spr vs MS (current)

bpsDur (yrs)

Slovenia 02/14 A2/A+/A 1,5 2.4.2009 2.4.2014 4,375% 102,174 3,291% 160 bps 221,0 1,922

Slovenia 03/15 A2/A+/A 1 17.3.2010 17.3.2015 2,750% 97,994 3,452% 37 bps 220,4 2,806

Slovenia 02/16 A2/A+/A 1,2 17.1.2005 17.1.2016 4,000% 99,729 4,075% 268,7 3,614

Sloven 03/18 A2/A+/A 1 22.3.2007 22.3.2018 4,000% 95,015 4,969% -8 bps 320,0 5,045

Slovenia 02/19 A2/A+/A 1 6.2.2008 6.2.2019 4,375% 95,957 0,051 -3 bps 316,8 5,820

Slovenia 01/20 A2/A+/A 1,5 26.1.2010 26.1.2020 4,125% 89,940 0,057 68 bps 369,4 6,463

Slovenia 01/21 A2/A+/A 1,5 18.1.2011 18.1.2021 4,375% 90,145 0,058 125 bps 367,2 7,038

Slovenia 09/24 A2/A+/A 1,5 9.9.2009 9.9.2024 4,625% 90,403 0,057 80 bps 327,5 8,911

Slovenia 03/26 A2/A+/A 1,5 30.3.2011 30.3.2026 5,125% 88,691 0,064 130 bps 387,2 9,043

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Strong relative performance in turbulent times

Financing programme

Source: MTS.

Most debt denominated in local currencyOutstanding debt by type of currency (31.12.11)

EUR: 99.8% USD: 0.0% Other: 0.2%

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Your contacts

Republic of SloveniaMinistry of Finance

Treasury DirectorateBoštjan PlešecDirector Generalbostjan.plesec@mf-rs.siTel: +386 1 369 6410

Public Debt Management DepartmentMaja PraprotnikHead of Departmentmaja.praprotnik@mf-rs.siTel: +386 1 369 6440