development report 2012 - UMAR

36 Development Report 2012
Development by the priorities of SDS – A competitive economy and faster economic growth
Box 5: Private sector borrowing and debt (internal imbalance indicators in excessive imbalance assessment
procedures in the EU) - continue
In the years preceding the economic crisis, the high level of private sector borrowing was generated by the growth
in corporate and household borrowing. Both the supply and demand for loans during this period were high, which
was due to strong upward economic trends and the related strong private sector demand for loans for financing the
increased production volumes, investments and even takeovers. During this period, households also borrowed heavily
to purchase homes and consumer goods. Private sector net borrowing flows peaked in 2007 and accounted for slightly
less than one quarter of GDP, then stabilised in 2008 but still exceeded their threshold value. As the situation in the
international financial markets deteriorated, lending volumes decreased. The drop in Slovenia’s lending activity was
above average since the indicator value was below the EU average. In 2011, Slovenia’s credit crunch worsened while
the EU banks’ lending activity to the private sector, on average, stabilised as the net flows still remained positive.
Private sector debt grew rapidly during the past decade but remained below its ceiling throughout this period.
During the period 2001–2010, the indicator almost doubled in value (to 129% of GDP), which was one of the highest
growth rates in the EU. Among the old EU Member States, a higher growth rate was recorded only by Ireland. In terms
of indicator value, Slovenia’s private sector ranks among the least indebted sectors, which is largely due to the fact that
Slovenia’s household debt is one of the lowest in the EU. At the same time, corporate debt is higher and is approximately
at the EU level. A detailed study of the sources of financing of Slovenian businesses shows that loans are a considerably
important source of financing for Slovenia’s economy since there are practically no other sources of financing due to a
poorly developed financial market. This puts Slovenian businesses among the most highly indebted businesses in the
EU in terms of debt-to-equity ratio.
Figure : Private sector debt and private sector indebtedness
Private sector debt
Limit value of private sector debt
180
25
Private sector borrowing
Limit value of private sector borrowing
160
140
20
In % of GDP
120
100
80
In % of GDP
15
10
60
40
5
20
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Bank of Slovenia, calculations by IMAD.
0
2002 2003 2004 2005 2006 2007 2008 2009 2010