Economic crisis in Slovenia

The SBI 20 index, tracking 20 leading companies listed on the Ljubljana Stock Exchange (LJSE), has lost nearly half of its value since it peaked in August last year. The stock market boom that started in earnest in March 2007, two months after Slovenia adopted the euro, has now definitely turned to bust.

For more than two years, Slovenia’s economy has grown vigorously. Strong external demand has filled the order books of the country’s leading exporters, which have posted record profits. Turning many a Slovenian town into a construction site, the developers have poured money in commercial and residential real-estate, allowing the builders to enjoy an unprecedented bonanza.

But as exports and investment, the two engines of Slovenian economic growth, slow down, analysts are taking a harder look at the economy’s prospects. Growth is forecasted at 4.8 percent for 2008, down from a record 6.8 percent last year. With the stock market teetering and banks scrambling for capital, it seems that the fallout from the US financial crisis is hurting both the financial and real sectors of the economy.