The upcoming tax reform, legislation on FDI control measures, and skyrocketing investments in business premises are the key updates for Slovenia, alongside major mergers in the banking sector, according to ODI Law Partner Branko Ilic.
"There are two major discussion points in Slovenia at the moment, one being the war in Ukraine, and the other one – a newly elected government," Ilic says. "The latter has been in power for three months by now and will slowly have to start showing some results. After the elections, the previous center-right government has been replaced by a center-left one, and the relevant changes in policies are expected to follow," he notes.
Ilic says that the new government aims to amend a significant amount of legislation adopted in the past two years, including tax reform. "The income tax is expected to increase and that, together with new FDI control measures, will likely lead to a decrease in FDIs in Slovenia," he points out.
According to him, "Slovenia was highly resilient during the pandemic crisis and, last year, our GDP growth was over 8%. However, this year the number has decreased to 4-6%, while next year we expect to see only a 2-3% increase. Despite that, the economy is doing quite well, which is mainly due to our real estate market." Ilic adds that, because of the increase in interest rates, real estate prices might stagnate or decrease slightly next year.
"Another noticeable trend in Slovenia are the skyrocketing business premises project investments," Ilic notes. "In the last ten years, there was a lack of such investments but, in 2022, this trend has changed – there are a number of obtained building permits, which will have an impact on business premises markets." Ilic says that, for instance, recently, the Kolosej building was acquired by the company Boscarol in Ljubljana to be transformed from a movie center into a business center. "The projects related to building offices and logistics spaces are expected to grow," he notes.
Additionally, Ilic says that "the crisis in Ukraine is affecting gas and electricity distribution, with a very high inflation rate of 11% in August. The government has banned increasing electricity prices for a year and, hopefully, that will stabilize the market." One good thing the new government did, according to him, "was canceling fines imposed during the pandemic, as the Constitutional Court decided that a large number of the emergency measures were unconstitutional. So the fines were also struck down: they no longer need to be paid."
According to Ilic, the market remains busy with M&A transactions, however, most of these transactions are done by small and medium-sized companies. "Yet, there are still big mergers, including the merger of two of Slovenia’s biggest banks – SKB and NKBM. They signed the merger agreement at the beginning of 2021 and are still waiting for approval from the Slovenian competition authority. Considering the size of the Slovenian market, the competition authority is very cautious in granting approval." Other than that, Ilic says "another noteworthy transaction is the former Sberbank’s merger with NLB, which was started, imposed, and finalized by the Single Resolution Board and Banka Slovenije and will have interesting judicial repercussions in front of the European Court of Justice."