Improving exports of goods in final months of 2020 but a reduction of 10% on a yearly level likely 

On Slovenia's Economy

• January 2021 delivered the enactment of similar restrictions that were in place before Christmas, due to the uptake in new infections. At the end od 2020, some signals were made with regards to opening the kindergartens and schools, but this is unlikely at least until 18th of January 2021. Vaccination is taking place, but the pace is slow, mainly due to lack of supplies. Different ideas are being contemplated on how to encourage the population to accept vaccination: from the restrictive ones (not able to freely move) to a more positive ones (people getting a voucher if deciding to vaccine). We believe it does make sense to launch an omnichannel promotional campaign as well as accept some measures that restrict the right to those not applying for vaccination (not able to board a plane e. g.).
• November data on exports (1 week ahead of Eurostat release) from Slovenian Statistical Office shows that trends have improved in final months, what was expected based on improving sentiment in manufacturing as well as anecdotal data from main companies. Y-o-y change (Nov. 20/Nov. 19) was positive (+0.9%; +EUR 30 m), for both group of markets (exports to EU: +EUR 20 m and exports to non-EU: +EUR 10 m). One must be careful by interpreting the headline figure for 11 months (-2.7% y-o-y) as the change severely underestimates the reduction of exports which is due to one-off increase in distribution of drugs of one bigger pharmaceutical group with operations in Slovenia and the region. Specific company’s decision on distribution of foreign produced drugs through Slovenia namely led to 93% increase in exports to Switzerland (as well as corresponding increase of imports from several other states). We therefore advise our readers to focus on the export trends to EU-27 markets or to the data from Balance of Payment, that are due to be released next week (13th of January, Bank of Slovenia). The exports to EU-27 in the first 11 months were down 10%. The main reduction in value terms can be explained by the fall of exports to the following main trading partners (note: individual country data is available only for 10 months of 2020): Italy (-EUR 800 m; -24%), Germany (-EUR 550 m; -10%) and Croatia (-EUR 250 m; -10%). From the other important trading partners, exports fell relatively a lot to UK (- 18%) and Spain (-18%). On the bright side, the exports increased to Netherlands, Denmark, Canada, Saudi Arabia and Australia by EUR 20-30 m to each country individually, although there are more or less one-off trading businesses patterns explaining this trends. 

 

On EU-27

• German industry’s production expectations for the coming months have deteriorated slightly, falling to 4.5 points in December from 5.6 points in November. The indicator has fallen most in the pharmaceutical industry: having stood at 36 points in November, it dropped to just 6 points in December. The automotive industry plans to curtail production; the indicator fell from minus 1 point to minus 21 points in December. Industries that were most pessimistic in December are manufacturers of leather and related products, at minus 33 points, and the clothing industry, at minus 40 points. This are labour intensive industries where Germany is traditionally losing jobs to Turkey and China. Furniture manufacturers, meanwhile, are expecting to increase production by a significant margin. Their indicator rose from 3 points in November to 24 points. Computer manufacturers’ production expectations are still expansive; their production expectations remain at 28 points in December. Beverage producers have put aside planned production cutbacks for the time being. Their indicator jumped to minus 1 point, having stood at minus 21 points in November. Developments were similar among food manufacturers (source: IFO).

Forecast of the Week

Nov. industrial production in Slovenia: +0.0% y-o-y (previous month: -1.1%) 

Comment: we expect the recovery of manufacturing will continue at least until first quarter 2021

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