We anticipate year-on-year (y-o-y) improvements across the board in the Slovenian freight transport mix in 2015, which mirrors the upgraded growth estimate and forecast for the economy as a whole in 2014 and 2015 respectively. This growth will be built on the back of stronger than expected exports, as well as early indications that household consumption is finally recovering. Nonetheless, a considerable corporate debt overhang and government austerity plans will cap the overall pace of real GDP growth.
The Slovenian freight sector will certainly be buoyed going forward by stronger than expected exports in the first half of 2014, which bodes well for tonnage handled across the freight modes in 2015. With that in mind, the outperformer in terms of y-o-y growth is set to be the country's smallest mode by output, the air freight sector (5.69%), while the rail and road modes are both set to record steady growth over the next 12 months (4.40% and 4.80% respectively).
Headline Industry Data
2015 air freight tonnage is forecast to increase 5.69% y-o-y to 8,890 tonnes
2015 rail freight tonnage is forecast to rise 4.40% to 18.68mn tonnes
2015 road freight tonnage throughput is predicted to grow 4.80% to 71.56mn tonnes
2015 port of Koper tonnage growth is expected to increase by 3.63% to 18.87mn tonnes
Total trade in 2015 is forecast to increase by 3.70% in real terms
Key Industry Trends
Koper Port Expansion Strengthens Adriatic Freight Role : Slovenia's only commercial seaport at Koper is now able to accommodate ships of 10,000 twenty foot equivalent capacity (TEU), compared to the 7,500TEU capacity vessels it could previously handle, following development work at the facility. The container terminal has been expanded by more than 6,800 square metres and dredged by 14 metres, allowing it to handle these larger ships and also boost its storage capacity by an additional 680 containers. The expansion project is part of a wider series of upgrades, which will see the port spend an additional USD311mn over the coming years. Work will begin on deepening the port by another metre starting in 2015, further enabling it to handle even larger ships.
Fraport Acquires 75.5% Stake In Aerodrom Ljubljana: A 75% stake of Ljubljana airport's Slovenian operator Aerodrom Ljubljana has been acquired by Fraport. Fraport signed an agreement in September 2014 with a consortium led by SDH to buy the stake in Aerodrom Ljubljana for EUR177.1mn (USD224mn). SDH received about EUR16mn (USD20.24mn) for its 6.82% stake in Aerodrom Ljubljana, while the Slovenian government received EUR118.8mn (USD150.26mn) for a further 50.67% in equity.
ÖBB Seeking New Locomotives: In August, Austrian Federal Railways' (ÖBB) subsidiary ÖBB Produktion gave potential bidders two weeks to respond to a tender for five second-hand electric locomotives, underlining how desperate they were to secure them. In other news, Adria Transport and LTE recently hired two former ÖBB Class 1822 electrics 'capable of working between the Adriatic port of Koper, Maribor, and the Austrian border at Spielfeld-Strass', reported Rail Journal.
Key Risks To Outlook
There are considerable downside risks to our real GDP growth forecasts for Slovenia. The banking sector, in particular, remains in poor shape due to high levels of non-performing loans which have yet to be fully restructured. The collapse of the government has raised the risk that political impetus behind the restructuring loses momentum, in turn casting doubts over the ability of Slovenia to react effectively to another banking sector crisis. We are skeptical that the government would be able to finance another bailout of the banking sector without external assistance from the EU. This would likely be contingent upon a number of measures that would be growth-negative in the near-term.
Political instability will remain elevated as the four-party government coalition attempts to push through harsh austerity measures that will likely prompt parliamentary tensions and social unrest.
A big risk to the Slovenian economy lies abroad. A major deterioration in the eurozone sovereign debt crisis, or even just a greater-than-expected slowdown in the core eurozone nations, would have severe knock-on effects on the Slovenian economy, not only via depressed trade and investment flows, but also via credit channels and broader economic sentiment.