I. THE WAY WE LIVE
3.4 Borrowing
Household borrowing in Slovenia has been on the rise since 2004. This has been the result not only of the positive macroeconomic situation in the country, but also of declining interest rates, the release of assets from the National Housing Saving Scheme and the easing of loan conditions, as well as the development of the financial market.
By a long-term increase in the standard of living, the personal consumption structure changes as well:
the share of expenditure on food declines and the share of expenditure on services, recreation and culture, edu-cation and visits to hotels and restaurants rises. Levels of other expenditures re-main largely unchanged.
Figure 14: Share of liabilities in the households’ financial assets and NPISH, selected countries, 2006, in %
0 10 20 30 40 50 60 70
IT BE SI BG RO HU AT FR GR PL DE NL SE EE FI LT PT ES DK SK
%
Source: Eurostat, financial accounts.
Note: NPISH – non-profit institutions serving households.
16 The analysis includes data per household, excluding the money value of own production.
17 It should be noted that the category "other expenditure"
includes also savings, and is as such not an actual expenditure of a household.
18 The data from the Household Budget Survey for the reference year (e.g. 2006) are calculated using the data from the three consecutive years (e.g. 2005–2007).
Table 22: Allocated assets per household, Slovenia, 2000–2006
2000 2001 2002 2003 2004 2005 2006
Allocated assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Consumption expenditures 89.9 90.0 89.5 89.0 87.7 86.9 85.1
Food and non-alcoholic beverages 18.2 17.8 17.4 16.3 15.2 14.5 14.1
Alcoholic beverages 1.9 1.8 1.9 2.0 2.1 2.1 2.2
Clothing 8.1 8.0 7.9 7.7 7.3 7.0 6.8
Housing, water, electricity, gas and other fuels 10.0 10.5 10.4 10.4 10.3 10.5 10.6
Furnishings, household equipment 6.8 6.7 6.3 6.1 6.1 6.3 6.4
Health 1.7 1.7 1.7 1.6 1.6 1.5 1.5
Transport 16.1 15.2 14.2 15.2 16.2 16.6 15.9
Communication 2.9 3.4 3.9 4.1 4.1 4.3 4.4
Recreation and culture 8.5 8.9 9.5 9.8 9.7 9.5 9.1
Education 0.8 0.9 0.9 0.8 0.9 0.9 0.9
Restaurants and hotels 5.2 5.2 5.4 5.2 4.5 4.1 3.5
Miscellaneous goods and services 9.7 9.8 9.9 9.8 9.7 9.6 9.7
Other non-consumption expenditures 10.1 10.0 10.5 11.0 12.3 13.1 14.9
Expenditures on dwelling, house 7.2 7.0 7.3 7.6 8.7 9.5 10.7
Other expenditures 2.9 3.0 3.2 3.4 3.6 3.6 4.2
Ratio of allocated to available assets 1.101 1.063 1.048 1.037 1.057 1.047 1.052
Source: SORS – Household Budget Survey; calculations by IMAD.
The National Accounts data (which are slightly more up-to-date, since they are available for 2007) reveal increased expenditures for consumer durables since 2003 (excluding dwellings, houses, as they belong to investment category, not consumption). Expenditures for this type of goods increased most markedly in Figure 15: Households loans and NPISH, Slovenia, 2004–2008
0 100 200 300 400 500 600 700 800
2004* 2005 2006 2007 2008**
EUR million
Consumer Housing Other
Source: BS; calculations by IMAD.
Note: *Data for 2004 do not include January and are not entirely comparable to data for other years. ** Data for 2008 are only available by November. The value of loans taken is expressed in the net flow of loans i.e. the difference between the two states. NPISG – non-profit institutions serving households.
2007 (in real terms by as much as 16%), which can be attributed to the economic upturn and the growth in the total wage bill. Thus in 2007, households spent one fifth more on vehicles, and around one tenth more on household appliances and furnishing than in the year before. The latter increase was, of course, also related to a rise in the number of bought dwellings since 2005;
housing loans of almost EUR 2 billion were raised in the period from 2005 to 2007.
In 2008, there was a slowdown in household borrowing and consequently also in expenditure on consumer durables; this was particularly true in the second half of the year as a result of a normal cyclical slowdown in durable purchases as well as a crisis. In November, households took on 70% less consumer loans than in the same period in the year before and approximately the same level of housing loans (note: this is not seen from the figure, as it shows the flows by December and not by November 2007).
When households find themselves in a situation where they can no longer repay their debts, they become over-indebted. The problem of over-indebtedness in Slovenia has not yet been analysed systematically.19 Indicators for measuring (over)indebtedness still need to be developed.
An indicator of debt repayment (called household debt service ratio) that would reveal the repayment of loans in relation to disposable income over a certain period of
19 Good practice from abroad – see Ferk, Barbara: Indebtedness and Overindebtedness of Households, Working paper IMAD 1/2007
time and would show an actual burden of loan repayment (annuities) on household income is not available. In 2008, banks and saving banks established a SISBON system, which will allow the exchange and processing of data on natural persons – clients. The Financial Operations, Insolvency Proceedings and Compulsory Dissolution (personal bankruptcy) Act entered into force in October 2008. There is also a need to establish comprehensive statistics allowing monitoring of over-indebtedness i.e. the measures for analysing over-indebtedness as well as for its prevention. Particular attention should be given to socially weak groups of population, which are not “creditworthy”
and are thus forced to take more expensive and risky loans. Consumers should be properly informed about all available financial products. Borrowing is not a negative phenomenon if consumers are properly informed about financial products and do not overestimate their capacity to repay loans.
4 Socio-economic stratification of the population in 1998, 2002 and 2006
Methodology
The economic situation of the population of Slovenia was analysed based on data from the Household Budget Surveys (HBSs) conducted by the Statistical Office of the Republic of Slovenia. The samples included 3,867 households with 11,693 members in 1998, 3,687 households with 10,556 members in 2002, and 3,709 households with 9,826 members in 2006. In fact, three consecutive annual surveys were merged in order to produce individual datasets: 1997–1999 at May 1998 prices, 2001–2003 at May 2002 prices, and 2005–2007 at May 2006 prices. Data for each period have been named after the medium year of that period (i.e. 1998, 2002, and 2006, respectively).
Definition of income and income brackets
Income is defined as current monetary disposable income. It includes income from employment,1 income from occasional work (on the basis of a contract2 and direct payments, or through the student work brokerage service), income from self-employment,3 pensions,4 social5 and family6 benefits, income from property,7 and financial support and gifts.8 Total current income is reduced by the transfers made (i.e.
dependent child, former spouse and elderly parent maintenance payments, monetary gifts and voluntary contributions). Household income thus defined does not include one-off large amounts of income,9 the value of the household's own production consumed in the household, imputed rent (in the case of owner-occupied housing units), savings withdrawals, or received loans. Household income is a net income i.e.
the income after all social security contributions and personal income taxes have been paid.
In order to allow comparisons across people living in households of a different size and composition, the household income is divided by the number of its equivalent adult members. The resulting equivalised household income is also the equivalised income of the people in a particular household. The number of equivalent persons (adults) was calculated using the modified OECD equivalence scale, which is also used by Eurostat and SORS. The first adult in a household is assigned a weight of 1, each further adult a weight of 0.5, and each child below 14 years of age 0.3. The sum of weights assigned to the members of a certain
The observed period saw shifts in the distribution of persons across the income brackets thus defined. On the one hand, it recorded a drop in the share of persons in the low bracket from 1998 to 2002, and a drop in the share of persons in the lower-middle bracket in 1998–2006, with the total drop slightly exceeding 3 p.p. On the other hand, the upper-middle bracket increased (by 3.5 p.p.).
This is also evident from indicators of social cohesion: in 1998–2002, the relative at-risk-of-poverty rate and the Gini coefficient (i.e. the indicator of inequality of income distribution) decreased, while from 2002 onward, both indicators have remained unchanged.
household produces the number of equivalent adults, or equivalised household size.
Househols were classifies by their equivalised income into 4 income brackets:
1. Low – with equivalised income below 60%
of the median equivalised income of persons in Slovenia, i.e. below the at-risk-of-poverty threshold as defined by Eurostat.
2. Lower-middle – iwith equivalised income higher than the at-risk-of-poverty threshold but below 1.2 of the median equivalised income.
3. Upper-middle – with equivalised income between 1.2 and 2 times the median.
4. High – with equivalised income higher than 2 times the median equivalised income.
1 Income from employment includes salaries and wages (both home- and foreign-earned ones), holiday allowance, meal allowance, transport allowance, and other cash benefits received from the employer.
2 Either copyright or work contract.
3 i.e. income from farming, income from an independent commercial activity, an entrepreneur’s salary, and holiday, meal and transport allowances.
4 Including recreation allowance and pensions earned abroad.
5 Social benefits include unemployment benefit, other social security benefits, financial social assistance, rent subsidy, disability and war-related disability allowances, and educational grants.
6 Family benefits include child allowance, parental leave benefit, parental allowance, birth grants in money or equipment, and child care allowance.
7 i.e. net income from renting out an apartment, house, garage or other real property, dividends, interest, and royalties from patents, licences and other intellectual property rights.
8 i.e. alimony and/or child support received from the former spouse, regular financial support, dependent elderly person support, and monetary gifts.
9 e.g. income from the sale of real or personal property or of securities or other capital shares, compensation for nationalised or dispossessed property, gambling winnings, inheritance, life insurance money, or property damage compensation.
Table 23: Distribution of persons across income brackets, Slovenia, 1998, 2002 and 2006, %
Income bracket Share of total population, %
1998 2002 2006
Low 14.0 11.9 11.8
Lower-middle 54.1 55.0 53.1
Upper-middle 26.9 28.2 30.4
High 5.1 4.9 4.7
Total 100.0 100.0 100.0
Source: SORS, HBS data files 1998, 2002 and 2006; calculations by Stropnik.