1.
FOLLOW THE MONEY WORKSHOP
Macro- and micro-economic storytelling

2.
Dr. Ales Pustovrh, ABC
Pospeševalnik
Dr. Aleš Pustovrh
Freelance Contributor for
The Economist Intelligence Unit,
ABC Pospeševalnik,
Ekonomska Fakulteta

3.
:00 – 9:45
Aleš Pustovrh
Presentation of a real world case where
macroeconomics and political
economics are critical to an
understanding of events (e.g., Brexit or
one of the attendee’s proposed
stories). Introduction to basic principles
and vocabulary of macroeconomics;
brief introduction to political economy
10:00 – 10:45
Aleš Pustovrh
Further introduction to political
economy. Presentation of a real world
case where a knowledge of
microeconomics is valuable (e.g.,
competition policy regarding mobile
phone providers or an attendee case).
Introduction to basic principles and
vocabulary of microeconomics

4.
•Gathering data
•Analyzing data and developing the idea
•Presenting your idea !
Good project work requires…

5.
MACRO-ECONOMICS
field of economics that studies the behavior of the
aggregate economy –
country economy as a whole

6.
Case study – Slovenian budget in 2016 and 2017
‚Proračunski primanjkljaj se je lani zmanjšal skoraj za polovico – z 1,277 milijarde
evrov v letu 2015 na 687 milijonov evrov.‘ – Dnevnik, 18.1.2017
How do you report this ? Is this good or bad or irrelevent news that most people will not care about ?

7.
Case study – different opinions among experts
Kljub tako občutnemu znižanju primanjkljaja pa Marko Jaklič z ljubljanske
ekonomske fakultete ocenjuje, da za kakšno »zmagoslavje« ni nobenega razloga.
»Če upoštevamo, da smo v konjunkturi, bi morali imeti presežek,« meni Jaklič.
Maks Tajnikar: ni razloga, da se ne bi primanjkljaj znižal tudi letos, bo lahko vlada
kljub fiskalnemu pravilu in zahtevam Bruslja lažje uresničila že izvedene
»odpustke« kot tudi dane obljube. Med drugim sporazum s sindikati javnega
sektorja, spremembe socialne zakonodaje, dvig najnižjih pokojnin, zdravstveno
reformo…

8.
Data on the budget
- Current data on expenditure and revenue of public sector:
http://www.mf.gov.si/si/delovna_podrocja/javne_finance/tekoca_gibanja_v_javni
h_financah/konsolidirana_bilanca_javnega_financiranja/
- Budget planning – current budget for 2016:
http://www.mf.gov.si/si/delovna_podrocja/proracun/sprejeti_proracun/2016/spre
jeti_proracun_republike_slovenije_za_leto_2016/
- Up-to-date official analysis:
http://www.mf.gov.si/si/delovna_podrocja/javne_finance/tekoca_gibanja_v_javni
h_financah/bilten_javnih_financ/
- Newspaper reports: https://www.dnevnik.si/1042759993/slovenija/lanski-
proracunski-primanjkljaj-150-milijonov-evrov-nizji-od-predvidenega

9.
First observations
• We spend more than we get revenue – 9 bln EUR expenditure from the budget,
8,31 bln EUR income. This creates a deficit of 687 mio EUR.
• This deficit was much larger in 2015: 1.277 mio EUR
• Even the deficit we were planning for 2016 was larger: 839 mio EUR.
• Slovenia has a primary budget surplus – we‘ve paid 1,05 bln Eur for interest on
our loans, without those we would have a surplus of 364 mio EUR.
• THESE ARE FACTS THAT SHOULD BE REPORTED.

10.
Analysis:We need to compare this in time and space
In order to do so, we usually compare deficit with GDP – it is a proxy for
measuring if we will be able to finance our expenditure.
In 2016, we do not have the estimated GDP yet. Officially, UMAR was predicting
exactly 40 bln Eur of GDP for 2016 (but they are usually wrong !). This means we
had a estimated budget deficit of 1.7 % of GDP.
• We need to compare this for Slovenia for longer time period (the best result
since 2008 – but we have never had a surplus – ever !)
• We need to compare this with other countries (Germany – surplus !)
• Official data source: EUROSTAT - http://ec.europa.eu/eurostat/data/database

11.
Analysis: What does that mean ?
• Can we spend
more now ?
• YES, but…

12.
What does it mean ?
• …not necessarily ! We made commitments to the EU and our lenders that we
will keep lowering the deficit and try to repay our debts !
• Check the deficit targets for 2017:
http://www.mf.gov.si/si/delovna_podrocja/proracun/sprejeti_proracun/
• Some signs are not too promising:
http://www.delo.si/gospodarstvo/finance/bruselj-v-sloveniji-tveganje-krsitve-
proracunskih-pravil-eu.html
• Analyse why the deficit is lower than expected: expenditure was low, but also
tax receipts !

13.
Conclusion
• If we want to keep our obligations (and we are legally obliged to do so !) we
need to keep lowering our deficit.
• But tax receipts are only 2.7 % higher that last year – in spit of fast growth
(close to 3 % in real terms, probably more than 3 % in nominal terms – check
Stat.si for nominal data, not real data since they use fixed prices) !
• The reason for low deficit is strong control over budget expenditure !
• Essentially, austerity measures !

14.
Political economy
Technically, it is clear what needs to be done: we need to keep lowering the
deficit.
• In the past, we succeeded due to austerity measures. We‘ve increased the
taxes but failed to collected more of them.
• Now, at least 2 of the coalition parties are opposing austerity measures in spite
of the legal requirements to continue lowering deficit (there are good economic
reasons for that, too). But technically&economically this is not a question.
• This is a political question ! Next year, the elections are coming and each party
wants to get more money for its voters.

15.
ANY
QUESTIONS ?

16.
MICRO-ECONOMICS
Study of the economic behavior of
individual units of an economy
(such as a person, household, firm, or industry)

17.
Case: Cimos

18.
Data sources for micro
◻Annual reports:
http://www.cimos.eu/index.php?page=letna_ p
orocila&item=99
◻However: good analysis of Cimos ! -
http://www.drugisvet.com/naslovnica/ali-res-
resujemo-cimos.html

19.
ANALYSIS - MICRO
◻How much is Cimos worth ? Why ?
◻Simple rule: calculate its net present value by
adding and discounting its future positive and
negative cash flows.
◻You have all the data in teh annual reports –
for the past (use cash flow or EBITDA)!

20.
Analysis
◻However, how will you know about the future ?
◻However, these calculations might have
different results for different investors !
⬜The calculation for the government is different
(unemployment benefits) than for the current
owners (banks) than for the single investor left.

21.
Analysis
◻ This depends on the plans that will influence their
future cash flows.
◻ Who knows what will happen in next 5-10 years with
CIMOS ?

22.
Analysis: what can happen ?
◻ Scenario 1: It goes bankrupt
◻ Scenario 2: It continues the same way it has in the
past
◻Scenario 3: It is bought and sold its assets

23.
Analysis
◻If it goes bankrupt it will cost the government
(actually 2 government !) unemployment
benefits and lost taxes that would be paid. In
Slovenia, there are 2000 employees.
⬜Outside Slovenia another 3000.

24.
Analysis
◻CIMOS Group is still making app. 30 million
EBITDA per year. But the core company‘s
EBITDA has fallen to 15 million in 2015 (do not
forget they also have the 2016 data already but it is not
public yet).
◻It could fall further is revenue from sales fall
faster than its costs. !

25.
Analysis
◻ Rule of thumb I use: 5 years EBITDA is the value of
the company. In CIMOS: 150 million EUR.
◻ The offer from potential buyer is 105 million + 70 million
into equity = 175 million EUR
◻This is based on the assumption it will continue
to be as profitable as before ! But…

26.
Analysis
◻But the company still has 190 million EUR of
loans and obligations (270 mil. In the whole
group) and app. 235 million EUR of assetss
(320 in the whole group).
◻Quite big difference between the core
company and the group !

27.
Analysis
◻And CIMOS‘es customers are very reluctant to
continue working with company that is in very
bad financial situation: it has only 42 million EUR
capital but 270 million obligations (15%:85%).
They might prefer to buy from its competitors if
its financing structure does not improve (that is
why the acquirer wants to invest 70 mil EUR in
equity).

28.
WHAT WILL
HAPPEN ?

29.
Most common mistakes I see in the articles
◻ Send questions by email and just publish answers (no
insights !) - TAKE YOUR TIME TO DO PROPER ANALISYS
◻ Using one-sided sources – challange yourself with
reading the opinions that you do not agree with !
◻ Non-critical quoting of sources (all they say) – a lot of the
sources have agenda (remember the mayor from the
morning)?

30.
Most common mistakes I see in the articles
◻Too much focus on non-stories and ingorant
about other stories (CIMOS vs. OUTFIT7)

31.
•Gathering data
•Analyzing data and developing the idea
•Presenting your idea !
Good project work requires…

32.
• Structure
• Written text
• Emphasis (design elements, graphs…)
• Delivery (passion)
• DIFFERENTIATION
Rules for good presentations…