COMMISSION STAFF WORKING DOCUMENT Country Report Slovenia 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2019-02-27
Institutions: European Commission, Secretariat-General
Subjects: Slovenia, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2019  SWD(2019) 1023 final  COMMISSION STAFF WORKING DOCUMENT Country Report Slovenia 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2019) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Reform priorities 

3.1.  Public finances and taxation 

3.2.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Competitiveness reforms and investment 

Annex A: Overview Table 

Annex B: Commission Debt Sustainability Analysis and Fiscal Risks 

Annex C: Standard Tables 

3 

6 

12 

16 

16 

23 

26 

31 

43 

47 

48 

Annex D: Investment Guidance on Cohesion Policy Funding 2021-2027 for Slovenia 

54 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators 

Table 2.1: 

Assessment of 2018 Country-Specific Recommendations (CSRs) 

Table 3.2.1: 

Financial soundness indicators - all banks in Slovenia 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1: 

Composition of GDP growth 

Graph 1.2: 

Composition of potential growth 

Graph 1.3: 

Labour market developments in Slovenia 

1 

60 

11 

13 

23 

48 

49 

50 

51 

52 

53 

6 

6 

7 

 
 
 
 
Graph 1.4: 

Export market shares 

Graph 1.5: 

Net International Investment Position (NIIP) by sector 

Graph 1.6: 

Debt decomposition 

Graph 1.7: 

Change in pro capita GDP from 2007 to 2016 

Graph 2.1: 

Level of implementation of 2011-2018 CSRs 

Graph 3.1.1:  Gross debt as % of GDP - Debt Sustainability Analysis 

Graph 1: 

Distributional (on the left) and labour supply (on the right) effects for both scenarios 

Graph 3.3.1:  Activity rate by age and educational attainment in 2017 

Graph 3.3.2:  Reasons for inactivity by age and sex, 2016 

Graph 3.3.3:  Labour shortages, Slovenia 2008-2018 

Graph 3.3.4:  At risk of poverty or social exclusion rate and its components 

Graph 3.4.1:  Labour productivity and total factor productivity (TFP), Slovenia and Euro area 

Graph 3.4.2: 

Investment by type 

Graph 3.4.3:  R&D funding 

LIST OF BOXES 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to fostering 

growth and competitiveness in Slovenia 

Box 3.1.1: Shifting taxation from labour to immovable property 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.1: Barriers to investment in Slovenia 

8 

8 

9 

10 

12 

17 

22 

26 

26 

27 

29 

31 

31 

32 

15 

22 

30 

35 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

remains 

Slovenia’s  economy,  currently  experiencing  a 
robust  growth,  can  be  made  more  resilient  to 
future  shocks  by  increasing  investment  and 
addressing  the  challenges  related  to  its  ageing 
population (1).  The  economy  is  growing  strongly 
and 
internationally. 
competitive 
Investment is growing, but it is still below the EU 
average  as  a  share  of  GDP,  which  slows  down 
Slovenia’s  convergence  in  terms  of  productivity. 
Social  indicators  generally  signal  progress,  while 
inequality  (between  both  citizens  and  regions)  is 
below  the  EU  and  OECD  average.  The  banking 
sector  has  improved  further,  also  thanks  to  the 
favourable economic climate. Structural reforms of 
the pension, healthcare and long-term care systems 
are becoming increasingly urgent if Slovenia is to 
ensure that it remains on a sustainable growth path.  

In 2018, Slovenia’s economy  continued to grow 
strongly. After achieving a growth rate of 4.9 % in 
2017, GDP is expected to have expanded robustly 
in 2018 with growth of 4.4 %. Economic growth is 
expected  to  slow  to  3.1 %  in  2019  and  2.8 %  in 
2020,  closer 
to  Slovenia’s  potential  growth. 
Although  the  expected  slowdown  is  not  dramatic, 
it is  nevertheless an indication that the  favourable 
economic  climate  of  recent  years  is  unlikely  to 
continue. 

Economic  growth 
is  mostly  driven  by 
investments.  The  main  drivers  of  private 
investment are expected to be: fully or almost fully 
employed  production  facilities,  increasing  labour 
costs and better availability of funding.  

The  unemployment  rate  continues  to  decline 
towards  its  pre-crisis  level.  Helped  by  economic 
growth,  the  unemployment  rate  fell  to  5.6 %  in 
2018,  and  is  expected  to  fall  further  in  2019  and 
2020.  The  rate  of  long-term  unemployment  was 
less  than  3 %  at  the  end  of  2018,  which  is  still 
above  the  pre-crisis  level  but  below  the  average 

(1)  This  report  assesses  Slovenia’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey published 
on 21 November 2018. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
European  economy  more  productive, 
resilient  and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  delivering  high-quality  investment, 
efforts  on  productivity  growth, 
reform 
focusing 
inclusiveness  and 
institutional  quality,  and  ensuring 
macroeconomic stability and sound public finance. 

rates in the EU (3.4 % in 2017) and the euro area 
(4.4 %). 

The  inflation  rate  stabilised  at  1.9 %  in  2018. 
Energy and fuel prices were the main drivers of the 
increase  in  inflation.  As  nominal  compensation 
(i.e. without controlling for inflation) per employee 
is projected to have increased by 3.9 %, real wages 
will have increased by about 2 % in 2018.  

Fiscal  policy  is  becoming  pro-cyclical.  In  2017, 
the  general  government  balance  turned  positive, 
(i.e.  government  revenues  exceeded  government 
spending), rising from a negative balance of 1.9 % 
of GDP in 2016 to a  positive balance of 0.1 % of 
GDP in 2017. The government balance is expected 
to have increased to 0.8 % of GDP in 2018. Public 
debt  is  forecast  to  decrease  further  to  62.5 %  of 
GDP  in  2020,  from  a  peak  of  82.6 %  in  2015, 
thanks  primarily  to  the  economic  recovery  and 
interest 
active  debt  management 
payments. However, the structural deficit, that is if 
taking  Slovenia’s  position  in  the  business  cycle 
into  account,  deteriorated  from  0.4 %  in  2017  to 
0.5 %  in  2018,  and  is  expected  to  deteriorate 
further in 2019. Temporary consolidation measures 
are  now  expiring  and  a  substantial  pay  rise  in  the 
public  sector  was  agreed.  The  Fiscal  Council 
repeatedly  stated  that  the  intended  fiscal  policy 
would be pro-cyclical.  

reduce 

to 

while 

growth, 

on 
and 

investment (2) 
skills, 
Focusing 
energy 
transport 
environmental, 
infrastructure,  as  well  as  on  research  and 
development  would  strengthen  competitiveness 
and  productivity.  Investment  as  a  share  of  GDP 
in  Slovenia remains below the EU average.  Skills 
constraints and a  slow digital transformation  limit 
productivity 
insufficient 
environmental  infrastructure,  lacking  sustainable 
transport  connections  and  a  low  share  of  green 
energy  hinder  economic  development  in  less 
developed regions. The underused labour potential 
of older workers is a challenge to inclusive growth. 
Population ageing calls for significant investments 
in measures to ease pressure on the healthcare and 
long-term 
research, 
systems. 
development  and  innovation  ecosystem  remains 
inefficient.  There  are  only  weak  links  between 
businesses  and  research  institutions.  Annex  D 
the 
identifies  key  priorities  for  support  by 

care 

The 

(2)  Both private and public investment. 

3 

 
 
                                                           
                                                           
Executive summary 

  Healthcare  -  Slovenia  has  not  proposed  any 
clearly  specified  measure 
the 
Country-Specific Recommendations. However, 
as  announced  by  the  authorities,  the  adoption 
of  the  draft  healthcare  act  will  follow  by  the 
end of 2019. 

to  address 

  Long-term  care  -  No  concrete  measures  have 
been taken, and there is no agreed timetable for 
a  concrete  legislative  proposal.  A  two-year 
pilot project has been initiated in 2018. 

  Pensions  -  No  concrete  measures  have  been 
taken to ensure the long-term sustainability and 
adequacy  of  the  pension  system,  whether  by 
increasing  the  statutory  retirement  age  or  by 
restricting early retirement.  

Regarding  progress  towards  its  national  targets 
under  the  Europe  2020  strategy,  Slovenia  has 
already achieved – or is well on track to achieving 
– national targets for the early school leaving rate, 
tertiary  educational  attainment,  energy  efficiency 
and greenhouse gas emissions. However, Slovenia 
is  moving  away  from  the  2020  renewable  energy 
target  and  the  R&D  spending  target  (in  2017, 
Slovenia's  overall  R&D  intensity  was  1.86 %  of 
GDP,  a  significant  decline  from  its  2013  value  of 
2.58 %  of  GDP).  The  employment  rate  is  now 
moving closer to the target. 

European  Regional  Development  Fund, 
the 
European Social Fund Plus and the Cohesion Fund 
over  2021-2027  in  Slovenia,  building  on  the 
investment  needs  and  challenges 
analysis  of 
outlined in this report. 

Overall,  Slovenia  has  made  limited  progress  in 
country-specific 
addressing 
recommendations (3).  

2018 

the 

There  has  been  some  progress  in  the  following 
areas. 

  Alternative  sources  of  financing  for  fast-
growing  companies  -  Slovenia  is  preparing 
further  EU-funded 
to  improve 
equity funding. 

instruments 

  Barriers  for  market  entry  and  administrative 
burden - The Investment Promotion Act brings 
improvements  but  administrative  burden  and 
regulatory restrictiveness remain problems. 

  Privatisation - Slovenia made an important step 
in  carrying  out  privatisations  by  privatising 
65 %  of  the  shares  of  its  largest  bank,  Nova 
Ljubljanska  Banka  (NLB),  which  was  until 
then  fully  owned  by  the  state,  and  launching 
the  sales  process  for  Abanka,  the  third  largest 
Slovenian bank. 

There  has  been  limited  progress  in  the  following 
areas. 

Key structural issues analysed in this report, which 
to  particular  challenges  for  Slovenia’s 
point 
economy, are the following. 

  Older and low skilled workers - The Slovenian 
government continued its efforts to increase the 
employability of low-skilled and older workers 
learning  and  activation 
through 
measures.  However,  participation 
in  adult 
learning  is  still  low,  especially  for  this  target 
group. 

lifelong 

  Public  procurement  -  Slovenia  has  adopted  an 
action  plan  to  professionalise  procurement 
further, but the situation remains unchanged as 
regards competition and independent oversight. 

There has been no progress in the following areas. 

(3)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in the Annex. 

is  presented 

in 

  Slovenia 

is 

Income 

inequality 

is  performing  well  on  most 
indicators  of 
the  Social  Scoreboard 
supporting  the  European  Pillar  of  Social 
Rights. 
low.  The 
education  and  training  system  is  generally 
performing  well,  but  fairness  in  the  system 
could  be  improved.  The  risk  of  poverty  and 
social exclusion has decreased in recent years. 
However,  the  labour  market  participation  of 
older  workers  and  low-skilled  is  low  and  the 
old-age poverty still remains a challenge.  

  The  ageing  of  the  population  is  putting  a 
strain on the pension, healthcare and long-
term  care  systems.  Age-related  expenditure 
is  expected  to  increase  by  six  percentage 
points of GDP between 2016 and 2070, one of 

4 

 
 
                                                           
Executive summary 

progress  with  privatisation  in  the  banking 
sector.  However, 
the  state  still  plays  a 
dominant  role  in  many  sectors.  This  carries  a 
risk  of  distortion  in  competition  and  resource 
allocation. 

  Slovenia’s 

for 

their 

small 

external 

and  medium-sized 
enterprises (SMEs) rely extensively on bank 
credit 
financing. 
Slovenia’s  venture  capital  market  is  still  less 
developed  than  those  of  other  Central  and 
Eastern  European  countries.  The  market 
capitalisation of the national stock exchange is 
low 
financial 
instruments  heavily  depend  on  EU  funding. 
The  lack  of  alternative  sources  of  finance, 
and 
limited 
combined  with 
investment 
literacy  among  many  SMEs, 
makes  Slovenia’s  SMEs  less  resilient  if  bank 
credit  becomes  more  expensive  or 
less 
available in the future. 

shrinking. 

financial 

Public 

and 

the  highest  increases  in  the  EU.  The  main 
driver of this is pension expenditure, with the 
total  amount  spent  on  public  pensions 
expected  to  increase  from  11 %  of  GDP  in 
2020  to  15.6 %  in  2050.  This  increase  can 
partially  be  explained  by  the  early  exit  from 
the  labour  force. However, ensuring adequate 
pensions remains a challenge, as some pension 
recipients are still at or below the poverty line. 
Financing 
is 
currently  highly  cyclical  and  inadequate  to 
face  the  expected  cost  increases  from  the 
technological 
ageing  of  population  and 
change. Waiting times and public procurement 
in healthcare are still inefficient despite recent 
efforts  to  improve  it.  The  authorities  have 
announced  that  the  adoption  of  the  draft 
Healthcare Act will follow by the end of 2019. 
Slovenia  does  not  have  an  overarching  law 
that covers long-term care.  

the  healthcare  system 

for 

  Although 

the  business  environment 

is 
improving,  restrictive  regulations  and 
administrative  burden  remain,  as  well  as 
certain  weaknesses  in  public  procurement 
remain.  Regulatory restrictions, including  for 
key  professions,  and  administrative  burdens 
are  still  perceived  as  obstacles  to  investment, 
and  are  considered  to  be  one  of  the  most 
problematic  factors  when  doing  business  in 
Slovenia.  Often  lengthy  commercial  court 
proceedings  could  influence  the  readiness  of 
companies to enter the market or invest. There 
is  further  scope  to  improve  competition, 
transparency  and  independent  oversight  in 
public procurement. The share of procurement 
procedures  for  which  only  one  bid  was 
received  remains  high  as  does  the  share  of 
procurement  done  without  a  call  for  tenders. 
Strengthening  safeguards  against  bid  rigging 
and  corruption  would  also  reduce  the  risk  of 
unnecessarily high procurement costs.  

 

Inactivity  rates  of  older  and  less  skilled 
workers  are  high  while  labour  shortages 
are  emerging.  The  inactivity  rate  of  55-64 
year-olds  is  significantly  higher  than  the  EU 
average as  is  their unemployment rate.  Long-
term  unemployed  people  over  50  represent  a 
substantial  share  of  the  total  number.  This 
means that a significant part of the workforce 
is  losing  contact  with  the  work  environment. 
A  mismatch  between  the  skills  young  people 
acquire  at  school  or  in  tertiary  education  and 
the  skills  sought  after  by  employers  may  be 
contributing to the emerging labour shortages. 

banks’ 

the  steady  decline 
loans, 

  The  situation  of  the  Slovenian  banking 
sector  has 
improved  significantly,  but 
challenges  remain  and  new  risks  emerge. 
Thanks 
in  non-
to 
performing 
profitability, 
solvency  and  asset  quality  have  improved. 
Still,  banks  need  to  find  new  sources  of 
income and control costs to remain profitable. 
House  prices  are  growing  fast  but  household 
debt  and  stock  of  loans  to  the  construction 
sector remain low. Strong growth in consumer 
lending  raises  credit  risk  and  led  Bank  of 
Slovenia  to  issue  specific  recommendations. 
With  the  partial  privatisation  of  NLB  in 
November  2018  and  the  initiation  of  the 
privatisation of the third largest bank, Abanka, 
is  making  good 
by  mid-2019  Slovenia 

5 

 
 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

Graph 1.2:  Composition of potential growth 

In  2018,  Slovenia’s  GDP  is  assumed  to  have 
grown  by  4.4 %,  following  the  4.9 %  annual 
growth  recorded  in  2017.  Over  the  first  three 
quarters  of  2018,  investments  grew  by  11.0 % 
compared  to  the  same  period  in  2017.  Investment 
growth  was  particularly  strong  in  non-residential 
in  machinery  and 
construction  (19.5 %)  and 
equipment 
residential 
construction  grew  by  5.0 %.  During  the  same 
period,  private  consumption  increased  by  1.8 %, 
despite  relatively  strong  growth  in  households’ 
disposable  income.  Exports  increased  by  8.3 %, 
slightly less than imports which grew by 8.5 %.  

Investment 

(8.6 %). 

in 

Graph 1.1:  Composition of GDP growth 

Source: European Commission Autumn 2018 forecast 

is 

growth 

potential 

rapidly 
Slovenia’s 
recovering.  After  the  crisis,  the  country’s  growth 
potential  was  held  back  by  low  investments  and 
low  total  factor  productivity  growth.  In  2018, 
investment  had  a  positive  impact  on  potential 
growth for the first time in several years, and total 
factor  productivity  also  contributed  positively 
labour’s 
(Graph 1.2). 
contribution 
the 
population  ages  and  therefore  the  availability  of 
labour  diminishes.  Overall,  potential  growth  is 
currently expected to stabilise at 3 %. 

In 
the  coming  years, 
to  growth  will  diminish  as 

Inflation 

Inflation  remains  moderate.  In  2018,  it  reached 
1.9 %. Over the coming years, inflation is expected 
to  moderately  increase,  driven  by  energy  prices 
and  expected  wage  growth.  As  the  labour  market 
becomes  tighter  and  wage  growth  continues,  it  is 
expected  that  core  inflation  will  reach  1.8 %  by 
2020  —  driven  mainly  by  the  price  increase  in 
services. 

Labour market 

The robust economic growth of recent years has 
also  boosted  the  labour  market.  Employment 
growth  was  sustained  (2.9 %  in  2017),  with  job 
creation  across  most  sectors.  The  unemployment 
rate  continued  to  decline,  falling  from  8.0 %  in 
2016  to  6.6 %  in  2017.  In  the  same  period,  the 

6 

Source: European Commission Winter 2019 forecast 

Economic  growth  is  forecast  to  slow  down  to 
3.1 %  in  2019  and  2.8 %  in  2020.  The  growth 
composition  is  expected  to  shift  more  towards 
domestic  demand,  with  net  exports  making  a 
negative  contribution  by  2020  (Graph 1.1).  In  the 
medium  term,  growing  employment  and  rising 
wages  are  expected  to  continue  to  support  private 
consumption.  Investment  is  expected  to  be  driven 
by  high  capacity  utilisation  rates  and  a  tightening 
labour  market.  Amid  high-income  growth,  high 
household  savings  and  rapidly  rising  residential 
real estate prices,  residential investment growth is 
forecast to remain strong over the forecast horizon. 
the  external 
Risks  are  mainly 
environment. 

related 

to 

-6-4-2024611121314151617181920% of GDPPublic consumptionNet exportsInventoriesPrivate consumptionInvestmentReal GDPforecast-1,0-0,50,00,51,01,52,02,53,03,54,0050709111315171921Rate of change y-o-y (%)Capital Accumulation ContributionTFP ContributionTotal Labour (Hours) ContributionPF Potential Growth 
 
 
 
 
1. Economic situation and outlook 

activity rate increased from 76.2 % to 78.6 % (See 
Graph 1.3). 

Graph 1.3: 

Labour market developments in Slovenia 

Social developments 

Inequality  in  Slovenia  is  low  and  the  share  of 
people  at  risk  of  poverty  and  social  exclusion 
has decreased, but remains high for the elderly. 
The  at-risk-of-poverty  or  social  exclusion  rate  for 
people over 65 was 18.3 % in 2017, above the all-
age-groups rate of 17.1 %. Inequality, as measured 
by  the  ratio  of  incomes  of  the  richest  20 %  of 
households compared to the incomes of the poorest 
20 %  of  households,  continued  to  decrease  and 
remains among the lowest in the EU. 

Competitiveness 

continued 

competitiveness 

Sloveniaʼs 
to 
improve  in  2017.  After  a  small  loss  of  export 
market  share  in  2015,  Sloveniaʼs  export  market 
share  increased  by  6.8 pps  in  2016  and  5.6 pps  in 
2017.  (Graph  1.4).  This  increase  was  driven  by 
increases in both the export of goods and services. 
Combined  with  modest  productivity  growth,  the 
nominal wage growth led to an increase in nominal 
unit  labour  costs  of  1.3 %  in  2017.  The  effect  on 
cost  competitiveness  appears  to  be  limited,  as 
nominal  wage  growth  in  2017  remains  only 
slightly  above  the  benchmark  indicator  for  cost 
competitiveness in both 2017 and 2018 (4). 

Unit  labour  costs  are  expected  to  grow  faster 
between 2019 and 2020. Higher unit labour costs 
and  less  demand  for  exports  are  expected  to 
contribute  to  somewhat  slower  export  growth. 
However,  Slovenia’s  export  market  shares  should 
continue  improving  in  2019  and  remain  stable  in 
2020.  Imports  are  forecast  to  grow  faster  than 
exports due to the stronger domestic demand.  

(4)  This  hypothetical  benchmark  developed  by  the  European 
Commission compares actual wage developments with the 
wage growth that would be consistent with a constant real 
effective exchange rate based on unit labour costs.  

(1) Activity and employment rates (% of population), total, 
ages 20-64, non-seasonally adjusted. 
(2) Unemployment rate (% of labour force), total, ages 15-
74, seasonally adjusted. 
Source: Eurostat 

Despite  these  positive  developments,  structural 
challenges remain. The working-age population is 
shrinking as a result of demographic change. This 
could  hamper  economic  growth  in  the  future.  It 
also  poses  challenges  to  the  sustainability  and 
adequacy of the pension, health care and long-term 
care 
labour-market 
participation  remains  low  for  older  workers,  in 
particular those with lower levels of education. 

addition, 

systems. 

In 

The  tightening  labour  market  is  putting  some 
upward  pressure  on  wages,  although  wage 
growth remains somewhat lower than expected. 
Nominal compensation per employee increased by 
3.2 %  and  by  1.5 %  in  real  (GDP  deflated)  terms 
(remaining  somewhat  below  productivity  growth) 
in  2017.  This  growth  rate  is  projected  to  reach 
3.3 %  in  2018  and  2019.  Nominal  compensation 
per  employee  increased  in  2017  the  most  in  the 
finance and business services sector (4.6 %) and in 
the  building  and  construction  sector  (4.3 %). 
Despite  increasing  shortages  being  reported,  the 
industry  sector  exhibited  the  lowest  increase  in 
nominal compensation per employee (2.9 %). 

7 

024681012455055606570758085010305070911131517% of population% of labour forceUnemployment rate 15-74 (rhs)Activity rate 20-64Employment rate 20-64 
 
                                                           
1. Economic situation and outlook 

current  account 

The  high 
surplus  has 
contributed  to  the  improvement  of  the  net 
international  investment  position.  The  banking 
sector,  which  previously  had  a  large  negative 
position, has now built up net foreign assets. Non-
financial  corporations  and  the  government  have 
(Graph  1.5). 
also 
direct 
Liabilities 
investments  are  comparatively  small.  The  net 
international  investment  position  is  expected  to 
further  improve  thanks  to  the  current  account 
surplus and fall in government debt. 

associated  with 

liabilities 

lowered 

foreign 

their 

Financial sector 

Slovenia's financial sector has a relatively stable 
funding basis and abundant liquidity. However, 
this  liquidity  exerts  considerable  pressure  on 
profitability.  The  growing  maturity  mismatch 
between 
loans  and  sight  deposits 
exposes  banks  to  a  sudden  rise  in  interest  rates. 
The Slovenian state still plays a substantial role in 
the  financial  sector  despite  some  significant 
divestments  in  the  last  quarter  of  2018  and  the 
future privatisations planned for 2019. 

long-term 

Private debt 

The deleveraging process appears to have come 
to  an  end  as  credit  flow  from  banks  to  the 
domestic  economy  has  become  positive  again. 
Since  the  indebtedness  ratio  peaked  in  2010  (at 
125.4 % of GDP), private sector debt decreased to 
82.5 %  of  GDP  in  2017  (Graph  1.6)  and  is  now 
below 
fundamental 
benchmarks (5).  Both  profits  and  wages  are 
increasing, while domestic and export demand are 
forecast  to  grow  and  credit  remains  relatively 
inexpensive. 

prudential 

both 

and 

(5)  Fundamental-based 

are 

derived 

from 
benchmarks 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential  thresholds  represent  the  debt  threshold  beyond 
which  the  probability  of  a  banking  crisis  is  high, 
minimising the probability of missed crisis and that of false 
alerts (European Commission, 2017b). 

Graph 1.4: 

Export market shares 

Source: Eurostat 

External position 

Sloveniaʼs  current  account  has  been  in  surplus 
since  2011,  reaching  7.2 %  in  2017.  While  both 
goods  and  services  balances  are  in  surplus,  the 
surplus in services is especially strong. The current 
account  surplus  is  higher  than  might  be  expected 
based  on  the  economic  fundamentals  and  also 
considering  the  cyclical  position  of  the  economy. 
The  surplus  is  expected  to  gradually  decline  over 
the  medium  term,  as  investment  and  consumption 
increase. 

Graph 1.5:  Net International Investment Position (NIIP) by 

sector 

Source: Eurostat 

8 

-25-20-15-10-505101520010305070911131517Rate of change y-o-y (%)Contribution: World export growth (euros, neg. Sign)Contribution: Export growth (euros)Export market share growth rate-80-60-40-200204010Q211Q212Q213Q214Q215Q216Q217Q218Q2% of GDPGeneral GovernmentPrivate sectorMFI (excl central bank)Central Bank (incl reserves)Net int'l investment position (NIIP) 
 
 
 
                                                           
Graph 1.6:  Debt decomposition 

Source: Eurostat 

Housing market 

factors.  The 

Increases  in  the  prices  of  real  estate  reflect  the 
recovery  of  the  Slovenian  economy.  The  robust 
GDP  growth  is  being  supported  by  employment, 
private  consumption,  consumer  confidence,  and 
bank  loans  to  households,  which  are  all  co-
dependent 
favourable  economic 
situation  led  to  increasing  demand  for  real  estate 
but  supply  has  not  responded.  House  prices  have 
therefore  been  increasing  strongly  since  summer 
2016,  reaching  13.4 %  growth  in  the  first  half  of 
2018. While the prices of existing dwellings grew 
at 11.7 %, those of new dwellings rocketed in price 
by 26.8 %. Slovenia has now the highest growth in 
house prices of all EU Member States.  

Despite  the  strong  increase  in  house  prices, 
there  is  no  indication  of  a  new  real  estate 
bubble.  House  price  growth  seems  mainly  linked 
to the current limited supply of new residential real 
estate  that  is  pushing  up  prices  up.  It  is  expected 
that  with  an  increase  in  construction  activity 
residential  real  estate  price  dynamics  could 
moderate  substantially  in  the  near  future.  Low 
household debt, moderate growth of housing loans 
and a low stock of loans to the construction sector 
indicate  that  there  is  no  sign  of  increased  risk  to 
the banking system. 

Although the aggregate valuation gap  indicates 
that  prices  were  undervalued  in  2017,  the 
recovery  pace  should  be  carefully  monitored. 

1. Economic situation and outlook 

Risks  could  increase  in  the  event  of  excessive 
optimism about further growth in real estate prices. 
The  Bank  of  Slovenia  already  issued  two  macro-
prudential recommendations  for the housing loans 
sector at the end of 2016 and has extended them in 
late  2018.  Up 
these 
recommendations  seem  to  be  effective.  However, 
it is important that banks continue to maintain high 
credit standards in their housing loans. 

to  now,  both  of 

Regional disparities  

in 

shares 

While  not  as  pronounced  as  in  other  EU 
Member  States,  disparities  exist  between 
Slovene  regions.  Slovenia  has 
two  cohesion 
regions,  less  developed  East  Slovenia  and  more 
developed  West  Slovenia  with  GDP  per  head  of 
EUR  16 000  and  EUR  23 400  respectively,  the 
latter just below the EU average (Statistical Office 
of the Republic of Slovenia). Slovenia’s economic 
structure  differs  between  its  regions  with  high 
employment 
and 
manufacturing  in  the  East  and  a  comparatively 
stronger  service  sector  in  its  capital  and  the  West 
(European  Commission,  2017a)  (see  sections  3.1 
and  3.3).  At  the  level  of  statistical  regions,  a 
downward  convergence  trend  can  be  observed 
since  2007,  with  more  developed 
regions 
experiencing  a  sizeable  reduction  in  GDP  per 
capita, while less developed ones managed to stay 
at  approximately  the  same  levels.  The  latter  can 
also  be  attributed  to  targeted  investments  in  less 
developed  regions,  including  through  EU  funds, 
which remain key for ensuring convergence. 

agriculture 

Labour  market  and  socio-economic  conditions 
vary  between  regions.  Unemployment  rates  are 
below  the  EU  average  with  low  differences 
between  East  and  West  Slovenia.  West  Slovenia, 
however,  shows  significantly  higher  employment 
rates  in  high-technology  and  knowledge-intensive 
services sectors as compared to East. The share of 
the population with tertiary education is quite high 
(46.4 %) and well above the EU average (39.9 %). 
Nevertheless, 
there  are  significant  disparities 
between  cities/urban  centres  on  one  hand  and 
smaller  towns/rural  areas  on  the  other.  Socio-
economic indicators show a major divide between 
the  growing  capital  that  alone  attracts  skilled 
people  in  higher  value-added  sectors  and  the  rest 
of  the  country  where  gains  in  employment  are 
concentrated  in  lower-value-added  sectors  amid 
outward  migration.  Yet  even  the  attractive  capital 

9 

0501001502002500405060708091011121314151617% of GDPFinancial corporationsGovernmentHouseholdNon financial corporationsPrivate sectorPrivate sector EU 
 
 
region is facing the challenges of declining labour 
productivity  and  capacity  constraints  linked  to  a 
shortage of skills. Such inequalities can be tackled 
the 
through  bottom-up 
initiatives,  utilising 
local  development  approach, 
community 
targeting 
deprived 
persons/areas. 

socio-economically 

led 

Graph 1.7:  Change in pro capita GDP from 2007 to 2016 

1. Economic situation and outlook 

employees  are  expected  to  grow  firmly  in  2019, 
driven  by  a  continuing  relaxation  in  temporary 
restrictive  measures  and  negotiations  with  trade 
unions.  At  the  same  time,  public  investment  is 
projected  to  increase,  supported  by  the  improved 
take-up of EU funds. Taking all this into account, 
the  government  surplus  is  forecast  to  slightly 
decline  to  0.7 %  of  GDP  in  2019.  In  structural 
terms,  Slovenia’s  fiscal  position  is  expected  to 
worsen  to  -0.6 %  of  GDP  in  2019  and  stay 
unchanged  in  2020,  indicating  that  the  country  is 
engaged in a pro-cyclical fiscal policy. 

to  62.5 %  of  GDP 

The  debt-to-GDP  ratio  continues  to  decline. 
Supported  by  the  economic  recovery  and  active 
debt  management,  public debt is forecast to come 
in  2020. 
down  steadily 
Nevertheless,  the  long-term  perspective  is  more 
challenging, as government expenditure is forecast 
to  increase  over  the  longer  term,  given  that 
expenditure on pensions, health care and long-term 
care  will  increase  due  to  the  ageing  of  the 
population. 

Source: Eurostat 

Public finances indicators 

The  general  government  overall  balance  is 
expected to stay in surplus for the third year in 
a  row.  In  2017,  the  general  government  balance 
turned  positive,  moving  from  -1.9 %  of  GDP  in 
2016  to  0.1 %  of  GDP.  The  ad-hoc  forecast (6) 
predicts  a  surplus  of  0.8 %  of  GDP  for  2018, 
mainly  due  to  strong  revenue  growth,  reduced 
interest  expenditure  and  low  absorption  of  EU 
funds. Social transfers and compensation of public 

6   The  Commission  Winter  2019  forecast,  which  was 
published  on  7  February  2019,  only  includes  projections 
for  GDP  growth  and  inflation.  In  order  to  assess  the 
updated draft budgetary plan, the Commission Winter 2019 
forecast  was  complemented  by  a  fully-fledged  “ad-hoc” 
forecast, including in particular projections for the general 
government balance and the structural balance. 

10 

 
 
                                                           
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators 

(1) NIIP excluding direct investment and portfolio equity shares. 
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation. 
Source: Eurostat and European Central Bank as of 31/01/2019, where available; European Commission for forecast figures 
(Winter forecast 2019 for real GDP and HIPC, Autumn forecast otherwise) 

11 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)5,2-1,11,43,14,94,43,12,8Potential growth (y-o-y)3,61,30,61,42,12,73,13,4Private consumption (y-o-y)3,20,40,03,91,9...Public consumption (y-o-y)2,60,7-0,32,70,5...Gross fixed capital formation (y-o-y)7,7-8,90,8-3,710,7...Exports of goods and services (y-o-y)13,00,64,66,410,7...Imports of goods and services (y-o-y) 12,6-1,93,66,610,3...Contribution to GDP growth:Domestic demand (y-o-y)4,2-1,90,11,93,0...Inventories (y-o-y)0,9-0,90,40,70,6...Net exports (y-o-y)0,11,70,90,51,3...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0,10,10,10,30,60,80,90,9Capital accumulation (y-o-y)1,70,6-0,2-0,4-0,20,10,40,6Total factor productivity (y-o-y)1,80,70,81,51,81,81,81,9Output gap3,4-1,5-4,7-1,61,12,73,02,5Unemployment rate5,96,99,68,06,65,65,35,1GDP deflator (y-o-y)2,81,71,10,81,62,22,62,5Harmonised index of consumer prices (HICP, y-o-y)3,12,70,5-0,21,61,91,92,1Nominal compensation per employee (y-o-y)6,32,71,03,03,23,33,33,4Labour productivity (real, person employed, y-o-y)4,0-0,31,21,21,9...Unit labour costs (ULC, whole economy, y-o-y)2,23,0-0,11,81,32,02,52,2Real unit labour costs (y-o-y)-0,61,3-1,31,0-0,3-0,2-0,1-0,3Real effective exchange rate (ULC, y-o-y)0,30,7-0,80,90,70,80,30,1Real effective exchange rate (HICP, y-o-y)-0,4-0,20,10,5-0,41,9-0,2-0,1Savings rate of households (net saving as percentage of net disposable income)9,06,04,55,16,2...Private credit flow, consolidated (% of GDP)14,03,6-4,6-0,80,8...Private sector debt, consolidated (% of GDP)80,6111,997,180,675,6...of which household debt, consolidated (% of GDP)20,229,128,627,427,1...of which non-financial corporate debt, consolidated (% of GDP)60,382,968,653,248,4...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)..15,79,67,0...Corporations, net lending (+) or net borrowing (-) (% of GDP)-6,1-0,17,92,31,52,12,52,8Corporations, gross operating surplus (% of GDP)19,218,819,319,520,420,921,622,4Households, net lending (+) or net borrowing (-) (% of GDP)4,24,24,84,34,84,44,43,9Deflated house price index (y-o-y)12,7-3,7-4,23,86,2...Residential investment (% of GDP)3,73,42,22,12,1...Current account balance (% of GDP), balance of payments-2,6-0,74,95,57,27,57,16,7Trade balance (% of GDP), balance of payments-0,71,37,79,410,0...Terms of trade of goods and services (y-o-y)-0,7-0,91,10,9-0,5-0,5-0,10,2Capital account balance (% of GDP)-0,30,00,6-0,8-0,8...Net international investment position (% of GDP)-15,2-45,1-44,2-36,8-32,3...NIIP excluding non-defaultable instruments (% of GDP) (1)-8,0-40,8-33,7-22,1-17,7...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)72,3108,2112,1103,193,6...Export performance vs. advanced countries (% change over 5 years)35,29,2-7,61,113,3...Export market share, goods and services (y-o-y)..1,76,85,6...Net FDI flows (% of GDP)0,5-0,3-1,6-2,1-1,0...General government balance (% of GDP)-1,1-4,7-7,7-1,90,10,80,70,5Structural budget balance (% of GDP)..-1,5-1,1-0,4-0,5-0,6-0,6General government gross debt (% of GDP)25,539,077,878,774,169,966,262,5Tax-to-GDP ratio (%) (3)37,837,136,937,036,8...Tax rate for a single person earning the average wage (%)34,533,133,233,4....Tax rate for a single person earning 50% of the average wage (%)29,323,522,923,2....forecast 
 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

88  % 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Slovenia  have 
recorded  at  least  ‘some  progress'  (see  Graph 
2.1).  However,  one  out  of  nine  CSRs  have 
recorded  no  or  only  limited  progress  in  the 
implementation. 

Graph 2.1: 

Level of implementation of 2011-2018 CSRs 

(1) The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
(2) 2011-2012 annual assessment: Different CSR assessment 
categories. 
(3) The multiannual CSR assessment looks at the 
implementation until 2019 Country Report since the CSRs 
were first adopted. 
(4) The multiannual CSR assessment looks at the 
implementation until 2019 Country Report since the CSRs 
were first adopted. 
Source: European Commission 

In  2018,  the  political  process  in  Slovenia  was 
stalled by the snap elections held on 3 June 2018 
and  the  difficult  process  of  forming  a  new 
government.  The  new  coalition  government  was 
endorsed  by  the  parliament  only  on  13 September 
2018.  Since  the  resignation  of  the  previous  prime 
minister  on  14 March  2018,  neither  the  caretaker 
government  nor  the  new  government  has  tabled 
reforms 
any  major  policy 
the 
relevant 
the  2018  CSRs (7).  The 
implementation  of 
coalition  agreement  addresses  a  number  of  the 
issues discussed in the CSRs but is not sufficiently 
precise  in  terms  of  substance  and  timing  to 
conclude on progress in the implementation of the 
CSRs and is neither politically nor legally binding. 

to 

(7)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular Section 3. 

The  public  debt  to  GDP  ratio  was  reduced  but 
pressure  on  public  finance  in  the  long  term 
remains.  After  the  almost  fourfold  increase  up  to 
in  2015,  public  debt  has  decreased 
82.6 % 
significantly  since  then  and  is  expected  to  have 
been  at  69.9 %  of  GDP  in  2018.  In  parallel,  the 
fiscal  framework  has  been  strengthened.  Some 
measures  have  been  taken  to  address  the  increase 
in age-related expenditure, but the pressure on the 
long-term  sustainability  of  public  finance  remains 
significant. At the same time, temporary measures 
to contain public expenditure are expiring, leading 
to a pro-cyclical fiscal policy.  

The  situation  of  the  Slovenian  banking  sector 
improved  significantly.  Thanks  to  the  improved 
macro-economic  environment  and  robust  policy 
measures, 
improved 
the  banking  sector  has 
dramatically since 2014. The non-performing loans 
ratio declined sharply to 7.4 % in June 2018, down 
from  11.4 %  one  year  earlier.  At  the  same  time, 
profitability  increased  and  the  average  capital 
adequacy  ratio  is  solid  (18.8 %  in  June  2018) 
renewed  credit  growth.  The  partial 
despite 
privatisation  of  NLB  carried  out  in  2018  and  the 
plan  to  privatise  Abanka  in  the  first  half  of  2019 
represent  important  steps  to  ensure  the  long-term 
viability of the sector. 

Measures  have  been  adopted  to  improve  the 
employability of low-skilled and older workers. 
Since  2011  the  Council  has  recommended  that 
Slovenia  should  take  measures  to  increase  the 
employability  of  low-skilled  and  older  workers. 
The 2013 labour market reform and targeted active 
labour  market  policies 
increased 
employment  opportunities  for  older  and  low-
skilled workers, but their participation rate remains 
low.  

somewhat 

The  Slovenian  authorities  have  taken  action  to 
improve 
the  business  environment.  They 
reduced  administrative  burden,  removed  some 
restrictions  in  regulated  professions,  and  ensured 
better  governance  of  state-owned  enterprises.  A 
comprehensive  corporate  governance  system  for 
state-owned  enterprises  has  been  put  in  place  in 
recent  years.  Between  2010  and  2018,  Slovenia 
reduced the  number of regulated professions from 
323  to  215;  however,  the  initially  fast  progress  in 
this area slowed down in recent years. In 2017, the 
legislation  was 
construction 
planning 

and 

12 

No Progress2%Limited Progress10%Some Progress47%Substantial Progress21%Full Implementation20% 
 
 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of 2018 Country-Specific Recommendations (CSRs) 

Source: European Union 

overhauled  to  reduce  the  previously  high  burden 
resulting from spatial and urban planning. Slovenia 
also  uses  national  and  EU  funding  to  provide 
alternative  funding  for  SMEs  and  fast  growing 
companies. 

limited  progress 

in 
Slovenia  has  made 
addressing  the  first  of  the  2018  CSRs.  The 
government  continued  its  efforts  to  increase  the 
employability  of  low-skilled  and  older  workers 
through lifelong learning and activation measures. 
It  announced  that  a  new  draft  Healthcare  Act 
should be adopted by the government by the end of 
2019, but it is still open how it should be financed. 
While a two-year pilot project has been initiated in 
2018,  there  are  no  plans  to  table  a  legislative 
proposal  on  long-term  care  in  2019.  No  concrete 
measures have been taken to ensure the long-term 
sustainability and adequacy of the pension system.  

Slovenia has made some progress in addressing 
the second of the 2018 CSRs. Some progress has 

so-called 

schemes.  The 

been  made  in  implementing  key  equity  funding 
support 
"Single 
Document" and the Investment Promotion Act has 
brought  some  progress  in  reducing  barriers  and 
administrative  burdens  and  to  stimulate  domestic 
and  international  investments.  The  2018  Action 
Plan  on  Professionalisation  is  a  good  basis  for 
further  professionalising  public  procurement  in 
Slovenia,  while  overall  progress  is  only  limited 
due  to  a  lack  of  action  as  regards  competition, 
independent  oversight  and  health  sector  tender 
aggregation.  With  the  sale  of  65 %  in  Nova 
Ljubljanska  Banka  (NLB)  and  the  launch  of  the 
selling  process  for  Abanka,  Slovenia  has  made 
some progress in the execution of its privatisation 
plans.  

Slovenia's draft budgetary plan for 2019 would 
not  ensure  that  the  nominal  growth  rate of  net 
primary  government  expenditure  does  not 
exceed  3.1 %  in  2019.  This  draft  budgetary  plan 
was  transmitted  to  the  European  Commission  on 

13 

Slovenia Overall assessment of progress with 2018 CSRs:  limited progress CSR 1: Ensure that the nominal growth rate of net primary government expenditure does not exceed 3.1 % in 2019, corresponding to an annual structural adjustment of 0.65 % of GDP. Adopt and implement the Healthcare and Health Insurance Act and the planned reform of long-term care. Ensure the long-term sustainability and adequacy of the pension system, including by increasing the statutory retirement age and by restricting early retirement. Increase the employability of low-skilled and older workers through lifelong learning and activation measures. Slovenia has made limited progress in addressing CSR1 (*):  No Progress in the reform of healthcare.  No Progress in the reform of long-term care.  No Progress in reforming the pension system.  Limited progress in increasing the employability of low-skilled and older workers.  CSR 2: Develop alternative sources of financing for fast-growing companies. Lower the barriers for market entry through the revision of Product Market Regulation and limiting administrative burden. Enhance competition, professionalisation and independent oversight in public procurement. Carry out the privatisations in line with to the existing plans.  Slovenia has made some progress in addressing CSR2:  Some progress in promoting alternative sources of finance.  Some progress in limiting administrative burden.  Limited progress in enhancing competition, professionalisation and independent oversight in public procurement.  Some progress in the privatisation of state-owned enterprises. (*) This does not include an assessment of compliance with the Stability and Growth Pact.   
 
 
 
 
2. Progress with country-specific recommendations 

15 October  and  is  based  on  a  ‘no-policy-change’ 
assumption.  The  government  plans  to  prepare 

updated budget in the first quarter of 2019. 

14 

 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes contribute to addressing structural challenges and to 
fostering growth and competitiveness in Slovenia 

Slovenia is a relatively large beneficiary of EU solidarity with EU investments representing almost 40 % of 
all  national  public  investment.  The  financial  allocation  from  European  Structural  and  Investment  Funds  (ESI 
Funds)  aimed  to  support  Slovenia  in  facing  development  challenges,  amounts  to  EUR 3.9  billion  in  the  current 
Multiannual Financial Framework, equivalent to around 1.4 % of the GDP annually. The additional national co-
financing of around EUR 1 billion brings the budget to EUR 5 billion. By the end of 2018, around EUR 2.8 billion 
were  already  allocated  to  specific  projects.  In  addition,  EUR 332  million  were  allocated  to  specific  projects  on 
strategic  transport  networks  through  a  dedicated  EU  funding  instrument,  the  Connecting  Europe  Facility. 
Furthermore, numerous Slovenian research institutions, innovative firms and individual researchers benefited from 
other EU funding instruments, notably Horizon 2020 which provided around EUR 210 million. 

EU  funding  has  helped  to  address  policy  challenges  identified  in  the  2018  CSRs.  ESI  Funds  support 
competence  centres  for  skills  development  in  niche  areas  with  the  biggest  potential  for  raising  the  international 
competitiveness of the economy. ESI funds also play a key role in enhancing the implementation of the European 
Pillar of Social Rights, with targeted investments in services and infrastructure designed to enhance the access to 
affordable, sustainable and high quality healthcare, long-term  care and social care. In addition, European Social 
Fund supports tailor-made social inclusion and activation programmes for the most vulnerable groups, in particular 
older, low-skilled or long-term unemployed workers. ESI Funds supported closer collaboration between business 
and  research  institutions,  and  R&D  investments  in  the  private  sector  with  direct  support  for  nearly  6000 
enterprises. Infrastructure in Slovenia was also improved, namely, 13 km of new motorways were constructed, the 
projects for  more than 51 000 tonnes of CO2 equivalent reduction have been decided, additional capacity of 26 
megawatt  of  renewable  energy  capacity  has  already  been  contracted,  and  more  than  300 000  persons  will  be 
served by improved wastewater treatment. 

In addition, the Commission can provide tailor-made technical support upon a Member State's request via 
the Structural Reform Support Programme to help Member States implement growth-sustaining reforms to 
address  challenges  identified  in  the  European  Semester  process  or  other  national  reforms.  Slovenia,  for 
example, received support from the Commission to assess and improve the performance of its health system, to 
prepare work for the pending long-term care reform, and to provide better protection for children in need with the 
development of a feasibility study for setting up a House of Children. Support is also being provided to Slovenia to 
attract foreign direct investment, as well as to enhance the performance of state owned enterprises. In addition, the 
Commission  is  assisting  the  authorities  in  their  efforts  to  increase  the  awareness  of  capital  market  financing 
possibilities,  in  particular  on  initial  public  offerings  and  to  develop  the  national  capital  markets.  In  2018, 
preparatory  work  started  to  enhance  the  efficiency  of  the  bank  supervision  system  with  a  view  to  improving 
financial stability and macro-prudential policy design. 

EU  funding  contributes  to  mobilisation  of  public  and  private  investment  through  grants  and  financial 
instruments.  Around  EUR 306  million  (7.8 %  of  the  total)  is  earmarked  to  be  delivered  in  the  form  of  loans, 
microloans, portfolio guarantees and equity. The investments carried out via Financial instruments will be focused 
on  R&D,  SMEs,  energy  efficiency,  urban  development,  processing  of  agricultural  products  and  development  of 
non-agricultural and forestry activities in rural areas. In Slovenia, the overall volume of operations backed by the 
European  Investment  Plan's  European  Fund  for  Strategic  Investments  (EFSI)  by  December  2018  amounts  to 
EUR 161 million, which is set to trigger a total of EUR 941 million in additional private and public investments. 

EU actions strengthen  national, regional and local authorities and the  civil society. EUR 209  million (from 
ESIF) have been allocated for strengthening the capacity of public administrations at different levels by prompting 
close  cooperation  with  stakeholders.  The  Regions  in  industrial  transition  action  helps  to  address  specific 
challenges, 
deindustrialisation. 
https://cohesiondata.ec.europa.eu/countries/SI 

skills-base, 

labour 

costs 

such 

high 

unit 

low 

and 

as 

15 

 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL POLICY 

The  general  government  headline  balance 
turned positive in 2017 but the structural deficit 
has  been  declining  since  then.  In  2017,  the 
budget  reached  a  surplus  of  0.1 %  of  GDP,  up 
from  a  deficit  of  -1.9 %  of  GDP  in  2016. 
According  to  the  ad-hoc  forecast,  the  surplus 
accelerated further to 0.8 % of GDP in 2018 and is 
expected  to  decline  slightly  to  0.7 %  of  GDP  in 
2019. In  structural  terms,  the  government  balance 
is  forecast  to  have  reached  a  structural  deficit  of 
0.5 %  of  GDP  in  2018.  The  structural  deficit  is 
expected  to  worsen  further  to  0.6 %  of  GDP  in 
2019  (8).  Taking  Slovenia’s  position 
the 
economic  cycle  into  account,  this  indicates  a  pro-
cyclical  fiscal  policy  and  a  missed  opportunity  to 
strengthen fiscal sustainability. 

in 

Expenditure  pressures  continue  to  build  up. 
Over  the  course  of  2018  and  2019,  previously 
introduced  temporary  consolidation  measures  in 
the field of public-sector pay and social allowances 
have  been  gradually 
In  addition, 
Slovenian  authorities  and  trade  unions  reached 
agreement  on  a  substantial  pay  rise  amounting  to 
EUR 308m  in  2019-2020  in  November  2018. 
Therefore,  after  recording  high  growth  in  2018, 
social  transfers  and  compensation  of  employees 
are projected to further increase in 2019. 

relaxed. 

Recurrent  taxation of immovable property and 
capital  is  below  the  EU  average  while  the  tax 
burden  on  labour  is  relatively  high.  Recurrent 
taxation of immovable property is considered to be 
less  distortive  to  economic  growth  than  labour 
taxes. However, the share of recurrent tax revenues 
from  immovable  property  to  GDP  is  around  three 
times  lower  in  Slovenia  compared  to  the  EU 
average  (0.5 %  of  GDP  compared  to  an  EU 
average  of  1.6 %  in  2017).  A  larger  fraction 
(around  70 %  according 
to  OECD  data)  of 
property  tax  burden  is  borne  by  businesses.  In 
terms  of  revenues  from  capital  taxes  relative  to 
GDP, Slovenia ranks among the  lowest in the EU 

(8)  For  Slovenia,  the  output  gap  (and  therefore  the  structural 
balance)  estimate 
to  uncertainty.  The 
subject 
Commission considers this in its assessment of Slovenia’s 
updated draft budgetary plan.  

is 

(4.3 %  of  GDP  compared  to  an  EU  average  of 
8.6 %  in  2017).  At  the  same  time,  secondary 
earners with low wages face high labour tax rates, 
decreasing their work incentives (9). A new reform 
on real estate tax is planned for 2020 with the aim 
to relieve businesses and to link the tax base to the 
properties’  market  value  in  a  budget  neutral  way, 
using  a  mass  valuation  system.  The  Mass 
Valuation  Act  was  adopted  and  is  expected  to  be 
applied  to  all  properties  in  mid-2019.  Box 3.1.1 
discusses  the  simulation  results  of  an  increase  in 
real  estate  tax  for  households,  compensated  by  a 
revenue-neutral  reduction  in  tax  burden  on  labour 
and a strengthening of the social safety net. 

3.1.2.  FISCAL FRAMEWORK 

The  Fiscal  Council  warns  of  non-compliance 
with  fiscal  rules  in  the  years  2018  to  2021. The 
Fiscal Council assessed that most fiscal rules were 
respected  in  2017  and  that  the  fiscal  policy  was 
appropriate  (Fiscal  Council,  2018a).  However, 
after  examining  the  2018  stability  programme 
drafted  based  on  unchanged  policies,  it  called  on 
the  government  to  take  additional  measures  to 
avoid  non-compliance  with  the  fiscal  rules  in  the 
years  2018  to  2021.  According  to  the  Fiscal 
Council,  the  coalition  agreement  fails  to  address 
adequately  long-term  risks  to  fiscal  sustainability. 
The  Fiscal  Council  warned  in  autumn  2018,  and 
again  in  January  2019,  that,  if  implemented  as 
agreed,  the  fiscal  policy  of  the  new  government 
would  be  pro-cyclical (Fiscal  Council,  2018b; 
Fiscal Council, 2019).  

3.1.3.  DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

has 

debt 

been 

Government 
gradually 
decreasing  from  its  peak  of  82.6 %  of  GDP  in 
2015. Since 2016, Slovenia has been extending the 
maturity of its debt portfolio and executing cross-
currency  liability  management  transactions,  thus, 
benefiting  from the low interest rate  environment. 
Due  to  this,  Slovenia  could  reduce  its  implicit 

(9)  The average labour tax rate for secondary earners at 67 % 
of  average  wage  is  at  35.6 %  and  significantly  above  the 
EU average of 31.3 %. 

16 

 
 
                                                           
                                                           
3.1. Public finances and taxation 

points  below  the  baseline  projection  in  2029.  By 
contrast,  government  debt  in  2029  would  exceed 
the  60 %  of  GDP  threshold  if  the  structural 
primary balance converges to its historical average 
(Graph 3.1.1) (14). 

Graph 3.1.1:  Gross debt as % of GDP - Debt Sustainability 

Analysis 

Source: European Commission 

to 

projected 

in 
challenge 

age-related 
increase 
The 
expenditure  poses 
the 
a 
sustainability  of  Slovenia’s  public  finances  in 
the  long  term.  Age-related  public  spending  is 
expected  to  rise  from  21.9 %  of  GDP  in  2016  to 
28.2 %  of  GDP  in  2070,  strongly  affecting  the 
sustainability  gap  indicator  S2.  The  S2  indicator 
shows  that  a  fiscal  adjustment  of  5.5 percentage 
points  of  GDP  is  required  to  ensure  the  debt-to-
GDP  ratio  stabilises  in  the  long  term (15).  This 
result is primarily due to the projected increase in 
spending on pensions (contributing 3.3 pps of GDP 
to the increase), health care (0.8 pps of GDP) and 
long-term  care  (0.7 pps  of  GDP).  Slovenia  is 
considered  at  medium  risk  in  the  baseline  long-
term  projections.  However,  the  more  adverse 

recommendations 

excessive  deficit  procedure 
and 
convergence  to  the  medium-term  objective,  according  to 
the  matrix  of  required  fiscal  adjustment  from 
the 
Commission Communication on flexibility in fiscal rules. 
(14)  The historical structural primary balance scenario assumes 
gradual  convergence  to  the  historical  average  for  the 
structural primary balance over the four years following the 
forecast.  All  other  macroeconomic  assumptions  are  the 
same as in the baseline. 

(15)  The  following  thresholds  apply:  (i)  if  the  value  is  lower 
than 2, the country is assigned low risk; (ii) if it is between 
2 and 6, it is assigned medium risk; and (iii) if it is greater 
than 6, the country is assigned high risk. 

economic 

interest  rate  to  below  3 %  of  GDP  by  the  end  of 
2018  from  4.1 %  of  GDP  in  2015.  Because  of 
strong 
interest 
growth, 
expenditure,  and  the  2017  primary  surplus,  the 
debt-to-GDP ratio declined from 74.1 % of GDP in 
2017 to 69.9 % of GDP in 2018. Based on the ad-
hoc forecast, the debt ratio will stand at 66.2 % of 
GDP in 2019. 

reduced 

The  outlook  for  fiscal  sustainability  appears 
sound  in  the  short  term.  The  short-term  risks  of 
fiscal  stress  in  the  short  term,  as  indicated  by  the 
sustainability gap indicator S0, are low,  with both 
fiscal and financial competitiveness sub-indices far 
below the critical thresholds. 

Overall,  Slovenia  is  deemed  to  face  medium 
fiscal  sustainability  risks  in  the  medium  term. 
The  sustainability  gap  indicator  S1  points  to 
medium risks, mainly due to the projected increase 
in  age-related  public  spending (10).  According  to 
this  indicator,  a  cumulative  gradual  improvement 
in the structural primary balance of 0.2 percentage 
points  of  GDP,  relative  to  the  baseline  scenario, 
would  be  required  over  5  years  to  reach  the  debt 
ratio  of  60 %  of  GDP  by  2033 (11).  At  the  same 
time, the debt sustainability analysis points to low 
risks  over  the  medium  term.  Under  the  baseline 
scenario  of  no-policy-change (12),  the  government 
debt level is expected to decline until 2027, thanks 
to  the  projected  fiscal  effort  and  a  favourable 
differential  between  the  implicit  interest  rate  on 
government  debt  and  the  growth  rate  of  the 
economy  (snowball  effect).  As  ageing  costs  start 
outpacing  these  two  positive  effects,  debt  is 
projected  to  increase  again  in  2028  and  2029,  but 
stay well below the 60 % government debt-to-GDP 
ratio reference value. If Slovenia was to adhere to 
the fiscal rules under the Stability and Growth Pact 
(13), the debt-to-GDP ratio would lie 15 percentage 

(10)  For an overview of the Commission’s assessment of fiscal 

sustainability, see European Commission (2019c). 

(11)  The following thresholds apply: (i) for values lower than 0 
the country is assigned low risk; (ii) for values lower than 
2.5 it is assigned medium risk; (iii) for values greater than 
2.5 the country is assigned high risk. 

(12)  This  scenario  is  based  on  the  2018  Autumn  Forecast 
(European  Commission,  2018a) 
long-run 
convergence  assumptions  of  underlying  macroeconomic 
variables  (real  interest  rate,  real  GDP  growth,  inflation) 
agreed  by  the  Economic  Policy  Committee.  Under  the 
baseline  scenario,  it  is  assumed  that  fiscal  policy  stays 
constant beyond the forecast horizon. 

and  on 

(13)  European  Commission  forecasts  for  the  first  projection 
thereafter  assumption  of  full  compliance  with 

year; 

17 

25354555657585951314151617181920212223242526272829% of GDPBaseline no-policy change scenarioHistorical Structural Primary Balance scenarioStability and Growth Pact (SGP) scenario 
                                                           
 
 
                                                                                   
3.1. Public finances and taxation 

labour  force,  itself  largely  a  result  of  previous 
pension  legislation,  and  (ii)  the  retirement  of  the 
most  sizeable  generations,  which  will  also  enjoy 
longevity 
longer  retirement  due 
(IMAD and MoLFSAEO, 2018). 

increased 

to 

financial 

Previous 
consolidation  measures 
heavily  affected  the  level  of  current  and  future 
pensions  and  the  minimum  income  provision 
for  older  people.  The  challenge 
to  ensure 
adequate  pensions  is  especially  significant  for 
people  with  incomplete  or  short  working  careers, 
those  working  in  intermittent  jobs,  and  the  self-
employed. As the number of people working part-
time  or  on  fixed-term  labour  contracts  increased 
during  the  economic  crisis,  pension  adequacy 
might  become  even  more  critical  in  the  future 
(European  Commission  and  Social  Protection 
Committee, 2018). 

to 

rate 

at-risk-of-poverty 

(AROPE) (19) 
The 
among  those  over  65  remains  above  the  EU 
average,  mostly  due  to  relatively  low  pensions 
(see  Section  3.3.3).  At  present,  the  replacement 
income  before 
income 
ratio  of  pension 
retirement is below the EU average. The Slovenian 
pension  system  produces  a 
lower  aggregate 
replacement  ratio  (0.47  compared  with  the  EU 
average of 0.58). And even though total household 
savings  are  high  compared  to  other  EU  countries, 
Slovenes  save  relatively  little  for  old  age  (IMAD 
and  MoLFSAEO,  2018).  The  act  Amending  the 
Pension  and  Disability  Insurance  Act  in  2017 
(ZPIZ-2C)  increased  the  minimum  old-age  and 
disability  pension  to  EUR 500  per  month  for 
pensioners  who  had  fulfilled  the  full  retirement 
conditions.  This  amount  slightly  exceeds  the 
income 
income 
supplement, thus ensuring basic social security for 
this  group  of  pensioners.  (European  Commission, 
2018b) The number of pensioners affected by this 
reform  was  estimated  at  45 291  (46 %  of  all 
pensioners  with  a  pension  between  EUR 400  and 
EUR 500)  (European  Commission  and  Social 
Protection Committee, 2018). 

threshold  for  entitlement 

to 

scenarios  (including  greater  spending  on  health 
care  and  long-term  care,  historical  patterns  for 
life 
structural  primary  balance  or  higher 
fiscal 
indicate  high 
expectancy) 
sustainability 
future 
risks 
generations. 

long-term 
to  be  borne  by 

3.1.4.  PENSION SYSTEM 

in 

but 

ageing 

increase  (17) 

The  2012  pension  reform  brought  tangible 
benefits, 
puts 
population 
considerable  pressure  on  the  sustainability  and 
adequacy  of  the  pension  system.  The  pension 
reform (ZPIZ-2) (16) has temporarily slowed down 
the 
the  number  of  old-age 
pensioners.  It  also  decreased  the  number  of  other 
types  of  pensioners  (18).  The  current  rules  are 
expected  to  keep  the  pension  system  relatively 
stable  over  the  next  10years  but  the  long-term 
sustainability of the pension system is not ensured. 
In  2017,  the  previous  government  reached  a 
consensus with the social partners on key starting-
points  for  the  modernisation  of  the  pension  and 
disability insurance system. They agreed upon the 
broad outline of a pension reform to be adopted by 
2020.  The  outline  includes  measures  to  achieve  a 
sustainable and transparent pension system, which 
will  also  provide  adequate  pensions  in  the  long 
run.  The  work  priorities  for  the  government 
published in January 2019 refer only to an update 
of the White Paper and the “drafting of core points 
of  departure”  for  a  reform  but  do  not  provide  a 
time line. 

Long-term  projections  indicate  that  pension 
spending  will  soon  start  increasing  again  and 
that  the  ratio  of  the  active  working  population 
to  pensioners  will  deteriorate  faster.  Gross 
public  pension  expenditure,  as  a  share  of  GDP, 
will  rise  from  11 %  in  2020  to  15.6 %  in  2050. 
This  shows  that  expenditure  on  pensions  will 
increase  at  one  of  the  fastest  rate  among  all  EU 
countries  (European  Commission,  2018b).  This 
can mostly be explained by (i) early exit from the 

(16)  Pension and Disability Insurance act (2012) 
(17)  According to the Institute of Macroeconomic Analysis and 
Development  (IMAD)  the  slow-down  in  the  increase  of 
number of pensioners might be a one-off effect reflecting a 
surge  in  their  number  in  the  years  before  and  after  the 
adoption of the act. 

(18)  Beneficiaries of disability, survivor's, widower's and partial 

old-age pension insurance benefits 

Data  on 
the  working  years  of  younger 
generations reveal substantially lower values of 

(19)  AROPE:  At-risk-of-poverty  or  social  exclusion  rate  (%  of 
total population). People who are at-risk-of poverty and/or 
suffering from severe material deprivation and/or living in 
household with zero or very low work intensity. 

18 

 
                                                           
                                                           
3.1. Public finances and taxation 

The  share  of  government  budget  funding  for 
healthcare  is  one  of  the  lowest  in  the  EU  but 
healthcare  financing  is  still  highly  pro-cyclical. 
taxation 
General  national  and  municipal-level 
represents only 6 % of current health expenditure. 
Transitioning  towards  a  system  that  is  less  reliant 
on contributions could improve the future stability 
of  healthcare  financing.  The  Slovenian  authorities 
are  currently  preparing  a  policy  reform  to  avoid 
further strain in the financing of the system, but no 
act  has  been  adopted  yet.  The  services  intend  to 
update  a  new  draft  Health  Care  and  Health 
Insurance  Act  and  the  draft  Long  Term  Care  Act 
and to consult on them publicly before submitting 
them to the parliament in 2019. 

The  authorities  plan  to  focus  on  efficiency  and 
effectiveness  of  healthcare.  They  aim  to  reduce 
waiting  times  and  to  improve  the  efficiency  and 
effectiveness  of  the  public  health  network  (the 
management of healthcare institutions, quality and 
safety  in  healthcare  and  in  long-term  care  for  the 
elderly  and  decent  ageing).  The  financing  of  the 
reform remains the main unresolved issue.  

Amenable  mortality  levels  are  in  general  low, 
but  challenges  remain.  Life  expectancy  at  birth 
remain  one  of  the  best  in  the  EU.  On  the  other 
hand,  preventable  mortality  and  obesity  rates  are 
above  the  EU  average  with  evident  differences 
between  NUTS 3  regions.  Mortality  from  liver 
cirrhosis in men is among the highest in Europe. In 
the elderly population, healthy life years at the age 
of 65 are below EU average. In 2016, healthy life 
years were 8 pps below the EU average for women 
and 6 pps below the EU average for men (IMAD, 
2018). 
in  modernising  health 
infrastructure,  such  as  addressing  disparities 
between  regions  in  terms  of  hospital  beds  per 
population ratio, services for prevention, screening 
and  early  diagnosis  at  the  primary  care  level, 
specialised  diagnostic  and  treatment  programmes 
at  outpatient  and  palliative  care  can  improve 
efficiency  in  healthcare.  EU  funds  are  supporting 
health  promotion  activities 
to  reduce  health 
inequalities  at  community  level  and  promote 
healthy lifestyles. 

Investments 

An ageing population and a growing burden of 
chronic  diseases  is  expected  to  boost  demand 
for  a  more  efficient  mix  of  care  models. 
Provision of acute care hospitals beds is above the 
EU  average  (422  beds  per  100 000  inhabitants  in 

pension  base.  Younger  generations  will  have 
accrued  a  lower  number  of  working  years  at 
retirement  age  and  consequently  receive  lower 
pensions.  (European  Commission  and  Social 
Protection  Committee,  2018).  The  low  number  of 
accrued  working  years  is  even  more  of  a  concern 
for  non-standard  workers,  whose  lower  density  of 
work  (compared  to  standard  employment)  is  an 
additional  problem.  Relatively  short  insurance 
periods  have  negative  consequences  for  the  long-
term  social  security  of  workers  on  fixed-term 
contracts  (including  casual  and  seasonal  workers, 
temporary  agency  workers,  workers  on  civil 
contracts,  etc.).  Student  work  now  qualifies  as  a 
pension insurance period, but the insurance base is 
low. 

contributions. 

Self-employed  workers  face  challenges  for  the 
adequacy  of  their  pensions  if  they  only  pay 
minimum 
Self-employed 
people (20) in Slovenia are insured against all risks 
and  at  the  same  rates  as  employees  on  permanent 
full-time 
their 
employers.  However,  almost  70 %  of  the  self-
employed  pay  social  security  contributions  at  the 
minimum base and will be entitled to the minimum 
old-age  pension  only  (European  Commission  and 
Social Protection Committee, 2018). 

employment 

contracts 

and 

3.1.5.  HEALTH CARE AND LONG-TERM CARE 

by 

changes 

The  projected  increase  in  healthcare  spending 
threatens  the  long-term  fiscal  sustainability  of 
the system. In 2017, Slovenia spent 8.0 % of GDP 
on  healthcare,  which  is  below  the  EU  average  of 
9.6 %.  However, 
in 
driven 
demographic  structure,  public  spending  on  health 
care is projected to increase by 18% or 1.0 pp. of 
GDP,  more  than  the  13%  average  increase  in  the 
EU  (0.9  pps)  according  to  the  ‘AWG  reference 
scenario’ (European  Commission,  2017a).  When 
taking into account the impact of non-demographic 
drivers  on  future  spending  growth  (‘AWG  risk 
scenario’),  healthcare  expenditure  is  expected  to 
increase  by  2  pps  of  GDP  from  now  until  2070 
(EU: 1.6 pps).  

(20)  A ‘self-employed person’ is defined by the Labour Market 
Regulation  Act  (2010,  Article  5),  but  also  by  the  acts 
regulating  social  security  insurance; primarily  the  Pension 
and Disability Insurance Act (2012) 

19 

 
                                                           
3.1. Public finances and taxation 

agency. 

assessment 

The  services  envisage  the  creation  of  a  health 
technology 
Health 
technology  assessment  would  be  an  asset  in  the 
efficient  allocation  of  resources  and  could  help  to 
determine which benefits should be covered by the 
Health  Insurance  Institute  of  Slovenia.  Only 
certain  mechanisms  of  it  are  used  during  regular 
assessments  within  the  Agency  for  Medicinal 
Products  and  Medical  Devices  of  the  Republic  of 
Slovenia, 
Institute  of 
the  Health 
Slovenia and the Health Council.  

Insurance 

to  13 % 

Waiting times for medical treatment depend on 
efficient healthcare services. The share of unmet 
need  due  to  waiting  times  is  broadly  in  line  with 
the  EU  average.  However,  waiting  times  have 
increased  markedly  in  Slovenia  (see  also  box 
3.3.1). The share of people reporting waiting times 
for some specialist services increased from 6 % in 
2007 
(OECD/European 
in  2015 
Observatory  on  Health  systems  and  Policies, 
2017). Moreover, only about 67 % of patients aged 
65  and  over  were  operated  on  within  2  days  of 
their  admission  for  a  hip  fracture,  below  the  EU 
average of 77 %. Information and communications 
technology  could  improve  nationwide  access  to 
information,  including  the  monitoring  of  waiting 
times for a broad set of services. 

years (24). 

In  2014,  the  share  of  Slovenes  reporting 
depression  was  above  the  EU  average.  National 
reports  suggest  an  increasing  trend  of  mental 
health  incidents  in  children  and  young  people  in 
recent 
suggest 
overcrowding  in  social-welfare  institutions.  In 
March  2018,  national  authorities  started  to  follow 
up  on  these  issues  with  the  adoption  of  a 
a  National  Mental  Health 
Resolution  on 
Programme 2018-2028. 

Reports 

also 

long-term  care 

Due to population ageing, the number of elderly 
(LTC)  has  been 
needing 
increasing,  and  will  continue  to  increase.  In 
2015,  there  were  more  than  61 000  recipients  of 
long-term  care (25).  The  provision  of  services  is 
quite fragmented, as only recipients in institutional 
setting  receive  integrated  long-term  care.  The  rest 
are  in  home  care (OECD/European  Commission 
2018). It has been estimated (Majcen et al., 2016) 

(24)  Resolution on a National Mental Health Programme 2018–

2028. 

(25)  Statistical office of the Republic of Slovenia, www.stat.si  

in 

the  EU)  However, 

2015  versus  402 
the 
occupancy rate of acute care hospital beds is below 
average  (68.8 %  in  Slovenia  compared  to  76.8 % 
in  the  EU).  This  points  to  excess  capacity, 
suggesting  there  is  room  to  improve  efficiency 
with the existing infrastructure (21). The proportion 
of  surgical  procedures  conducted  as  day  cases  is 
extremely low compared to the EU average (9.7 % 
versus  32.3 %  in  2015).  Moreover,  there  may  be 
scope to increase medical equipment if the lack of 
such  equipment  contributes  to  excessive  waiting 
times for diagnostics (22).  

Attracting  physicians  to  primary  care  remains 
difficult.  Although 
there  has  been  a  steady 
increase in recent years, the number of physicians 
and  the  share  of  general  practitioners  are  still 
below  the  EU  average  (19 %  versus  23 %  in  the 
EU).  The  uneven  geographic  distribution  of 
doctors  and  difficulties  in  recruiting  and  retaining 
doctors  in  all  areas  are  significant  policy  issues. 
Slovenia  does  not  have  enough  healthcare 
personnel,  which  makes  it  a  priority  for  the 
country to use its available resources as effectively 
as possible, for example through training, research 
opportunities and e-health solutions. 

for  health 

Public  procurement  aggregation  in  Slovenia's 
health  sector  remains  underdeveloped (23).  In 
2018,  not  much  progress  was  made  to  improve 
procurement aggregation, besides the extension of 
a database on prices. The reason for this was a lack 
of  staff.  Slovenia  has  not  yet  set  up  a  dedicated 
central  purchasing  body 
sector 
procurement,  which  would  bring  about  a  higher 
level  of  professionalisation.  This  would  make  it 
possible 
to  organise  centralised  procurement 
procedures  and  to  advise  individual  hospitals  on 
procurement  procedures 
technical 
for  very 
supplies.  The 
lack  of  a  proper  procurement 
strategy  for  the  health  sector  limits  Slovenia's 
ability  to  harmonise  tenders,  share  expertise  for 
tenders  and  effectively  mitigate  the  risk  of  bid-
rigging. 

(21)  In  2016,  there  were  533  hospital  beds  per  100 000 
inhabitants in Western but only 373 in Eastern Slovenia. 

(22)  For  example, 

the  number  of  computed 

tomography 
scanners  and  magnetic  resonance  imaging  units  per 
100 000 
the  EU  average  (1.3 
compared  to 2.2  EU  average  and  0.8  compared  to  the  1.7 
EU average, respectively). 

inhabitants 

is  below 

(23)  For a discussion on public procurement more generally see 

section 3.4.4 below. 

20 

 
                                                           
                                                           
3.1. Public finances and taxation 

providers, 
volunteers and local communities. 

non-governmental 

organisations, 

3.1.6.  STATE OWNED ENTREPRISES 

In  2017, 

in  2017. 

improved 

The  performance  of  state-owned  enterprises 
the 
further 
performance  of  state-owned  enterprises,  that  are 
fully managed by the Slovenian Sovereign Holding 
(SSH), exceeded the targets set in the management 
acts,  with  a  6.5 %  net  return  on  equity  on  an 
aggregated basis (SSH, 2018). While the return on 
equity  increased  by  0.6  pps  to  6.3 %  for  the 
‘strategic companies’ (26), it decreased by 1 pp. to 
8.9 % for the rest of the portfolio.  

The  sale  of  65 %  of  the  shares  in  NLB  on  the 
stock  market  in  autumn  2018  is  a  significant 
step  in  the  reduction  of  state  ownership  in  the 
banking  sector.  Until  that  sale,  NLB  was  fully 
state-owned  and  the  state  still  remains  the  largest 
individual  shareholder.  With  the  sale,  which  had 
been  long  delayed,  Slovenia  has  fulfilled  the  first 
set of commitments (as amended in 2018) given to 
the  European  Commission  in  reaction  to  the  state 
aid  provided  to  NLB  in  2013.  SSH  intends  to 
proceed  with  the  privatisation  according  to  the 
strategy and in line with the commitments given by 
Slovenia to the European Commission. This means 
that  the  remaining  proportion  of  shares  (of  up  to 
75 % minus one share) will be sold before the end 
of 2019. 

As  a  next  step,  Abanka,  the  third  largest  bank 
in Slovenia, will be privatised in 2019. The sales 
process  was  already  launched  in  October  2018. 
The  privatisation  of  this  fully  state-owned  bank 
should be completed in 2019. 

(26)  Strategic companies have, in addition to economic goals, to 
attain  strategic  and  development  goals;  in  particular  the 
realisation of important social interest and maintaining key 
development factors in Slovenia. 

that,  in  addition  to  home  and  institutional  care, 
there were 104 000 people receiving informal care 
in Slovenia, and that the care needs of 35 500 were 
unmet. There is also a discrepancy between urban 
and  rural  areas.  Rural  areas  frequently  do  not 
provide  sufficient  institutional  care  or  home  care, 
while  urban  areas  tend  to  offer  a  wide  range  of 
services. 

coalition 

agreement  mentions 

The 
the 
establishment of an autonomous, integrated and 
sustainable  LTC  system  one  of  the  main  goals 
of the new government. To date, there is still  no 
single, overarching legislative act in Slovenia that 
covers  LTC.  The  current  fragmented  system  in 
Slovenia  results  in  financing  challenges,  risks  of 
inefficiencies  and  may  cause  difficulties  for  users 
(European  Commission,  2018b).  In  2020,  the 
government  intends  to  put  forward  a  unified 
legislative  act  on  LTC  with  a  comprehensive 
to  be  provided. 
description  of 
However,  at  present,  the  financing  of  the  services 
still  needs  to  be  agreed  at  inter-ministerial  level. 
There will also be accompanying measures such as 
information  and 
training  of 
communication  technologies,  promotion  of  social 
inclusion and elderly employability programmes to 
achieve a higher quality of life for the elderly and 
help them stay at home as long as possible. There 
is also a plan to set up a real estate strategy to take 
care of the specific needs of an ageing population.  

staff,  use  of 

the  services 

A  two-year  pilot  project  was  launched  in  2018 
to  help  prepare  concrete  measures  to  reform 
LTC.  Its  main  objective  is  to  assess  solutions 
proposed in a draft legislative act on LTC in three 
environments  (urban,  semi-rural  and  rural)  and  to 
in 
show 
practice.  The  project  therefore  aims  to  establish  a 
single entry point for the LTC system in Slovenia 
that will provide an affordable, accessible and fair 
service to the population. It will also offer training 
service 
and 

their  advantages  and  shortcomings 

coordination  between 

support 

21 

 
                                                           
3.1. Public finances and taxation 

Box 3.1.1: Shifting taxation from labour to immovable property 

The  European  Commission  Joint  Research  Centre  conducted  simulations  of  the  effects  of  a  tax 
shift  from  labour  to  immovable  property  in  Slovenia.  The  simulations  are  based  on  the 
EUROMOD  model  using  2016  EU-SILC  data (1).  The  key  assumption  is  an  increase  in  the 
revenues from recurrent taxation of immovable property from currently 0.5 % of GDP to the EU 
average of 1.6 % of GDP (European Commission, 2018c). In addition, the households’ share in the 
revenues from recurrent property taxation is set to rise from around 30 % to 50 %, in line with the 
government’s intention to reduce the burden on businesses (as indicated in the  released blueprint 
for  the  new  recurrent  property  tax).  The  simulation  estimates  the  distributional  and  labour 
supply (2)  effects  of  two  hypothetical  scenarios  to  use  the  extra  revenues  for:  (i)  a  refundable 
means-tested benefit for residents with low incomes (‘Scenario 1’) (3); (ii) a refundable lump-sum 
reduction in employees’ social insurance contributions (SIC) for active employees older than 55 or 
with low incomes (‘Scenario 2’) (4). Both scenarios would result in a revenue-neutral reform. 

Scenario 1 reduces the tax burden on labour for employees and strengthens the social support for 
vulnerable  groups,  i.e.  pensioners  (see  section  3.1.4.).  The  results  reveal  a  strong  positive 
distributional effect as the increase in disposable income caused by the means-tested benefit more 
than offsets the reduction caused by the higher tax rate on immovable property for lower-income 
households. Inequality as measured by the S80/S20 quintile ratio decreases by 1.9 % (Graph 1). In 
terms of labour supply, Scenario 1 shows a shift to part-time work (increase by 0.6 %) while the 
labour market participation remains broadly unchanged (decrease by 0.05 %). This result could be 
explained  by  employees’  decision  to  substitute  work  time  for  leisure  (income  effect)  combined 
with the choice of inactive people not eligible for the benefit to take-up work (substitution effect). 
In  Scenario  2,  the  impact  on  labour  supply  is  positive,  especially  for  singles,  with  their  labour 
market participation and total hours worked rising by 0.4 % (see section 3.3.3.). At the same time, 
the  inequality  decreases,  although  only  slightly  compared  to  Scenario  1.  Overall,  both  scenarios 
show a positive impact of a revenue-neutral tax shift from labour to immovable property, with a 
positive distributional effect in Scenario 1 and a favourable labour supply outcome in Scenario 2. 

Graph 1:  Distributional (on the left) and labour supply (on the right) effects for both scenarios 

Source: European Commission Joint Research Centre, calculations based on the EUROMOD model / EU-SILC 

(1)  EUROMOD  is  the  tax-benefit  microsimulation  model  for  the  EU.  It  simulates  individuals'  and  households'  benefit 
entitlements and tax liabilities (including social security contributions) according to the rules in place in each Member 
State. Incomes reported in the EU-SILC (EU Statistics on Income and Living Conditions) of 2016 refer to 2015. 

(2)  The labour supply model does not capture any shifts in or out of retirement and self-employment. 
(3)  The following annual income thresholds and amounts of refundable means-tested benefit apply: (i) for incomes lower 
than  EUR 11 166.37,  the  benefit  equals  EUR 307.41;  (ii)  for  incomes  above  EUR 11 166.36,  it  decreases 
proportionally to the tax base until it reaches zero at EUR 18 903.76 (i.e. average wage based on 2017 OECD data). 
(4)  Active employees receive an annual refundable lump-sum SIC reduction of (i) EUR 1 500 if they are older than 55; (ii) 

EUR 633.97 if their income is below EUR 12 602.51 (i.e. 67 % of average wage based on 2017 OECD data). 

22 

-1,0%0,0%1,0%2,0%3,0%Scenario 1Scenario 2Reduction in inequality-0,10%0,00%0,10%0,20%0,30%Scenario 1Scenario 2Change in labour market participation 
 
 
 
 
 
3.2.  FINANCIAL SECTOR 

3.2.1.  BANKING SECTOR 

and achieve economies of scale. 

The  situation  of  the  Slovenian  banking  sector 
has  improved  significantly,  due  to  improved 
profitability,  solvency  and  asset  quality.  The 
return  on  equity  reached  9.1 %  in  2017,  up  from 
7.8 % 
lower 
in  2016,  mainly  because  of 
impairments,  downward  revaluations  of  fixed 
assets  held  by  the  banks.  However,  profitability 
might  come  under  pressure  when  the  current 
release  of  provisions  ends.  The  average  capital 
adequacy  ratio  remains  stable  (18.8 %  in  June 
2018)  despite  renewed  credit  growth.  Credit  to 
households continued to grow at a sustained year-
on-year  rate  of  6.8 %  in  September  2018,  while 
lending  to  non-financial  corporations  has  slowed 
down  to  a  rate  of  around  2.0 %.  With  a  loan-to-
deposit ratio of 75.5 % in June 2018, banks benefit 
from  a  substantial  excess  of  deposits  over  loans. 
This  ensures  a  relatively  stable  funding  basis  and 
abundant liquidity. However, the growing maturity 
mismatch  between  long-term  loans  and  sight 
deposits  makes  banks  vulnerable  to  a  sudden  rise 
in interest rates. 

likely 

to  come  under  pressure 

To  maintain  profitability,  banks  must  control 
costs  and  find  new  sources  of  income.  Current 
profitability is mainly driven by lower impairments 
and  by  releasing  previous  impairments.  This  is 
bound  to  change  as  new  lending  progressively 
generates  new  impairments.  Bank  profitability  is 
also 
from 
persistently  low  interest  rates  and  increases  in 
compliance, 
and 
investment  costs.  One  possible  strategy  to  offset 
these  negative  factors  is  to  focus  on  fee  income 
and to develop new lending products and services, 
risk 
while 
management  practices.  Banks  could  also  opt  for 
partnerships  or  acquisitions  to  reduce  their  costs 

supervisory, 

prudential, 

enforcing 

prudent 

strict 

and 

Strong  consumer  lending  growth  raises  credit 
risk,  and  has  led  the  Bank  of  Slovenia  to  issue 
specific  recommendations.  Consumer 
lending 
grew  by  11.6 %  year-on-year  in  September  2018, 
partly  driven  by  the  pushy  behaviour  of  some 
medium-sized  banks  underwriting  non-purpose-
specific  consumer  loans  of  longer  maturities.  To 
prevent  the  relaxation  of  credit  standards  and  to 
improve  banks’  resilience,  the  Bank  of  Slovenia 
decided on 22 October 2018 to expand the existing 
for  housing 
macroprudential 
loans to all consumer loans. Concretely, banks are 
invited  to  cap  the  loan-to-value  ratio  at  80 %,  the 
debt  service-to-income  ratio  at  between  50 %  and 
67 %  and  the  loan  maturity  at  120  months.  In  the 
event  of  increased  risks  to  financial  stability,  the 
Bank of Slovenia stands ready to introduce binding 
macroprudential instruments if necessary. 

recommendation 

The  non-performing  loans  (NPLs)  ratio  has 
improved  further  and  reached  7.4 %  in  June 
2018,  down  from  11.4 %  one  year  earlier.  The 
segment  of  the  credit  portfolio  most  heavily 
burdened with NPLs is non-financial corporations, 
despite  improving  credit  quality  (according  to  the 
European  Central  Bank  respectively  for  33 %, 
30 %,  10 %  and  10 %  of  the  reduction  in  non-
performing  exposures  in  2017).  Banks  were  also 
more active in reducing non-performing exposures 
to non-residents in 2017 than in previous years.  

After several years of moderate losses, the state-
owned  Bank  Asset  Management  Company 
(BAMC)  made  a  profit  of  EUR 67  million  in 
2017  and  EUR 20  million  in  the  first  half  of 
2018. This translates into an  average annual  ROE 
of  27 %.  Between  its  inception  in  2013  and 
October  2018,  the  BAMC,  which  bought  up  bad 

Table 3.2.1: 

Financial soundness indicators - all banks in Slovenia 

(1) Annualized data. 
Source: European Central Bank - Consolidated Banking Data (CBD2); own calculations 

23 

2014q42015q42016q22016q32016q42017q12017q22017q32017q42018q12018q2Non-performing loans22,817,916,314,412,311,511,410,89,28,27,4o/w foreign entities13,9-15,814,211,411,011,010,39,08,67,6o/w NFC & HH sectors28,5-21,218,816,415,414,713,912,210,99,9o/w NFC sector43,536,833,630,426,825,424,123,220,218,216,3o/w HH sector7,87,26,35,54,84,64,44,13,93,73,5Coverage ratio53,359,362,061,960,360,360,560,559,656,557,8Return on equity(1)-2,53,510,19,07,811,710,310,39,112,011,5Return on assets(1)-0,30,41,21,11,01,41,21,31,11,51,4Total capital ratio17,918,618,919,119,118,818,718,418,118,418,8CET 1 ratio17,118,018,418,618,518,318,318,017,718,018,5Tier 1 ratio17,118,018,418,618,518,318,318,017,718,018,5Loan to deposit ratio79,474,174,472,574,073,774,273,674,775,975,5 
 
 
 
 
3.2. Financial sector 

funding  needs (EIB,  2018;  SAFE,  2018).  While 
larger  Slovenian  businesses  do  not  perceive 
funding  as  a  major  constraint,  the  situation  for 
SMEs  is  more  nuanced (28).  Banks  in  Slovenia 
remain  cautious  when  lending  to  SMEs.  High 
guarantee  requirements  by  banks  remain  an  issue 
(Bank of Slovenia, Survey 01/2018).  

A lack of equity funding options in Slovenia is a 
risk  for  the  prospective  financing  of  debt-
leveraged firms and might constrain the growth 
of  innovative  businesses.  Access  to  alternative 
finance  is  slowly  improving  in  Slovenia,  though 
from  a  very  low  level.  Equity  funding  represents 
only a minor share of financial resources available 
to  SMEs.  Private  equity  in  Slovenia  amounts  to 
only 0.05 % of GDP compared to 0.2 % in Central 
and Eastern Europe and 0.44 % on average across 
the  EU  (Invest  Europe  CEE,  2018).  The  country 
ranked among the lowest of EU Member States in 
terms  of  venture  capital  share  of  GDP  (Invest 
Europe, 2017). While many SMEs consider equity 
capital  as  relevant,  few  really  use  it  (SAFE, 
2018) (29). The limited and underdeveloped capital 
unfavourable 
market, 
framework  conditions,  hampers  inflows  of  equity 
and  venture  capital  into  the  country.  This  type  of 
funding  is  particularly  important  for  innovative 
start-ups in high tech and high growth sectors (see 
Section 3.4.2). 

combined  with 

the 

The  role  of  capital  markets  in  financing  the 
limited  and  falling. 
is 
Slovenian  economy 
Despite  the  favourable  economic  conditions,  the 
market  capitalisation  of 
the  Ljubljana  Stock 
Exchange  is  low  and  the  number  of  stocks  listed 
there has actually fallen (IMAD, 2018). To address 
this,  the  Ljubljana  Stock  Exchange,  following  the 
initiative  of 
the  Securities  Market  Regulator 
(ATVP), has provided tailored technical assistance 
and  advisory  support  on  listings  and  the  issuance 
of  bonds  to  SMEs (Ljubljana  Stock  Exchange, 
2018).  Development  of  the  local  capital  market 

loans  from  the  country's  banks  in  2013  and  2014, 
generated  cumulative  cash  flows  of  EUR 1.5 
billion,  representing  nearly  72 %  of  the  transfer 
value of its assets. The last bonds issued to finance 
asset transfers  were repaid in December 2017 and 
refinanced  by  bank  loans.  In  June  2018,  the 
BAMC managed to sell 56 % of the initial EUR 2 
billion of assets transferred to it. Its objective is to 
reduce its assets to EUR 100 million by the end of 
its mandate in December 2022. Still, the BAMC is 
confronted  with  a  number  of  challenges.  For 
example, achieving the cost efficiency ratio set by 
the  government  will  become  more  and  more 
difficult  as  residual  assets  are  more  costly  to 
manage.  In  addition,  keeping  skilled  staff  with 
knowledge  of  the  files  in  a  company  with  a  short 
life expectancy is challenging as their competences 
can sometimes be better remunerated elsewhere. 

The stake of the Slovenian state in the financial 
it 
sector  has  recently  decreased;  however 
remains  substantial,  in  particular  in  insurance. 
The Slovenian state controls a significant share  of 
the  financial  sector  through  its  stakes  in  NLB, 
Abanka-Celje  and  Sava  Re.  It  has  recently  made 
steps in the right direction such as the sale of NLB 
shares  in  2018,  the  commitment  to  reduce  state 
ownership  to  25 %  plus  one  share  by  the  end  of 
2019  and  the  privatisation  of  Abanka-Celje  in 
2019  (see  Section  3.1.6.).  In  the  insurance  sector, 
the  stake  of  the  state  is  60 %,  an  unusually  high 
share  in  such  a  non-strategic  sector,  making 
Slovenia  an  outlier  in  the  EU.  Two  attempts  by  a 
foreign  insurance  group  to  increase  its  stake  in 
Sava  Re  were  rejected.  As  demonstrated  by  the 
crisis that hit Slovenia in 2013, maintaining a high 
level  of  state  involvement  may  entail  risks  in  the 
stability,  economic 
for 
long 
efficiency and public finances. 

financial 

run 

3.2.2.  ACCESS TO FINANCE FOR SMALL AND 

MEDIUM-SIZED COMPANIES 

Internal finance and bank credit conditions are 
satisfactory  for  Slovenian  businesses.  Slovenian 
businesses,  notably  SMEs,  heavily  rely  on  bank 
credit (27)  and  internal  finance  to  cover  their 

(27)  According  to  the  2018  Survey  on  Access  to  Finance  of 
Enterprises  (SAFE),  for  Slovenian  SMEs  the  three  most 
important  sources  of  finance  are  credit  lines  (62 %),  bank 
loans  (61 %)  and  grants  (51 %).  In  the  period  April-

September  2018,  Slovenian  SMEs  most  often  used  credit 
lines (38%). 

(28)  In  the  2018  EIB  survey,  6 %  of  SMEs,  but  not  a  single 
large  firm,  considered  their  access  to  external  finance  as 
constrained  (EIB  2018).  According  to  the  2018  SAFE 
results, access to finance is the most important concern for 
6% of Slovenian SMEs (compared to 7% at EU level). This 
is a decline from 17% in 2009, and 23% in 2013. 

(29)  According  to  the  2018  SAFE  results,  equity  financing  is 
relevant for 24% of Slovenian SMEs but only 1% of them 
used it recently. 

24 

 
                                                           
                                                                                   
3.2. Financial sector 

capacities of commercial banks, through which the 
instruments are delivered. Broader use of financial 
instruments  for  revenue  generating  or  cost-saving 
activities in the future could result in better access 
to financial markets. It could also make it easier to 
find the optimal financing mix to address regional 
disparities. 

could  be  stimulated  by  growth  funds,  further 
listings (including of state-owned enterprises), and 
a 
long-term 
supplementary  savings),  resulting  in  more  equity 
investments by pension funds.  

(including 

pension 

reform 

The lack of financial and investment literacy in 
SMEs  remains  an  issue.  Despite  advice  and 
training  offered  by  public  institutions,  SMEs' 
access  to  finance  is  still  hindered  by  a  lack  of 
financial and investment literacy and of support in 
the  process  of  applying  for  bank  loans,  public 
financial 
incentives  and  alternative 
financial 
sources (European Commission, 2018i). 

Slovenia  offers  various  finance  schemes  for 
schemes 
businesses,  notably  SMEs.  These 
provide, for example, microloans or guarantees (30) 
and also create or participate in new instruments to 
support  business  funding.  They  are  backed, 
directly  or  indirectly,  by  EU  funds,  including  the 
cross-border  Central  Europe  Fund  of  Funds. 
Implementation of most of them is ongoing so that 
it is too early to assess their impact. 

regulatory 

corresponding 

Slovenia is strong in blockchain-based financial 
technology solutions and has started to work on 
a 
framework. 
Slovenian companies have had a high success rate 
on  several  international  crowdfunding  platforms, 
notably  Kickstarter.  Over  300  SMEs  have  raised 
around EUR 8.8 million in recent years (European 
Commission,  2018i).  Slovenian  companies  also 
raised  significant  funding  through  initial  coin 
offerings  in  the  last  2  years.  In  2017,  around  5 % 
of funds raised in global initial coin offerings went 
to  Slovenian  projects.  The  government  is  actively 
promoting  block-chain  technologies (31)  and  has 
adopted  an  action  plan  in  May  2018.  It  is  now 
preparing  a  regulatory  framework  for  investor 
protection in this area. 

Broader  use  of  financial  instruments  for  EU 
funds  presents  untapped  potential  to  improve 
Slovenia’s funding system. With a wide portfolio 
of  different  products,  EU  funds  are  helping  to 
the 
diversify  financial  markets  and 

improve 

(30)  However,  according  to  the  European  Investment  Fund 
(European Investment Fund, 2018), Slovenia is among the 
three EU countries where new guarantee activity decreased 
the most in the first semester of 2018. 

(31)  Initial  coin  offerings  are  only  one  type  of  application  for 

block-chain technology.  

25 

 
                                                           
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  EMPLOYMENT 

(Q3 2018). 

respectively 

Labour  market  performance  continues 
to 
improve,  although  certain  challenges  remain. 
Activity  and  employment  rates  continued 
to 
increase  in  2018  and  are  currently  at  79.7 %  and 
75.5 % 
The 
unemployment rate is at 5.2 % (Q3 2018), close to 
the  pre-crisis  level.  However,  the  activity  and 
employment  rates  of  older  workers  (aged  55-64) 
remain  well  below 
the  EU  average,  despite 
increases  in  recent  years.  This  is  particularly  the 
case  for  low-skilled  older  workers,  who  had  an 
activity  rate  of  29.4 %  (EU:  47.4 %)  and  an 
employment rate of 26.6 % (EU: 42.3 %) in 2017. 

According to self-declared reasons for not seeking 
work  based  on  the  Labour  Force  Survey  (Graph 
3.3.2),  the  main  reason  for  the  inactivity  of  older 
people (aged 55-64) in 2016 was early retirement. 
The inactivity  in this age category therefore  has a 
direct  negative  impact  on  the  sustainability  of  the 
pension system (European Commission (2018a). In 
the  age  category  45-54,  disability  or  illness  were 
also  mentioned  as  reasons  by  a  large  share  of  the 
inactive.  For  younger  people  (25-34),  education 
was the main reason for inactivity of men, whereas 
for  women 
care 
responsibilities  were  also  mentioned.  The  latter 
also  remain  important  reasons  for  inactivity  of 
women in the older age categories (35-54). 

personal, 

family, 

or 

Graph 3.3.2:  Reasons for inactivity by age and sex, 2016 

in 

previous 

Long-term  unemployment  is  still  above  pre-
crisis  levels  and  almost  half  of  the  unemployed 
aged  over  50  have  been  out  of  the  labour 
market for 2 years or more. Although it had been 
long-term 
decreasing 
unemployment remained at 3.1 % (32) in 2017, still 
accounting for almost half of total unemployment. 
More than 40 % of the long-term unemployed are 
older  than  50  years  of  age.  Further  targeted 
investments  in  training  could  help  to  improve  the 
weak  employment  situation  of  low-skilled  and 
older workers. 

years, 

Graph 3.3.1:  Activity rate by age and educational 

attainment in 2017 

Source: European Commission 

The  government  intends  to  focus  its  efforts  on 
reducing the low employment rate of workers in 
the age categories 45-54 and 55-64. Inactivity of 
people in these age categories has a direct negative 
impact on the sustainability of the pension system. 
Government  efforts 
the 
employment  rate  through  additional  activation 
measures  to  incentivise  older  workers  to  work 
longer. The government also seeks to identify and 
discontinue  any  remaining  bridges,  which  induce 
people  to  go  from  long-term  sick  leave  or  long-
term  unemployment  directly  into  retirement  (see 
European Commission, 2017b). 

increase 

intend 

to 

Source: Eurostat 

The  main  reason  for  the  inactivity  of  older 
to  be  early  retirement. 
people  appears 

(32)  Percentage of active population aged 15-75. 

Different  structures  and  funding  needs 
in 
Public  Employment  Service  offices  are  one  of 
the  challenges  in  Slovenia.  Good  coordination 
between local offices and a less central approach in 
setting  measures  could  improve  effectiveness. 
Project-based  financing  remains  a  challenge,  as  it 

26 

010203040506070809010020-2425-2930-3435-3940-4545-4950-5455-5960-64%Low SIMedium SIHigh SILow EUMedium EUHigh EU0%10%20%30%40%50%60%70%80%90%100%MenWomenMenWomenMenWomenMenWomen25-3435-4445-5455-64OtherDisability or illnessCare responsibilitiesPersonal or family responsibilitiesEducationRetirementDiscouraged 
 
 
                                                           
 
3.3. Labour market, education and social policies 

addition, bonuses,  which are currently  included in 
the  minimum  wage,  would  be  excluded  as  of  1 
January  2020.  The  provisions  will  ensure  that  the 
minimum  wage  will  be  at  least  20 %  above 
minimum  living  expenses  and  will  not  exceed 
them  by  more  than  40 %.  While  this  measure 
would  help  those  in  low-paid  jobs  and  increase 
their  purchasing  power,  there  is  a  risk  that  it  may 
create inflexibility in the labour market and reduce 
the  number  of  (new)  job  creations,  in  particular 
when the business climate is less favourable. 

Participation  in  adult  learning  by  low-skilled 
people, older workers and the inactive is below 
the  EU  average.  In  2017,  12 %  of  adults 
participated in learning, which is 1.1 pps above the 
EU  average.  However,  the  share  of  low-qualified 
adults  participating  in  learning  (as  percentage  of 
all low-qualified adults) was 2.9 % in 2017 below 
the  EU  average  of  4.3 %.  The  2016  Adult 
Education  Survey  shows  that  97.5 %  of  older 
workers  and  95.9 %  of  low-skilled  workers  were 
not  willing  to  participate  in  adult  learning  and 
training activities. 

in 

of 

support 

lifelong 

falling  participation 

To  address 
in  adult 
learning,  the  government  adopted  a  new  Adult 
Education  Act  in  2018.  The  Act  establishes 
educational  guidance  in  adult  learning  as  a  public 
service 
learning 
participation,  self-directed  learning  as  well  as  the 
validation  and  recognition  of  prior 
learning. 
Professional  counsellors  can  help  adults  identify 
learning needs, develop a career plan, find relevant 
programmes  and  financial  support,  and  achieve 
completion 
Encouraging 
participation  in  adult  education  –  in  particular  of 
low-skilled, older and inactive workers  – is also a 
promising  way 
some 
fill 
occupations, presenting opportunities for the long-
term unemployed to return to the labour market. 

shortages 

(OECD, 

2018). 

in 

to 

The  share  of  employees  in  temporary  and 
precarious jobs remains above the EU average. 
The share of temporary contracts was at 14.6 % in 
2017, while the EU average was at 11.3 %. At the 
same  time,  the  transition  rate  from  temporary  to 
permanent contracts has increased by 2.5 pps since 
2007  and  was  relatively  high  at  38.4 %  in  2017. 
Nevertheless,  the  share  of  involuntary  temporary 
employees  was  9.4 %,  above  the  EU  average  of 
7.8 %  (2017).  Moreover,  the  share  of  employees 

leaves many offices with budgetary constraints and 
a fluctuating number of counsellors. The changing 
labour  market  situation  requires  a  rich  and  stable 
pool  of  counsellors  in  local  offices  to  guarantee 
services 
integrated 
the  unemployed.  An 
approach  that  also  involves  the  support  of  social 
services, developed with the help of the European 
Social Fund, should have a positive impact when it 
is launched. 

to 

Graph 3.3.3:  Labour shortages, Slovenia 2008-2018 

(1) Labour shortages in Slovenia as reported in the industry, 
construction and services sectors, ESB indicator (2008, 2018). 
Source: Eurostat 

In  order  to  reduce  long-term  unemployment, 
the  focus  group  of  Employ.me  2017/2019  (33), 
the  active  labour  market  policy  programme, 
was  expanded  last  year.  Persons  older  than  50 
and  persons  aged  over  30 (34)  may  now  be 
included  in  subsidised  employment  immediately 
after having registered as unemployed, rather than 
after  having  been  registered  for  at  least  6  months 
as was previously the case (MOLFSAEO, 2018). 

In  December  2018,  the  Slovenian  parliament 
adopted  an  act  to  increase  the  minimum  wage 
gradually to EUR 700 net in 2020. The minimum 
wage  will  increase  from  EUR 638  at  present  to 
EUR 667  in  2019  and  to  EUR 700  in  2020.  In 

(33)  “Employ.me”  (“Zaposli.me),  is  a  subsidy  programme 
(EUR 5 000  -  7 000),  subsidising  the  employment  of 
disadvantaged  groups  for  a  minimum  period  of  one  year. 
According 
to  a  study  of  University  of  Primorska 
“Employ.me”  2009-2012  was  the  active  labour  market 
policy  with  the  biggest  labour  market  impact,  although  it 
was  also  the  most  expensive  one.  Co-financing  from  the 
European Social Fund amounts to 80 %. 

(34)  Without an elementary education or with no more than an 

elementary education. 

27 

01020304050070809101112131415161718%IndustryConstructionServices 
 
                                                           
3.3. Labour market, education and social policies 

Although  participation  in  tertiary  education  is 
widespread,  inequalities  in  access  persist.  In 
2017,  46.4 %  of  30-34-year-olds  had  obtained 
tertiary  education,  above  the  40 %  national  target 
and the EU average (39.9 %). However, the gender 
gap in Slovenia in 2017 was 24.1 pps, the biggest 
in 
is 
the  EU.  Access 
those  with  a  weak 
particularly  difficult  for 
socioeconomic  background:  only  2.9 %  of  new 
low 
tertiary  entrants  are 
attainment.  The  European  Centre 
the 
Development  of  Vocational  Training  (Cedefop) 
has  forecast  a  significant  further  shift  to  high 
qualifications by 2025. 

from  parents  of 
for 

to  higher  education 

in 

force 

The  Apprenticeship  Act, 
since 
December  2017, is trying to link education and 
practical experience. By October 2018, only 186 
out of approximately 12 000 students in vocational 
education  and  training  are  enrolled  in  one  of  the 
link  work 
eight  different  programmes 
experience  with classroom education. 20 % of  the 
curriculum  is  flexible,  making  the  apprenticeship 
adjustable to labour market demands. According to 
the  Ministry  of  Education,  the  main  disincentive 
for higher participation in vocational education and 
training or apprenticeship is low wages. 

that 

use 

information 

lack  digital 

skills.  The 
Young  people 
International  Computer  and  Information  Literacy 
results from 2013 show that only 16 % of pupils in 
primary  school acquire the necessary digital skills 
communications 
to 
technology  for  collecting  and  processing  data  and 
solving  problems 
independently  (Ministry  of 
Education,  2018).  In  addition,  only  around  5.5 % 
of  high  school  students  met  all  the  digital  skills 
targets  (National  Examination  Centre  RIC,  2016; 
Ministry of Education, 2018). 

and 

Knowledge and skills are insufficiently adjusted 
to the current and future needs of the economy. 
The  structure  of  students  enrolled  in  educational 
programmes and the skills of workers are adjusting 
only  slowly  to  labour  market  changes.  Reading, 
mathematical and digital skills of older generations 
as well as of people with a low level of education 
are  relatively  poor  (Government  of  Republic  of 
Slovenia,  2017).  According  to  a  2017  business 
survey,  64 %  of  companies  in  Slovenia  encounter 
difficulties  when  searching  for  adequately  skilled 
personnel (SPIRIT, 
in 
unemployment rates between sectors are relatively 

2017).  Differences 

with a precarious job (35) was 5.1 % in 2017, more 
than double the EU average of 2.3 %. 

3.3.2.  EDUCATION AND SKILLS 

less 

important 

is  comparatively 

Slovenia  has  a  generally  well  performing 
education  system,  but  it  could  be  improved  in 
certain  areas  and  sustained  for  the  future. 
Slovenian  students  in  general  education  perform 
well in international comparisons. Socio-economic 
status 
for 
(European  Commission 
education  outcomes 
2018b).  Its  importance,  however,  grows  with  the 
level  of  education  (Cankar  et  al.,  2017)  and  there 
are  visible  disparities  when  looking  at  pupil 
especially  when 
rates, 
underachievement 
comparing  the  top  and  bottom  socioeconomic 
quartiles  (European  Commission  2018d).  Literacy 
among  young  people  has  improved  significantly 
and  is  high  by  international  standards,  though 
performance  of  boys  in  reading  literacy  is  still  a 
concern.  At  4.3 %,  the  proportion  of  early  school 
leavers is the second lowest in the EU. The rate of 
over  4-year-olds  participating  in  early  childhood 
education  and  care 
increasing  slowly  but 
continuously  (European  Commission,  2018e).  It 
stood at 90.9 % in 2017, still 4.4 pps below the EU 
average.  There  is  also  a  need  to  review  general 
school  curricula  and  improve  the  situation  of 
teachers to attract a sufficient number of qualified 
students  to  choose  pedagogical  studies  (OECD 
2018).  Slovenia’s  teachers  are  relatively  old  with 
38 % of teachers aged over 50. 

is 

Education  spending  as  a  share  of  GDP 
decreased  during  the  crisis,  but  it  remains 
above  the  EU  average.  Between  2010  and  2015, 
expenditure  per  student  in  primary  and  secondary 
education  fell  by  13 %,  one  of 
the  highest 
decreases  among  OECD  countries.  Expenditure 
per student in tertiary education only increased by 
1 %,  compared  to  an  average  increase  of  11 % 
across  OECD  countries  (OECD,  2018).  The 
government  aims  to  keep  the  share  of  education 
financing  at  a  stable  6 %  of  GDP  in  the  future, 
0.5 pps  below  the  share  of  2013.  Reforms  on 
higher  education  financing  continue,  but  a  more 
substantial 
been 
postponed. 

legislative 

overhaul 

has 

(35)  The work contract did not exceed 3 months’ duration. 

28 

 
                                                           
for 

and 

large compared to other EU countries, which could 
point  at  sectoral  mismatches  in  supply  of  and 
links  between 
demand 
labour.  Stronger 
and 
employers 
investments  in  a  better  alignment  of  education 
curricula  with 
labour  market  needs  could 
contribute to reinforce the labour market relevance 
of skills in the working-age population and a better 
match in labour demand and supply. 

education 

sector 

the 

3.3.3.  SOCIAL POLICY 

The share of people at risk of poverty or social 
exclusion  has  decreased.  The  at-risk-of-poverty 
or  social  exclusion  rate  (AROPE)  decreased  by 
1.3 pps  to  17.1 %  in  2017  (Graph  3.3.4).  For 
people aged over 65, the AROPE was 18.3 % and 
approaching  the  EU  average  (18.1 %).  However, 
this  rate  was  higher  for  elderly  women  (22.9 %; 
EU  average  20.5 %).  After  2  years  of  increases, 
monetary poverty for the elderly fell by 1.2 pps to 
16.4 %  but  remains  above 
the  EU  average 
(14.6 %) as does the poverty gap for this age group 
(17.9 %;  EU  average:  16.7 %).  Inequality  as 
measured  by  the  ratio  of  incomes  of  the  richest 
20 % of households compared to the poorest 20 % 
of  households,  continued  to  decrease  and  remains 
among the lowest in the EU. In spite of this, the in-
work  at-risk-of-poverty  rate  was  6.6 %  for  people 
aged 18-64 in 2017 which was relatively low. 

Graph 3.3.4:  At risk of poverty or social exclusion rate and 

its components 

3.3. Labour market, education and social policies 

3.3.4.  INVESTMENT 

social 

growth. 

long-term 

inclusion  policies 

Increased  investment  in  skills,  education  and 
is 
training  and 
important  to  improve  Slovenia’s  productivity 
and 
The 
inclusive 
employment  situation  of  low-skilled  and  older 
workers  remains  weak,  and  there  are  shortages  in 
more and more segments of the labour market. To 
address  these  challenges,  a  better  alignment  of 
education  curricula  with  labour  market  needs    is 
needed  as  well  as  investments  in  training  and 
social activation  measures for the  currently  not or 
not  fully  used  labour  potential  and  in  a  better 
training  and  education  infrastructure.  Matching 
investments  in  social  inclusion,  in  the  capacity  of 
public services and the availability of child, health 
and  long-term  care  services (36)  are  necessary  to 
ensure long-term inclusive growth. 

The  decrease  of  social  benefits  when  taking  up 
employment  could  reduce  work 
incentives. 
According to a  benchmarking exercise  in  the area 
of minimum income schemes conducted within the 
Social  Protection  Committee,  Slovenia  performs 
around the EU average for the indicators related to 
adequacy  of  the  minimum  income  benefits  (see 
draft  Joint  Employment  Report  2018),  which  was 
increased by EUR 95,22 in the last year. However, 
inactivity  traps  in  Slovenia  are  relatively  large, 
especially  for  single  parents  and  one-earner 
married  couples  with  children.  The  major  part  of 
the inactivity trap is attributable to the withdrawal 
or  reduction  of  social  assistance,  family  and 
housing benefits when taking up employment, and 
only  a  minor  share  results  from  increased  income 
tax and social security contributions. Reducing the 
inactivity  trap  is  particularly  important  given  the 
ageing  of  the  population  in  Slovenia  (OECD, 
2018). 

(36)  Section  3.1.5  provides  an  overview  of  the  challenges 
Slovenia is facing in the areas of healthcare and long-term 
care. 

Source: European Commission 

29 

051015202505060708091011121314151617% of populationAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material deprivationPeople living in low work intensity households 
 
                                                           
3.3. Labour market, education and social policies 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is designed as a compass for a renewed process of upward convergence 
towards  better  working  and  living  conditions  in  the  European  Union  (1).  It  sets  out  twenty  essential 
principles  and  rights  in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working 
conditions; and social protection and inclusion. 

and 

Slovenia  is  performing  well  on  most 
indicators  of  the  Social  Scoreboard 
supporting  the  European  Pillar  of 
Social  Rights. 
labour  market 
  The 
continues  to  improve,  as  illustrated  by  a 
falling 
employment 
rising 
unemployment  rate.  However, 
labour 
market  participation  of  older  workers 
remains  low,  reflecting  possibilities  for 
early retirement. The education system is 
generally  performing  well.  Although  the 
at-risk-of-poverty or social exclusion rate 
has decreased over the last years, old-age 
poverty  remains  frequent  particularly  for 
reflecting  challenges 
elderly  women, 
regarding  the  adequacy  of  the  pension 
system.  As  illustrated  by  the  Social 
Scoreboard,  the  level  of  net  earnings  of 
workers  and  the  self  reported  unmet 
needs  for  medical  care  are  further  points 
of attention. 

Increasing  the  low  employment  and 
activity  rates  of  older  workers  and  in 
particular those with lower skills levels 
remains  challenging.  After  8  years  of 
falling participation in adult learning, the 
situation stabilised but remains especially 
critical among older workers and the low-skilled. Active labour market policies under evaluation performed 
rather well, if judged by labour market impact and cost-effectiveness. However, participation of unemployed 
in active labour market policies remains very low. 

Slovenia is making progress in improving childcare and support to children. Both the at-risk-of-poverty 
or social exclusion rate as well as monetary poverty for children younger than 18 years are well below the 
EU average. Participation of children younger than three in formal childcare is also above average compared 
to other Member States and has increased further in the last year. New positive steps to promote child well-
being  were  taken  also  with  the  adoption  of  new  Family  Code  and  a  new  Resolution  on  Family  Policy. 
However, Slovenia has yet to adopt a new National Programme for Children as the old one expired in 2016.  

(1)  The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council 
and  the  European  Commission.  https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-
union/european-pillar-social-rights/european-pillar-social-rights-20-principles_en  

30 

Early leavers from education and training (% of population aged 18-24)Best performerGender employment gapBetter than averageIncome quintile ratio (S80/S20)Best performerRisk of poverty or social exclusion (%)Better than averageGDHI per capita growthOn averageNet earnings of a full-time single worker earning AWTo watchImpact of social transfers on poverty reductionBetter than averageChildren aged less than 3 years in formal childcareBetter than averageSelf-reported unmet need for medical careTo watchIndividuals’ level of digital skillsOn averageMemberStatesareclassifiedaccordingtoastatisticalmethodologyagreedwiththeEMCOandSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaveragesandclassifiesMemberStatesinsevencategories(from“bestperformers”to“criticalsituations”)Forinstance,acountrycanbeflaggedas“betterthanaverage”ifthelevelofindicatorisclosetotheEUaverage,butitisimprovingfast.FormethodologicaldetailspleaseconsultthedraftJointEmploymentReport2019,COM(2018)761final.Dataupdateof29 January 2019.NEET: neither in employment nor in education or trainingGDHI: gross disposable household income SOCIAL SCOREBOARD FOR SLOVENIAEqual opportunities and access to the labour marketBest performerDynamic labour markets and fair working conditionsBetter than averageOn averageOn averagePublic support / Social protection and inclusionYouth NEET (% of population aged 15-24) Employment rate (% of population aged 20-64)Unemployment rate (% of population aged 15-74)Long-term unemployment rate (% of population aged 15-74) 
 
3.4. COMPETITIVENESS REFORMS AND INVESTMENT  

3.4.1.  PRODUCTIVITY GROWTH 

related 

in  particular 

in  R&D,  digitalisation  and 
Investments 
to 
infrastructure, 
transport and rail, would help the convergence 
process. Slovenia’s growth potential would benefit 
if  the  trend  of  declining  investment  into  research, 
development  and  innovation  could  be  reversed. 
Investments  in  the  digitalisation  of  Slovenia's 
firms, which are active in more traditional sectors, 
as well as in the uptake of e-government solutions 
are also important to ensure that Slovenia remains 
in 
competitive.  Bottlenecks 
particular  rail  transport,  continue  to  adversely 
impact on the economy and the society as a whole. 

infrastructure, 

in 

Graph 3.4.1:  Labour productivity and total factor 

productivity (TFP), Slovenia and Euro area 

Source: Eurostat 

Labour productivity is slowly converging to the 
euro  area  driven  by  total  factor  productivity 
(TFP), as recent reforms are starting to pay off. 
Slovenia's labour productivity in purchasing power 
standard  relative  to  the  EU  went  from  76.1 %  to 
80.5 % of the EU average between 2000 and 2017. 
After falling by more than in the euro area during 
the  crisis,  Slovenia's  labour  productivity  has  been 
growing  faster  than  the  euro  area  since  2015,  but 
the pace of convergence with the euro area remains 
slow.  Labour  productivity  is  driven  primarily  by 
fast  growth  in  TFP,  a  sign  that  the  economy  is 
gaining  efficiency,  although  the  low  TFP  growth 
state-
of 
owned-  enterprises  still  weighs  on  aggregate 
productivity (European Commission 2018b). 

large-sized 

medium 

and 

Investment  fell  rapidly  during  the  crisis  and 
remains below the euro area average as a share 
of  GDP,  although  it  is  now  recovering  slightly. 
Investment  averaged  over  26 %  of  GDP  in  2000-
2005,  well  above  the  euro  area  average  of  22 %. 
After increasing rapidly in the run-up to the crisis, 
it  fell  rapidly 
thereafter.  In  2017,  although 
continuing  to  grow,  the  level  of  investment  was 
still  well  below  the  euro  area  average  (18.5 %  vs 
20.5 %  of  GDP).  In  particular,  private  investment 
was  below  the  euro  area  average  while  public 
investment  was  slightly  above.  Construction 
investment suffered the most during the crisis, both 
for dwellings and, even more so for other buildings 
and  structures.  Investment 
in  machinery  and 
equipment also fell. Investment in information and 
communication  technology  fell  from  2 %  of  GDP 
on  average  in  2000-2005  (0.9 %  of  GDP  in  the 
euro area) to 0.8 % of GDP in 2017 (0.7 % of GDP 
in 
intellectual 
property products had been rather stable but is now 
substantially lower than in the euro area (3.0 % vs 
3.9 %  of  GDP).  The  2018  Investment  Promotion 
Act  harmonizes  support  for  domestic  and  foreign 
investments  and  facilitates  investments  that  are 
deemed strategic. 

the  euro  area).  Investment 

in 

Graph 3.4.2:  Investment by type 

Source: Eurostat 

investment 

foreign  direct 

Inward 
(IFDI) 
remains  comparatively  low.  For  a  small  open 
economy  like  Slovenia,  IFDI  is  a  key  driver  of 
productivity growth. Slovenia's stock of IFDI as a 
share  of  GDP  was  31.8 %  at  the  end  of  2016.  In 
most  similar  EU  Member  States  this  rate  is  much 

31 

85909510010511011512007080910111213141516171819202010=100Labour productivity Euro areaLabour productivity SloveniaTFP Euro areaTFP Slovenia05101520253035010305070911131517% of GDPIntellectual property productsOther machinery and equipmentInformation communication technologies equipmentTransport equipmentOther buildings and structuresDwellings 
 
 
 
3.4. Competitiveness reforms and investment  

its  lowest  level  ever  at  0.47 %  of  GDP  in  2017, 
down from a peak of 0.66 % of GDP in 2010. This 
decline  is  mostly  due  to  fiscal  consolidation  and 
the cyclical nature of EU funds. 

The  efficiency  of  Slovenia’s  public  R&D 
spending and the quality of its research system 
remain  relatively  low.  The  Slovenian  Research 
Agency is responsible for the allocation of funding 
based  on  research  excellence  criteria.  Looking  at 
scientific  excellence  (as  measured  by  the  share  of 
publications  among  the  top  10 %  most  cited 
worldwide), Slovenia lags behind the EU average, 
and  ranks  only  17th  among  EU  Member  States. 
However, the share of international co-publications 
in  the  total  number  of  publications  was  58.8 %  in 
2017  and  exceeded  the  EU  average  (49.4 %). 
Slovenia 
in 
international  co-publications  of  4.5 %  between 
2010 and 2016. 

compound 

achieved 

growth 

Graph 3.4.3:  R&D funding 

Source: Eurostat 

science 

Support for young researchers has declined and 
Slovenia  has  problems  attracting 
foreign 
research  talent.  Slovenia's  education  system 
performs  well 
and 
in  producing 
engineering graduates and doctoral graduates. Yet, 
the  decline  in  public  investment  in  R&D  has  also 
been  felt  in  a  reduction  of  funding  for  young 
researchers.  In  2017,  the  Slovenian  Research 
Agency  provided  funds  for  840  young  people 
(European 
involved 
Commission,  2017b).  The  number  of  researchers 
(full-time  equivalents)  employed  by  the  public 

doctoral 

studies 

in 

higher, up to 80 % of GDP and more. Furthermore, 
the  distribution  of  IFDI  (in  value  terms)  within 
Slovenia  contributes  to  regional  disparities  as 
nearly  61 %  of  all  IFDI  is  concentrated  in  the 
Osrednjeslovenska  region  while  at  least  8  of  the 
regions  are  under  5 % (Bank  of  Slovenia,  2016). 
Most  of  Slovenia’s  regions  thus  benefit  only  very 
marginally  from  the  productivity  spillover  effects 
of IFDI. 

Research and development 

to 

the  2017  summary 

Slovenia  is  a  strong  innovator  but  recent 
progress  was  limited  and  weaknesses  persist. 
According 
innovation 
performance index Slovenia falls in the category of 
strong  innovators  with  a  score  just  below  the  EU 
average. More importantly, its performance change 
from  2010  to  2017  was  rather  moderate,  with  an 
increase  of  only 
(European 
Commission, 2018f). One of the main weaknesses 
is the reduced and inefficient R&D expenditure in 
the  public  sector.  Slovenia  is  also  relatively  weak 
in  terms  of  the  effects  of  innovation  activity  on 
reflected 
competitiveness.  This  weakness 
particularly  in  the  low  shares  of  exports  of 
knowledge-intensive  services  and  of  persons 
employed in high-growth enterprises. 

about  1.4 % 

is 

Innovation  performance  across  Slovenia's 
regions  is  uneven.  East  Slovenia  is  a  moderate 
innovator,  though  it  has  improved  its  innovation 
performance over time. In contrast, West Slovenia 
is  a  strong  innovator  albeit  with  a  decreasing 
innovation performance. 

Slovenia has not yet reached the R&D-intensity 
target of 3.0 % of GDP. Slovenia’s investment in 
R&D is slightly below the EU average and remains 
the  European 
dependent  on  EU  funds,  with 
Regional  and  Development  Funds 
(ERDF) 
providing  33.9 %  of  public  R&D  expenditure.  In 
2017,  Slovenia's  overall  R&D 
intensity  was 
1.86 % of GDP, a significant decline from its 2013 
value  of  2.58 %.  This  decline  was  mainly  caused 
by a decrease in business enterprise expenditure on 
R&D  from  a  peak  of  1.98 %  of  GDP  in  2013  to 
1.39 % of GDP in 2017. In addition to grants, the 
Slovenian  government  strongly  relies  on 
tax 
incentives  to  promote  R&D  in  firms.  R&D  tax 
incentives accounted for 63 % of total government 
support for business expenditure for R&D in 2015 
(OECD,  2017a).  Public  R&D  expenditure  fell  to 

32 

11,21,41,61,822,22,42,6010305070911131517% of GDPEUSlovenia 
 
3.4. Competitiveness reforms and investment  

procedures,  such  as  quality  control  and  testing. 
Investing in knowledge is not seen as part of their 
competitive  strategy.  In  contrast,  firms  from  the 
highly  impactful  medium-and  high-tech  segments 
(e.g.  the  automotive  sector,  machinery)  are  more 
intensively involved in science-industry links. 

Finding  business  and  research  partners  can  be 
a  challenge  due  to  small  market  size.  Slovenia 
recognizes  this  shortcoming  by  taking  part  in 
several  interregional  innovation  actions.  These 
include  the  Interregional  innovation  pilot  project 
(Sustainable  buildings  -  Smart  campus  pilot 
project),  the  Industrial  transition  project  focusing 
on  addressing  challenges  of  skills  mismatches, 
modernisation and adaptation to new technologies, 
in 
the  Smart  Specialization  Cooperation 
and 
Central Europe project. At the same time, Slovenia 
performs  well  in  delivering  projects  within  the 
cross-border  programmes  and  macro-regional 
strategies.  Slovenia  could  benefit  from  further 
enhancing 
further 
possibilities, 
as 
transnational 
by 
for 
participating in business networks. 

such 
partnerships 

SMEs 

The  Slovenian  smart  specialisation  strategy 
aims at tackling  many of these  challenges  inter 
alia  by  establishing  Strategic  research  and 
innovation partnerships (SRIPs). It was adopted 
in 2015 and governs the delivery of almost EUR 1 
billion  of  EU  funds.  It  aims  to  develop  top-level 
conditions for creativity and innovation in several 
niche  areas.  SRIPs  have  been  established  around 
nine  focus  areas  of  the  strategy.  Through  SRIPs, 
the governance of smart specialisation is entrusted 
to  around  700  non-governmental  stakeholders 
(including  knowledge, 
institutions,  businesses, 
NGOs  etc.)  which  paves  the  path  for  a  structural 
transformation  empowering  and  strengthening  the 
innovation  ecosystem  of  Slovenia.  SRIPs  have 
already  helped  to  improve  the  internationalisation 
and 
and  networking  of  Slovene 
innovation stakeholders through their participation 
in  thematic  smart  specialisation  platforms.  For 
example,  Slovenia  is  co-leading  the  thematic  area 
‘SME  integration  to  Industry  4.0’  through  the 
‘Factories  of  the  Future’  SRIP,  and  the  thematic 
area  ‘Digitalisation  and  Safety  for  Tourism’, 
through  the  ‘Sustainable  Tourism’  SRIP,  and  is  a 
partner  in  other  areas.  This  enables  Slovene 
stakeholders to learn from more experienced peers 
from  well-advanced  regions  and  Member  States, 

research 

(whether 

sector 
in  government  or  higher 
educations)  per  thousand  active  population  has 
declined from 4.3 in 2011 to 3.7 in 2016. There is 
little  influx  of  foreign  researchers  and  academics. 
This is partially due to the public sector employer 
system and the old-fashioned habilitation system in 
universities.  Slovenia  attracts  a  lower  share  of 
international  students  at  all  levels  of  tertiary 
education, especially at the doctoral level: less than 
9 % of Slovene doctoral students are  international 
compared to an OECD average of 25.7 % (OECD, 
2017b). International mobility or mobility between 
academia and industry are  not incentivised. These 
are  key  obstacles 
the  attraction  and  re-
integration  of  talent  and  to  the  much-needed 
openness  of  Slovenia’s  research  and  innovation 
system (European Commission, 2018b). 

to 

The  share of innovative enterprises in  Slovenia 
is  decreasing  and  lags  behind  the  EU  average. 
In the period 2014-2016, 40 % of all enterprises in 
Slovenia carried out innovation activities, and this 
share  was  6  pps  higher  in  the  period  2012-2014. 
Looking at the shares per enterprise segment, only 
about  34 %  of  small  companies  carried  out 
innovation activities, while the share rises to 80 % 
in large ones (Statistical Office of the Republic of 
Slovenia).  The  employment  share  in  fast-growing 
firms  within  innovative  sectors  is  well  below  the 
EU  average.  In  Slovenia,  only  3.2 %  of  the 
workforce  was  employed  in  fast-growing  firms  in 
innovative  sectors,  whereas  the  EU  average  was 
4.8 %. This indicates at a lack of dynamism, which 
is especially pronounced in innovative parts of the 
economy (European Commission, 2018i). 

seriously 

capacity) 

Most  SMEs  in  Slovenia  have  a  low  innovation 
capacity.  They  tend  to  be  poorly  integrated  in 
domestic, regional or international clusters, with a 
low  potential  to  attract  critical  mass  investment 
and  to  develop  large-scale  innovations.  A  lack  of 
sufficiently  equipped  R&D  units  in  SMEs  (low 
absorption 
the 
opportunities  for  science-industry  cooperation. 
Only 19.9 % of Slovenian enterprises are engaged 
in  co-operations  with  government,  public  or 
private  research  institutions.  14.4 %  of  Slovenian 
enterprises  co-operate  with  higher  education 
institutions (European  Commission,  2014).  The 
research  interests  in  most  of  Slovenia’s  (small) 
firms  lie  in  cost  reduction  and  relatively  routine 
improvements in their processes. Their “R&D”  or 
development  departments  mostly  perform  routine 

limits 

33 

 
3.4. Competitiveness reforms and investment  

digitalisation  in  services  than  in  manufacturing 
(Statistical  Office  of  the  Republic  of  Slovenia 
Index  6373).  Overall,  digitalisation  of  Slovenian 
businesses is better than the EU average, especially 
in e-commerce, the tourism sector, and companies 
integrated  into  foreign  value  chains  (e.g.  the 
automotive  sector).  Slovenian  businesses 
lag 
behind  their  EU  peers  in  specific  technologies, 
such  as  electronic  information  sharing  and  cloud 
services.  Slovenia  has  no  specific  tax  breaks  for 
investments  in  digital  technologies  or  business 
models.  The  Ministry 
and 
Technological  Development  has  launched  a  call 
for interest for funding (EUR 8 million) to promote 
the digitalisation of business processes.  

for  Economy 

in 

low 

In  Slovenia, 

terms  of  mobile 
Slovenia  ranks 
broadband take up, fast broadband take up and 
the broadband price index. In 2016, Slovenia set 
itself  the  objective  of  ensuring  that  96 %  of  its 
population  had  internet  speeds  of  at  least  100 
Mbps and the remaining 4 % at least 30 Mbps by 
2020. 
the  ultra-fast  broadband 
coverage rate for households is 75 %. The take-up 
of  ultra-fast  broadband  remains  close  to  the  EU 
average  of  13 % (European  Commission  2018h). 
Relatively  high  prices  for  broadband  connectivity 
might  be  the  reason  for  low  take-up  of  fast 
broadband  with  speeds  of  30  Mbps  and  above.  In 
the  period  2014-2020,  approximately  EUR 56 
million from the ERDF and EUR 7.5 million from 
the  European  Agricultural  Fund 
for  Rural 
Development  were  earmarked  to  ensure  better 
network  coverage.  The  ERDF  allocation  was 
subsequently  reduced  by  half  due  to  an  expected 
increase  in  market  interest.  The  latest  calls  for 
expression of market interest still triggered limited 
interest.  

thus improving the skills, knowledge and expertise 
available in the R&D sector in Slovenia. 

is 

Slovenia  lacks  a  well-coordinated  system  to 
govern its R&D efforts and is not implementing 
strategic R&D policy reforms. Frequent changes 
in  public  governance  of  the  national  research  and 
innovation system combined with fragmentation of 
policies and instruments remain challenges. One of 
the  key  problems  identified  by  public  research 
organisations  and  business  entities 
the 
irregularity  of  the  government’s  announcements 
and  the  funding  of  support  measures  such  as  the 
co-financing  of  joint  R&D  projects.  In  2018, 
further  calls  for  co-financing  of  R&D  projects 
were  issued,  and  a  new  instrument  related  to  the 
smart  specialisation  strategy  was  introduced  in 
August 2018. The so-called DEMO projects under 
the  call  should  fit  within  the  focus  areas  of  the 
SRIP action plans. The Slovenian authorities have 
requested  support  from  the  Horizon  2020  Policy 
Support  Facility  with  a  special  focus  on  the 
internationalisation  of  the  Slovenian  science  base, 
and  its  cooperation  with  businesses  (European 
Commission,  2018g).  Additionally,  Slovenian 
business  could  benefit  from  investment  in  high 
performance computing and artificial intelligence. 

Digitalisation 

The  adoption  of  digital 
technologies  and 
business models is generally well advanced, but 
some  sectors  lag  behind.  There  is  a  growing 
awareness  of 
integrate  digital 
technologies into business processes. However, the 
degree  of 
these 
technologies  varies  considerably  across  different 
sectors  of  the  economy,  with  a  higher  degree  of 

integration  of 

the  actual 

the  need 

to 

34 

 
3.4. Competitiveness reforms and investment  

Box 3.4.1: Barriers to investment in Slovenia 

Section 1. Macroeconomic perspective  

Investments were the main driver of Slovenia's growth in 2017 and the first half of 2018. Private 
sector investment  stands out  with a growth rate  of 16 %. Public investment is  much  weaker and 
heavily  relying  on  EU  Funds.  Despite  the  encouraging  growth  in  private  sector  investment  total 
investment  as  share  of  GDP  in  Slovenia  is  still  relatively  low  compared  to  other  EU  Member 
States.  This  is  also  reflected  in  the  below-average  investment  in  R&D,  which  is  also  largely 
determined by EU Structural and Investment Funds. 

Section 2. Assessment of barriers to investment and ongoing reforms  

Slovenia  faces  a  number  of  challenges  with  regard  to  investments.  Many  of  them  have  already 
been  discussed  in  previous  country  reports  and  have  been  addressed  in  country  specific 
recommendations.  Most  of  them  are  sector-specific  regulations  (e.g.  in  construction  or  business 
services/regulated  professions)  or  inefficient  procedures/institutions  (e.g.  public  procurement  or 
the judicial system). There are, however, also barriers resulting from insufficient infrastructure. 

Box: Investment challenges and reforms in Slovenia 

Selected barriers to investment and priority actions underway 

1.  Lengthy  court  proceedings  and  a  high  number  of  unresolved  cases  create  an  atmosphere  of 
uncertainty, which can have detrimental impacts on the readiness of companies to invest or might 
even  keep  potential  entrepreneurs  from  setting  up  business.  Slovenia  succeeded  in  reducing  the 
total  backlog  of  pending  cases  at  court  by  10 %  in  2018.  The  average  length  of  proceedings 
stagnated at around 11 months in litigious civil and commercial cases, and it still takes around 12 
months until the first hearing in a commercial case trial. 

2. Suboptimal infrastructure within and between regions hinders the economic development of the 
country.  Lacking  water  and  waste  water  systems  in  secondary  cities  and  rural  areas,  lacking 
(sustainable)  transport  connections  to  major  economic  hubs  and  the  TEN-T  network,  and 
(renewable) energy production and storage systems limit people’s mobility and quality of life and 
adversely affect the attractiveness of Slovenia as an investment target.  

The  up-take  of  e-government  services  has 
improved  but  remains  lower  than  the  EU 
average,  particularly  among  businesses (37). 
Slovenia  has  made  more  e-government  services 

(37)  The  SPOT  business  portal  is  part  of  Slovenia’s  burden 

reduction efforts (see section 3.4.2).  

available  and  increased  take-up  of  these  services. 
All  basic  public  services  for  citizens  and  about 
80 % of basic public services for legal entities are 
available  online  (European  Commission,  2018h). 
The  ‘Digital  Slovenia  2020’  strategy  provides  for 
the rollout of digital public services by 2020 at all 

35 

Regulatory/administrative burdenCSRTaxationPublic administrationAccess to financeCSRPublic procurement / public-private partnerships (PPPs)CSRCooperation between academia, research and businessJudicial systemFinancing of R&D and innovationInsolvency frameworkBusiness services / regulated professionsCompetition and regulatory frameworkRetailEmployment protection legislation / framework for labour contractsConstructionWages & wage-settingDigital economy / telecomEducationEnergyTransportLegend:No barrier to investment identifiedCSRInvestment barriers also subject to a country-specific recommendationSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration / business environmentFinancial sector / taxationR&D and innovationSector-specific regulationLabour market / education 
 
                                                           
3.4. Competitiveness reforms and investment  

experts is one of the key challenges for enterprises, 
in  particular  start-ups  and  scale-ups  (high-growth 
companies). Under the new Investment Promotion 
Act, a register of innovative start-ups and a register 
of  high-value  added  firms  were  established. 
However,  these  registers  were  not  widely  known 
about  among  the  target  groups  in  the  months 
following  their  establishment.  Slovenia  plans  to 
address  some  of  the  specific  needs  of  these 
businesses in 2019. 

the 

support  environment 

Developing 
for 
businesses  further  could  help  to  improve  the 
current  poor  performance 
on  business 
education and technology transfers in Slovenia. 
According to the Global Entrepreneurship Monitor 
(GEM)  Slovenia  performs  poorly  in  business 
education  and  technology  transfer,  scoring  only 
3.37  and  4.20  out  of  9  points,  respectively.  Both 
are  below  the  EU  average  (GEM,  2018).  At  the 
same time, the support for businesses seems not to 
function  optimally  in  all  areas.  Satisfaction  with 
the local support environment differs widely across 
companies  of  different  sizes.  While  over  70 %  of 
large  companies  expressed  their  satisfaction,  only 
about 10 % of micro companies did so. According 
to  businesses,  the  main  downside  of  the  existing 
entrepreneurial-support  environment  is  that  public 
officials  work  in  this  field  often  lack  knowledge 
and  experience  in  business  subjects  (SPIRIT 
Slovenia, 2017). 

Regulatory and administrative burden 

in 

the  area  of 

Administrative  burden  continues  to  subdue 
growth  and  investment  in  Slovenia.  As  in 
previous  years,  red  tape  is  one  of  the  more 
problematic  factors in doing  business  in  Slovenia. 
Specific  problems  exist 
tax 
procedures,  which  are  considerably  longer  and 
more  uncertain  than  in  other  Member  States. 
According  to  GEM  2018,  two  thirds  of  EU 
terms  of 
countries  rank  above  Slovenia 
government  policies 
taxes  and 
bureaucracy.  This  is  the  area  where  Slovenia  is 
farthest behind the EU average. The World Bank's 
Doing  Business  2019  report,  which  indicates  the 
ease  of  doing  business  in  individual  countries, 
ranked Slovenia slightly lower than the year before 
but still in the top quarter among  the 190 surveyed 
countries.  In the protection of minority investors, 
Slovenia dropped also a few ranks but stays among 
the top fifth. Enforcement of contracts remains the 

in 
that  address 

levels  of  government.  The  strategy  introduces  the 
‘digital  by  default’  and  ‘once  only’  principle  and 
includes  the  development  of  various  key  enablers 
for access to and interoperability of e-government 
services. 
Interoperability  across  governmental 
departments  remains  a  challenge.  The  lack  of  a 
widely  spread  and  easy  to  use  national  electronic 
for  using  e-government 
identification  means 
services is a significant barrier to uptake. Slovenia 
puts great efforts to make the process of electronic 
identification  and  electronic  signature 
in  e-
government services simpler and user-friendlier. 

3.4.2.  MARKET FUNCTIONING AND BUSINESS 

ENVIRONMENT 

Entrepreneurship and scale-up 

Entrepreneurship has been growing slowly and 
steadily.  Slovenia’s  business  dynamic  has  been 
positive, with a constant net gain in the number of 
active  businesses  in  recent  years.  The  number  of 
nascent  and  new  companies  has  been  increasing 
since  2012  (IMAD,  2018).  This  positive  trend  is 
linked  to  the  economic  upswing.  However,  the 
early-stage entrepreneurial activity by  women and 
the choice of entrepreneurship as a desirable career 
the  EU  average 
remain 
(European  Commission,  2018i).  The  ‘Start:up 
the  annual  Podim 
Slovenia’ 
(which  attracts  more 
conference 
than  700 
from  Slovenia  and  neighbouring 
participants 
countries) 
start-up 
are 
community.  

helping  Slovenia’s 

somewhat  below 

initiative  and 

competitiveness 

Scaling-up, 
and 
internationalisation  of  SMEs  remain  key 
challenges.  Slovenia's  share  of  high  growth 
enterprises remains below the EU average (8.74 % 
in Slovenia compared to an EU average of 9.9 %; 
European  Commission,  2018i).  Company  growth 
in a small economy, such as Slovenia, is linked to 
the  companies’  ability  to  compete  in  international 
markets.  And  while  the  Slovenian  economy  as  a 
whole  is  well  integrated  in  global  value  chains 
(IMAD, 2018), its smaller firms and firms in more 
traditional 
in 
internationalisation.  Policy  measures  to  address 
this weakness, such as export loans granted by the 
Slovenian  Export  and  Development  Bank  or  the 
more recent Investment Promotion Act, have so far 
yielded  only  limited  effect.  Employing  foreign 

sectors 

behind 

lag 

36 

 
3.4. Competitiveness reforms and investment  

databases. It is complemented by 150 local SPOT 
points, including one special SPOT centre in each 
statistical  region  where  consultants  provide  free-
of-charge assistance and services to businesses and 
to  regional  entities.  SPOT  has  found  wide 
acceptance 
the  business  community,  with 
roughly  2  million  procedures  being  performed 
every year. Tax procedures, other than value added 
tax  registration,  will  remain  in  the  separate  e-tax 
portal. 

in 

further 

The  insolvency  and  restructuring  framework 
showed improved recovery rates while caseload 
mostly  decreased.  In  2018,  the  number  of  new 
personal 
types  of 
insolvency  cases  and  all 
restructuring cases continued to decrease by 10 % 
respectively.  However,  corporate 
and  15 %, 
increased  by  6 %. 
bankruptcy  cases 
Creditors  are 
initiating  personal 
insolvency  cases  against  debtors  The  duration  of 
corporate  bankruptcy  proceedings  (from  the  start 
until  a  court  decision  on  the  merits)  decreased. 
Elapsed period to distribution to creditors is 1 052 
days.  Recovery  rates  increased  to  about  14 %  in 
corporate  bankruptcy  and  personal  insolvency 
cases,  and  above  30 %  in  court-led  restructuring 
(both types of compulsory settlement procedures). 

increasingly 

3.4.3.  ENERGY, ENVIROMENT AND 

INFRASTRUCTURE 

Climate,  energy,  environment  and  resources 
efficiency 

Slovenia  is  well  on  the  way  to  reaching  its 
Europe 2020 sustainability targets. It has already 
achieved its energy efficiency and greenhouse gas 
emission  targets  and  is  above  the  indicative 
trajectory  for  the  renewable  energy  target  (for 
details see below and Annex C). However, energy 
consumption in Slovenia is above the EU average 
and  increasing.  This  puts  the  achievement  of  the 
EU  2020 
(European 
target  under  pressure 
Commission,  2018b).  Primary  and  secondary 
in  2016.  The 
energy  consumption 
transport  sector  saw  the  biggest  increase  (5.9 % 
from 2015 to 2016 and 27 % from 2005 to 2016). 
This  is  mainly  due  to  road  transport,  which 
includes  transit  transport  (Energy  Union  factsheet 
Slovenia, 
of 
Slovenia’s industry, services and residential sector 
are  all  above  the  EU  average.  The  residential 

2017).  Energy 

consumption 

increased 

country’s  weak  area.  Even  though  it  improved  its 
respective  score  by  some  ranks,  it  is  still  in  the 
lower  half.  On  other  business  environment 
indicators, Slovenia improved its position. 

Slovenia 

regulates 

Regulatory restrictions are still in place for key 
professions. 
lawyers, 
architects,  civil  engineers,  real  estate  agents  and 
tourist  guides  more  strictly  than  the  weighted  EU 
average  (European  Commission,  2017c).  Among 
these key professions, restrictiveness is the highest 
for  lawyers.  There  is  a  restriction  that  only 
attorneys  may  be  shareholders  or  owners  of  an 
attorney’s  office  established  in  Slovenia.  Slovene 
citizenship  is  required  to  qualify  as  a  lawyer  in 
Slovenia.  In  its  national  action  plan  submitted  to 
in  January  2018,  Slovenia 
the  Commission 
reported on reforms already undertaken, including 
professions 
trade, 
architecture,  engineering  and 
tourist  sectors. 
Slovenia  also  announced  its  intention  to  ease 
restrictions  for  real  estate  agents  and  abolish  the 
nationality  requirement  for  lawyers.  However, 
these reforms have not been finalised yet. 

the  crafts,  education, 

in 

the 

still 

added 

measures 

the  Single  Document 

Slovenia  is  making  progress  with  its  efforts  to 
reduce administrative burden, such as the SME 
‘Single  Document’.  The 
test 
and 
is 
implementation  of 
progressing,  but  a  number  of  old  as  well  as  more 
recently 
await 
implementation.  Business  stakeholders  ask  for 
more  detailed  and  transparent  information  on  the 
measures  formally  reported  as  implemented.  One 
of  the  key  measures  on  which  progress  has  been 
made is regulatory impact assessments. Slovenia is 
using regulatory impact assessments, including an 
SME  test,  to  determine  how  draft  laws  would 
affect  SMEs.  Such  impact  assessments  have  been 
made  compulsory  for  draft  laws  under  regular 
parliamentary  procedure.  However,  they  are  not 
yet done for the numerous laws adopted in urgent 
procedure.  

The  SPOT  business  portal  is  being  expanded 
but  its  scope  is  still  limited.  The  SPOT  portal 
encompasses the previous system called ‘e-VEM’. 
This portal should become a digital one-stop shop 
for  key  administrative  procedures  in  the  lifecycle 
of Slovenian businesses. It currently covers around 
40 of the most important administrative procedures 
and  is  being  expanded  constantly.  The  portal  is  a 
existing 
one-stop 

connecting 

interface 

to 

37 

 
3.4. Competitiveness reforms and investment  

air  pollutants (40).  Transport  has  become 
the 
biggest  source  of  CO2  emissions  accounting  for 
31.8 %  of  Slovenia’s  total  CO2  emissions,  which 
is above the average share of this sector in the EU 
(European Commission, 2019a; IMAD, 2018). The 
number  of  years  of  life  lost  per  1 000  inhabitants 
was  higher  in  Slovenia  than  in  the  EU  for  fine 
particulate  matter  concentrations,  ozone  and 
nitrogen dioxide in 2015. (EEA, 2017).  

thus 

circular 

important 

economy, 

Slovenia  is  progressing  towards  a  resource-
efficient 
but  waste 
management  remains  challenging.  On  average 
71 % of raw  materials consumed domestically are 
imported.  Waste  collection,  prevention,  reuse  and 
high-quality  recycling  to  close  the  materials  loop 
reduce  Slovenia’s 
are 
dependency  on  imported  materials  and  to  retain 
value  within  the  Slovenian  economy  (Ministry  of 
the  Environment,  2018).  The  municipal  waste 
recycling  rate  in  Slovenia  was  well  above  the  EU 
average  in  2016  (European  Commission,  2017b), 
but Slovenia still has difficulties in this sector. For 
example, 
the 
there  was  recently  backlog 
treatment of municipal packaging waste. 

in 

to 

Slovenia’s  economy  depends  on  its  natural 
environment,  which  is  deteriorating.  Natural 
assets  are  used  for  a  variety  of  purposes,  such  as 
developing niche green businesses that drive local 
economies.  However,  the  status  of  habitats  and 
species  is  deteriorating,  particularly  because  of 
inappropriate  urbanisation,  farming  and  water 
management  practices  (Slovenian  Development 
Strategy 2030). 

Infrastructure 

Slovenia’s transport infrastructure suffers from 
declining  quality  and  insufficient  connectivity. 
Slovenia  has  made  significant  investments  in  the 
transport  sector  in  recent  years,  helped  by  EU 
funds  (see  box  2.1.).  The  initial  focus  of  these 
investments  was  on  the  motorway  network,  while 
investments  in  rail  infrastructure  have  only  been 
increasing  more  recently.  However,  the  declining 
quality of the rail infrastructure, rated 2.9 out of 7 
by  the  World  Economic  Forum  (WEF,  2018) 
indicates  that  there  is  a  clear  investment  backlog. 

sector  in  particular  presents  a  problem,  as  energy 
poverty  is  quite  widespread.  Approximately  40 % 
of  the  population  spends  more  than  10 %  of  their 
income  on  energy (38).  This  limits  their  scope  to 
switch to equipment that is more energy efficient.  

the  period  until  2030,  Slovenia  has 
For 
in  energy 
investment  priorities 
identified 
infrastructure,  energy  efficiency  in  buildings 
and  renewable  energy  sources.  This  promotes 
long-term certainty and predictability for investors. 
Slovenia’s national energy and climate plan will be 
adopted  by  31  December  2019  in  line  with  the 
Regulation  on  the  Governance  of  the  Energy 
Union  and  Climate  Action (39).  It  will  provide  an 
overview  of  investment  needs  until  2030  for  the 
the  Energy  Union, 
different  dimensions  of 
including  renewable  energy,  energy  efficiency, 
security  of  supply,  and  climate  mitigation  and 
adaptation.  The  draft  plan  submitted  on  31 
December  2018  will  further  contribute  to  the 
identification  and  assessment  of  energy  and 
climate-related investment needs for Slovenia.  

Slovenia’s  economy  is  more  carbon  intensive 
than  the  EU  average,  and  the  share  of 
renewables is stagnating or declining. Slovenia’s 
carbon  intensity  remains  above  the  EU  average 
and  its  rate  of  reduction  since  1990  is  below  the 
EU  average  (European  Commission,  2018).  The 
share  of  renewable  energy  sources  declined  from 
22.4 % in 2013 to around 20.1 % (Eurostat, 2018). 
Traditional  renewable  energy  sources  such  as 
wood  and  hydropower  account  for  the  bulk  of 
renewable 
Slovenia 
(Government  of  the  Republic  of  Slovenia,  2017). 
In  the  use  of  other  renewable  energy  sources, 
Slovenia ranks towards the bottom of the EU with 
the  gap  in  wind  energy  being  particularly  wide. 
This  is  in  large  part  due  to  the  opposition  of  the 
local population.  

sources 

energy 

in 

Slovenia’s  greenhouse  gas  emissions  in  relation 
to GDP are declining but they are above the EU 
average; air quality remains a concern. (IMAD, 
2018).  Despite  emission  reductions  for  several  air 
pollutants, air quality in Slovenia continues to raise 
concerns.  There  are  still  breaches  of  air  quality 
requirements  and  fluctuating  emission  trends  for 

(38)  Statistical office of the Republic of Slovenia, www.stat.si  
(39)  Regulation  (EU)  2018/1999  on  the  Governance  of  the 

Energy Union and Climate Action. 

(40)  EU Environmental Implementation Review Country Report 
– 
2017, 
Slovenia, 
http://ec.europa.eu/environment/eir/pdf/report_si_en.pdf. 

38 

 
                                                           
                                                           
3.4. Competitiveness reforms and investment  

that 

take 

full  advantage  of 

expected  to  be  around  85 %.  However,  available 
smart  meters  do  not  offer  advanced  solutions  for 
clients,  so  there  is  scope  for  an  upgrade  of 
technology 
information  and  communications 
solutions 
the 
functionality  and  information  that  the  measuring 
devices  allow  and  offer.  Moreover,  the  existing 
energy storage is underdeveloped and thus fails to 
address  the  needs  linked  to  the  non-integrated 
network  of  local  production  of  renewable  energy 
sources.  The  draft  energy  concept  of  Slovenia 
(Ministry  of  Infrastructure,  2018)  has  identified 
energy  storage  as  one  of  the  priorities  for  the 
country. 

While  Slovenia’s  drinking  water  supply  system 
has  improved,  the  urban  wastewater  sector 
experiences  difficulties.  Slovenia  has  made 
considerable  improvements  to  its  drinking  water 
infrastructure in recent years. This is in contrast to 
treatment 
urban  wastewater 
infrastructure,  where  Slovenia’s  performance  is 
unsatisfactory  and  does  not  comply  with  EU 
standards (42). 

collection 

and 

Slovenia  is  vulnerable  to  natural  disasters, 
which  cause  damage  to  the  economy.  The 
frequency  and  severity  of  floods,  droughts  and 
forest fires are expected to increase due to climate 
change.  Slovenia’s  risk  assessment  has  identified 
floods  as  its  most  common  and  expensive  natural 
disaster  (around  EUR 1  billion  in  damages  due  to 
(Ministry  of 
flood  events 
Environment, 2018). Slovenia is using EU funds to 
invest  EUR 90  million  in  flood  protection  and 
EUR 15 million in forest restoration measures (see 
box 2.1). 

recent  years) 

in 

3.4.4.  INSTITUTIONAL QUALITY AND 

GOVERNANCE 

Public procurement 

Slovenia's  performance  as  regards  public 
procurement  remains  mixed (43).  The  main 
problems  remain  competition  and  transparency  as 
well as independent oversight and legal uncertainty 

(42)  Slovenia  is  3  years  late  in  transposing  the  Urban  Waste 

Water Directive. 

(43)  For  a  discussion  on  public  procurement  in  the  healthcare 

sector, see section 3.1.4 above. 

Furthermore,  the  inter-modality  of  rail  and  other 
modes of transport is insufficient. 

trains 

travelled,  which 

for  only  2 %.  The  state 

Slovenia’s  heavy  reliance  on  road  transport 
creates  problems  of  high  energy  and  carbon 
intensity,  as  well  as  road  fatalities.  Road 
transport  also  accounts  for  the  largest  share  of 
freight  with  66.7 %,  with  railways  covering 
33.3 %,  which  is  significantly  above  the  EU 
average  of  17.4 % 
(European  Commission, 
2018k).  Car  trips  accounted  for  86.3 %  of  all 
passenger-kilometres 
is  3.4 
percentage  points  above  the  EU  average,  with 
buses  and  coaches  accounting  for  around  11.8 % 
and 
road 
infrastructure has been deteriorating in quality and 
there  are  issues  with  connectivity  in  certain  areas 
(European  Commission,  2018j).  The  share  of 
renewable energy used in transport fell below 2 % 
in  2016,  in  contrast  with  the  EU  average,  which 
rose  to  7 %  (European  Commission,  2019a).  The 
recharging 
relatively  well 
developed,  but  the  share  of  new  cars  using 
alternative  fuels  is  low  (European  Commission, 
2016).  In  terms  of  sustainable  urban  mobility,  62 
sustainable  urban  mobility  plans  have  been 
prepared.  In  2017,  50  road  deaths  per  million 
inhabitants  were  reported,  which  was  slightly 
(European 
than 
higher 
Commission, 2019a). 

infrastructure 

the  EU 

average 

is 

gas 

and 

to  be 

is  a  need 

found.  There 

Although  Slovenia’s 
electricity 
infrastructure  is  well  developed,  solutions  for 
better  usage  of  smart  metering  and  storage 
need 
for 
improvement  in  the  completion  or  commissioning 
of  reverse  flow  projects  at  Slovenia’s  borders.  As 
regards  its  electricity  grid,  Slovenia  has  already 
vastly  exceeded  its  interconnection  target,  with 
84 % of its installed electricity production capacity 
currently  interconnected  (compared  to  the  targets 
of  10 %  for  2020,  and  15 %  for  2030).  It  is  also 
issues (41).  The 
solving  remaining  operational 
share  of smart  meters  for electricity  has increased 
by  10  percentage  points  from  2013  to  2015  to  a 
(European 
share  of  around  50 % 
Commission, 2017d) and by 2023, the coverage is 

in  2016 

(41)  Although  the  system  is  well  developed  Slovenia  is 
encountering  some  operational issues  (e.g.  solved  issue  of 
voltage profiles) which should be solved by implementing 
a smart grid project of common interest (i.e. Sincrogrid) in 
cooperation  with 
transmission  system 
operator. 

the  Croatian 

39 

 
                                                           
                                                           
3.4. Competitiveness reforms and investment  

issues  in  local  administrations  and  state  owned 
enterprises.  In  its  annual  reports  the  Corruption 
Prevention  Commission  has  also  highlighted 
conflicts  of  interest  in  the  evaluation  of  bids, 
collusive  bidding,  non-open  tenders  and  single-
bids  as  concerns.  Although  there  was  a  22  pp. 
decrease  in  the  proportion  of  companies  feeling 
in  public  procurement 
that  corruption  exists 
managed  by  national  authorities (46),  79 %  of 
that  collusive 
Slovenian  businesses  still  feel 
bidding  practices  are  widespread 
in  public 
procurement  procedures  overall (47).  Slovenia  is 
one  of  the  11  Member  States  participating  in  the 
Integrity Pact pilot projects (48). 

to 

started 

improve 

Slovenia  has 
the 
professionalism  of  those  involved  in  public 
procurement.  Slovenia  has  set  up  an  action  plan 
to  professionalise  local  contracting  authorities.  It 
has  also  issued  guidance  to  public  authorities  on 
specific  topics,  such  as  IT  procurement,  public 
works  and  cleaning  services.  It 
is  currently 
working  on  further  guidance  notes.  Contracting 
authorities in Slovenia are increasingly resorting to 
preliminary  market  consultations  with  industry 
prior to publication of calls for tender. This means 
that Slovenia is on the right track when it comes to 
professionalising the public-procurement process. 

There  remains  legal  uncertainty  in  the  area  of 
concessions.  Public  procurement  practices  for 
concessions  in  Slovenia  are  still  marked  by  legal 
uncertainty.  There  is  a  discrepancy  between  the 
understanding  of  a  concession  contract  under 
national law and the European law. In addition, the 
Concessions Directive still has not been transposed 
into  national  law.  The  absence  of  legal  certainty 
may  discourage  foreign  businesses  from  investing 
in  Slovenia,  since  they  risk  early  termination  of 
contracts or unsuccessful remedy procedures. 

Slovenia  has  not  yet  addressed  the  issue  of 
independent  oversight  of  public  procurement. 
Slovenia  has  chosen  a  remedy  system  with  only 
Review 
one 

instance, 

National 

the 

(46)  Eurobarometer question 5.1. 
(47)  Eurobarometer question 4.7. 
(48)  Such 
can 

participation 

increasing 
transparency,  accountability  and  efficiency  in  the  public-
procurement procedures for these projects. 

contribute 

to 

in the area of concessions (44). On professionalism 
and  in  the  area  of  e-government,  Slovenia  is 
advancing.  Furthermore,  Slovenia  ensures  a  high 
participation  of  SMEs  in  public  procurement.  In 
2018,  78 %  of  contractors  were  SMEs,  and  44 % 
of  tenders  were  divided  in  lots,  making  bidding 
easier  for  SME  (compared  to  58 %  and  30 %  EU 
thus  comparatively  low 
averages).  There  are 
barriers  for  smaller  firms  to  participate  in  public 
procurement procedures. 

Slovenia  is  advancing  in  the  roll-out  of  e-
procurement.  An  e-submission  functionality  has 
been in place since April 2018, and is widely used 
today.  The  e-procurement  system 
relies  on 
structured  data  that  is  shared  between  different 
databases.  The  ‘eDosje’  module,  which  gathers 
evidence for exclusion criteria, is also linked with 
national  databases  and  the  e-submission  module. 
Further  actions  are  planned:  rolling  out  electronic 
catalogues,  electronic  auctions  and  electronic 
appeals. Slovenia is actively involved in a number 
of  EU-funded  calls  aimed  to  further  digitalise 
public procurement. 

has 

Slovenia 

procurement. 

Competition and transparency remain issues in 
public 
a 
comparatively  high  number  of  single  bids  in 
low  average  number  of  bids 
tenders  and  a 
received 45.  This  hints  at  a  lack  of  competition  in 
markets  for  public  procurement,  not  least  due  to 
small size of the  market. As regards transparency, 
24 %  of  the  public  contracts  in  Slovenia  were 
concluded  through  negotiated  procedures  without 
publication  in  2018,  the  same  share  as  in  2017. 
This is one of the  worst scores in the EU and can 
only partly be explained by a particular use of this 
type of procedure.  

impact  on  procurement  by 

Slovenia’s  safeguards  against  collusion  and 
corruption  in  public  procurement  have  had  an 
impact  at  national  level,  but  they  have  not  yet 
had  an 
local 
administrations and by state-owned enterprises. 
Cartel  agreements,  bid-rigging  and  misuse  of 
public  procurement  procedures  have  been 
identified 
Prevention 
Commission  (CPC)  and  the  Court  of  Audit  as 

the  Corruption 

by 

(44)  Public procurement aggregation in healthcare also remains 

an issue (see 3.1.5). 

(45)  Last available figures for single bids are 37 % in 2016 and 

39 % in 2015. 

40 

 
                                                           
                                                           
Commission (49).  There  is  no  possibility  for  an 
appeal  against  the  Commission's  decisions,  but 
dissatisfied  stakeholders  can  start  proceedings 
before  civil  courts (50).  The  members  of  the 
Commission  do  not  benefit  from 
the  same 
guarantees  of  independence  as  Slovenian  judges. 
Unlike  Slovenian  judges,  these  members  are  not 
proposed  for  appointment  to  the  parliament  by  a 
body 
legislative  and 
from 
executive  branches,  nor  is  such  a  body  charged 
with  conducting  disciplinary  proceedings  against 
them. 

independent 

the 

Justice system and fight against corruption 

in 

Commission, 

2019b) 
the  perception  of 

The justice system has further reduced backlogs 
and  measures  to  improve  its  quality  are  being 
implemented.  The  2019  EU  Justice  Scoreboard 
shows 
(European 
improvements 
judicial 
independence and in reducing pending cases in all 
courts,  except  for  the  administrative  court,  which 
was impacted by an extraordinary influx of cases. 
In 2018, the total backlog decreased by more than 
10 %,  compared  to  2017. The  courts  continued  to 
resolve  more  cases  than  they  received  (total 
clearance  rate  of  102 %),  despite  resolving  fewer 
cases  than  in  the  past  (about  71 000  per  month 
compared  to  nearly  100 000  per  month  in  2012). 
The  average  length  of  proceedings  stagnated  at 
around 11 months in litigious civil and commercial 
cases, and it still takes around 12 months until the 
first  hearing in a commercial  case  trial. The  share 
of litigious civil and commercial cases,  which are 
resolved 
through  a  court  settlement,  further 
increased to above 20 %. Criminal courts resolved 
more  cases  than  they  received  (clearance  rate  of 
103 %). The  length  of  criminal  cases  increased  in 
local courts to about 10  months, and decreased in 
district courts (to less than 14  months). While the 
Council 
its 
for 
for 
administrative  capacity, 
improvement  in  providing  better  reasoning  of  its 
opinions and decisions on the career of (candidate 
national/international)  judges,  based  on  existing 
criteria and procedures. 

Judiciary 
there 

increased 
room 
is 

the 

(49)  Recognised  by  the  Court  of  Justice  in  Case  C  296/15  - 
Medisanus as a 'national court or tribunal' for the purposes 
of Article 267 TFEU 

50   Claim for damages or contesting the concluded contract. 

3.4. Competitiveness reforms and investment  

service  appears 

The  prosecution 
to  be 
experiencing  certain  challenges  in  efficiency 
and  quality,  despite  generally  resolving  more 
criminal  notifications  than  it  receives.  Some 
proceedings  take  several  years  from  the  arrival  of 
the criminal notification  from the police, until the 
decision  to  prosecute.  Efficiency  and  quality 
challenges are being addressed through promoting 
best  practices  among  prosecutors,  by  improving 
cooperation  with  courts  (e.g.  ensuring  that  the 
prosecutor  attending  a  court  hearing  does  not 
change until the trial ends), and through enhanced 
monitoring  of  prosecutors’  work  in  the  ICT 
system. Quality issues in the area of economic and 
financial  crime,  including  anti-money  laundering, 
are  being  tackled  through  an  action  plan,  which 
the 
envisages  additional 
analytical capacity and upgrading the ICT system. 
The  State  Prosecutorial  Council  lacks  human 
resources,  which  also  contributes  to  delays  in  the 
appointment of prosecutors and does not allow the 
Council  to  work  on  analysing  and  improving  the 
general quality of the Prosecution Service. 

improving 

training, 

Supreme  Court’s 

justice.  Several  projects, 

A comprehensive survey of court users has been 
launched, aiming to further improve the quality 
of justice, but the judicial map reform remains 
pending.  The 
detailed 
examination  of  court  users’  view  of  the  justice 
system will feed into the reform agenda on quality 
of 
including  on 
publishing  all  first  instance  judgments  and  on 
informing parties about the progress of their case, 
are also being implemented. However, the judicial 
map  reform  remains  pending.  While  consumers’ 
trust  in  courts  for  resolving  their  disputes  has 
increased,  their  confidence  in  alternative  dispute 
resolution mechanisms has decreased to the lowest 
level ever. Consumers’ trust in public authorities to 
safeguard  their  rights  also  remains  among  the 
lowest in the EU (European Commission, 2019d). 

The 

remain. 

Perceptions  of  corruption  are  improving,  but 
challenges 
2017  General 
Eurobarometer  on  corruption  shows  that  Slovenia 
has  the  highest  proportion  of  citizens  in  the  EU 
(71 %)  who  feel  that 
there  are  not  enough 
successful  prosecutions  of  corruption  to  deter 
people  from  corrupt  practices.  However,  Slovenia 
registered the largest rise in disagreement with this 
statement, a 12 pp. increase compared to previous 
figures.  Although  Slovenia’s  score  has  remained 
stable in the Transparency International corruption 

41 

 
                                                           
3.4. Competitiveness reforms and investment  

and  the  transparency  of  lobbying  records  remain 
unaddressed.  Trading  in  influence,  conflicts  of 
interest,  favouritism  and  nepotism  also  remain 
obstacles to the impartiality of the decision-making 
process. Shadow lobbying, where third parties can 
influence  government  decision  making  outside 
reported contacts, is not covered in the IPCA. 

perceptions index (51) its score in the World Bank's 
control of corruption index has gradually improved 
(76.5 in 2015 to 79.33 in 2017). 

Concerns  remain  regarding  the  independence 
and effectiveness of regulatory agencies and the 
Corruption Prevention Commission. Regulatory 
agency independence remains an issue, even if the 
2017  Draft  Law  on  Public  Agencies  has  been 
withdrawn  (European  Commission,  2018b).  Such 
concerns  as  regards  the  Corruption  Prevention 
Commission  were  e.g.  expressed  by  the  second 
compliance  report  of  the  Group  of  States  against 
Corruption  second  compliance  report  (GRECO 
2018)  and  by  the  OECD  Working  Group  on 
Bribery  (OECD  WGB,  2016).  There  has  been  a 
significant  decrease  (-18pps)  in  the  proportion  of 
Slovenes who mention the national anti-corruption 
agency  as  an  institution  they  would  trust  to  deal 
with  corruption (52).  This  decrease  has  coincided 
the 
with  a  significant  decrease  (-11pps) 
proportion of respondents who feel that people do 
not report incidents of corruption because doing so 
would be pointless (53). 

in 

are 

online. 

Most  of the  goals  in  the  2017-2019  programme 
of  government  measures  for 
integrity  and 
transparency  were  met,  or  partly  met.  Almost 
all documents for meetings of the government and 
parliament 
Several 
available 
applications  make  it  possible  to  monitor  public 
procurement expenses and  the use of public funds 
(including  pensions,  salaries  of  public  employees, 
health  expenditure  and  public  utility  services). 
Slovenia does not make the rules on contacts with 
lobbyists  by  members  of  the  National  Assembly 
subject  to  any  assessment.  While  the  National 
Council has adopted a code of conduct, it has been 
considered  insufficient  in  respect  of  conflicts  of 
interest,  supervision  and  sanctions.  The  amended 
Integrity and Prevention of Corruption Act (IPCA) 
is still on hold, despite initially being scheduled for 
adoption in 2015, due to concerns over stakeholder 
consultation 
drafting 
procedures.  Post-employment  issues  (‘revolving 
doors’ between government and the private sector) 

non-transparent 

and 

(51)  In 

the  Transparency 

International  2017  corruption 
perception index, Slovenia ranks 14 in the EU with a score 
slightly below the EU average. 

(52)  2017  Special  Eurobarometer  on  corruption  (EB  470 

European Commission, 2017), question 11. 

(53)  2017  Special  Eurobarometer  on  corruption  (EB  470 

European Commission, 2017), question 14. 

42 

 
                                                           
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment (54) 

2018 country-specific recommendations (CSRs)  

Slovenia  has  made  Limited  Progress  in  addressing 
CSR 1. 

CSR  1:  Ensure  that  the  nominal  growth  rate  of  net 
primary  government  expenditure  does  not  exceed 
3.1 % in 2019, corresponding to an annual structural 
adjustment of 0.65 % of GDP. Adopt and implement 
the  Healthcare  and  Health  Insurance  Act  and  the 
planned  reform  of  long-term  care.  Ensure  the  long-
term  sustainability  and  adequacy  of  the  pension 
the  statutory 
system, 
retirement  age  and  by  restricting  early  retirement. 
Increase  the  employability  of  low-skilled  and  older 
workers  through  lifelong  learning  and  activation 
measures.  

including  by 

increasing 

Ensure  that  the  nominal  growth  rate  of  net  primary 
government  expenditure  does  not  exceed  3.1 %  in 
2019,  corresponding 
structural 
adjustment of 0.65 % of GDP.  

to  an  annual 

The compliance assessment with the Stability and 
Growth Pact will be included in Spring when final 
data for 2018 will be available.  

Adopt  and  implement  the  Healthcare  and  Health 
Insurance Act 

No Progress Slovenia has not proposed any specific 
measure(s)  to  address  the  CSR.  However,  the 
authorities  announced  that  a  new  draft  Healthcare 
Act would be adopted by the end of 2019.  

and the planned reform of long-term care.  

No  Progress  The  government  intends  to  address 
LTC legislation only after adoption of healthcare act.  

Ensure  the  long-term  sustainability  and  adequacy  of 
the  pension  system,  including  by  increasing  the 

No Progress No concrete measures have been taken 
to  ensure  the  long-term  sustainability  and  adequacy 

(54)  The following categories are used to assess progress in implementing the country-specific recommendations (CSRs): 
No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a 
number  of  typical  situations  to  be  interpreted  on  a  case  by  case  basis  taking  into  account  country-specific  conditions.  They 
include the following: 

-no legal, administrative, or budgetary measures have been announced  
-in the national reform programme, 
-in any other official communication to the national Parliament/relevant parliamentary committees or the European Commission, 
-publicly (e.g. in a press statement or on the government's website); 
-no non-legislative acts have been presented by the governing or legislative body; 
-the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). However, it has 
not proposed any clearly-specified measure(s) to address the CSR. 

Limited progress: The Member State has: 
-announced certain measures but these address the CSR only to a limited extent; and/or 
-presented  legislative  acts  in  the  governing  or  legislative  body  but  these  have  not  been  adopted  yet  and  substantial  further,  non-

legislative work is needed before the CSR is implemented; 

-presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 
Some progress: The Member State has adopted measures 
-that partly address the CSR; and/or  
-that address the CSR, but a fair amount of work is still needed to fully address the CSR fully as only a few of the measures  have 
been implemented. For instance, a measure or measures have been adopted by the national Parliament or by ministerial decision 
but no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

43 

 
 
                                                           
A. Overview Table 

statutory  retirement  age  and  by  restricting  early 
retirement.  

of  the  pension  system,  whether  by  increasing  the 
statutory  retirement  age  or  by  restricting  early 
retirement. 

Increase  the  employability  of  low-skilled  and  older 
workers  through  lifelong  learning  and  activation 
measures.  

Limited  Progress  The  Slovenian  government 
continued its efforts to increase the employability of 
low-skilled  and  older  workers  through  lifelong 
learning and schemes to help the inactive find work. 
However,  participation  in  adult  learning  is  still  low, 
especially among the group of older workers and the 
low-skilled. 

CSR 2: Develop alternative sources of financing for 
fast-growing  companies.  Lower  the  barriers  for 
market entry through the revision of Product Market 
limiting  administrative  burden. 
Regulation  and 
and 
professionalisation 
Enhance 
independent  oversight  in  public  procurement.  Carry 
out  the  privatisations  in  line  with  to  the  existing 
plans.  

competition, 

Slovenia  has  made  Some  Progress  in  addressing 
CSR 2.  

Develop  alternative  sources  of  financing  for  fast-
growing companies.  

Some  Progress  In  2018  Slovenia  took  important 
steps in the implementation of, notably, the  Slovene 
Equity  Growth  Investment  Programme  and  the 
Central European Fund-of-Funds. These steps related 
to support amounts, intermediaries and beneficiaries. 
The  Ljubljana  Stock  Exchange  has  improved  its 
support  for  SME  listings.  Slovenia  also  adopted  an 
action plan on block chain technology, which is also 
used for crypto-currencies and initial coin offerings.  

Lower  the  barriers  for  market  entry  through  the 
revision  of  Product  Market  Regulation  and  limiting 
administrative burden.  

Some  Progress  Slovenia  adopted  the  Investment 
Promotion  Act  in  early  2018.  This  act  facilitates 
investment 
inter  alia  by  harmonising  support 
conditions for domestic and foreign investors and by 
reducing  barriers  for  strategic  investments.  Impact 
assessments  are  performed  for  draft  laws  under 
regular parliamentary procedure but not for the many 
laws in urgent procedure. Stakeholders benefit since 
2018  from  a  new  online  tool  for  their  input  to  this 
SME  test.  Slovenia’s  justice  system  also  continued 
reducing the backlog of pending cases. Slovenia also 
progressed  with  one-stop  online  portals  for  key 
administrative  procedures  and  with  the  so-called 
"Single  Document".  A  good  part  of  the  suggested 
administrative burden reduction measures, as well as 
planned measures to reduce regulatory restrictions on 
professions is still pending. 

professionalisation 
Enhance 
independent oversight in public procurement.  

competition, 

and 

Limited progress: In May 2018, Slovenia presented 
an  action  plan  detailing  planned  improvements, 
notably  on  further  professionalisation  of  public 

44 

 
A. Overview Table 

procurement,  for  2018-2020.  Slovenia  also  made 
progress  in  rolling  out  e-procurement,  which  is 
widely  used  since  April  2018.  Rather  little  progress 
was  made  to  increase  competition  in  procurement, 
which remains a key problem. Slovenia also did not 
strengthen the independence of the National Review 
Commission.  Slovenia  did  not  achieve  a  higher 
degree  of  tender  aggregation  for  health  sector 
procurement. 

Carry  out  the  privatisations  in  line  with  to  the 
existing plans.  

Some Progress: Slovenia made some progress in the 
privatisation  of  SOEs  as  only  one  privatisation  took 
place  in  2018.  With  the  partial  privatisation  of 
Slovenia’s  biggest  bank  in  2018  and  the  launch  of 
the  sale  of  its  third  biggest  bank,  Slovenia  took 
important steps in implementing its privatisation list.  

Europe 2020 (national targets and progress)  

Employment rate target set in the NRP: 75 %.  

R&D target set in the NRP: 3 % of GDP  

The  employment  rate  for  20-64  years  old  workers 
increased  by  3.3 pp.  to  73.4 %  in  2017,  and,  for  the 
first  time  since  2009,  is  now  again  above  the  EU 
average (72.2 %).  

R&D intensity has been declining since 2013, driven 
by declines in both the public and private sectors, but 
reached its lowest level at 1.86 % in 2017. 

In 2017, R&D intensity in Slovenia was composed of 
75%  (1.39%  of  GDP  )  private  investment  and  25% 
public investment (0.47% of GDP).  

The  declining  R&D  intensity  shows  a  clear  risk  of 
Slovenia not meeting its national R&D target of 3 % 
of GDP in 2020. 

National  greenhouse  gas  (GHG)  emissions  target:  
+ 4 %  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading scheme). 

Slovenia is also well on track to reach its greenhouse 
gas  emissions  target  in  the  non-ETS  sector  of  +4 % 
in 2020 compared to 2005 since most recent Slovene 
projections  expect  a  reduction  by  -9 %  for  this 
period. 

2020 renewable energy target: 25 %  

The  share  of  renewable  energy  sources  (RES)  is 
above  the  EU  average  but  has  stagnated  or  even 
deteriorated in recent years. 

The renewable energy  share in Slovenia  was around 
21 %  in  2016.  While  being  above  the  2015/2016 
indicative  trajectory  (20.1 %),  increased  efforts  are 
necessary to reach the 2020-target (25 %). Regarding 

45 

 
 
A. Overview Table 

the  use  of  other  RES 
(wind,  solar,  biogas, 
geothermal, biofuels, heat pumps), Slovenia ranks at 
the  tail  end  of  the  EU,  with  the  gap  in  wind  energy 
the 
being  particularly  wide. 
electricity  and  transportation  sectors  Slovenia  is 
lagging behind its sectoral renewable energy targets. 
Nevertheless,  Slovenia  has  a  high  potential  to 
develop  renewable  energy  sources  further  in  a  cost-
effective way, in all sectors. 

In  particular, 

in 

Energy efficiency, 2020 energy consumption targets:  

Slovenia’s  2020  energy  efficiency  target  is  7.3 
million tonnes of oil equivalent (Mtoe) expressed in 
primary energy consumption (5.1 Mtoe expressed in 
final energy consumption.)  

 In  terms  of  energy  efficiency,  primary  as  well  as 
final  energy  consumption  are  already  below  the 
indicative national 2020 targets. 

In  2017,  the  Government  adopted  a  new  National 
Energy  Efficiency  Action  Plan  (NEEAP)  for  the 
period  2017-2020,  which  confirms  that  Slovenia  is 
on track to meet its 2020 target in energy efficiency. 
Nonetheless,  additional  efforts  are  needed  as  both 
primary  and  final  energy  consumption  has  been 
the 
increasing 
achievement of the EU 2020 energy efficiency target. 
The  rise  in  energy  use  was  most  prominent  in  the 
transport sector, which accounts for 38% of the total 
energy  use.  The  latest  data  show  that  energy  use  in 
transport  increased  by  5.9%  in  2016  compared  to 
2015. 

this  puts  at  risk 

in  2016  and 

Early school/training leaving target: 5 %.  

In  2017,  Slovenia  retained  the  early  school-leaving 
rate  under the  national  target  by 0.7 pps. With early 
school leaving well below the Europe 2020 target of 
10 %,  Slovenia  is  placed  among  the  leading  EU 
Member States. 

Tertiary  education  target:  40 %  of  population  aged 
30-34.  

The 
tertiary  education  attainment  continuously 
improved.  After  exceeding  the  2020  target  in  2013, 
in  2017  there  were  46.4 %  Slovenian  young  adults 
(30-34 year-olds) with a tertiary degree. 

Target  for  reducing  the  number  of  people  at  risk  of 
poverty or social exclusion, expressed as an absolute 
number of people: 40 000 (base year 2010: 360 000).  

In 2017, the number of people at risk of poverty and 
social  exclusion  fell  for  the  third  consecutive  year. 
However, 345 000 people were still at risk of poverty 
or social exclusion. 

46 

 
 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

47 

General Government debt projections under baseline, alternative scenarios and sensitivity tests2017201820192020202120222023202420252026202720282029Gross debt ratio74.170.266.362.659.657.355.854.253.152.452.352.653.5Changes in the ratio (-1+2+3)-4.6-3.9-3.8-3.7-3.0-2.3-1.5-1.6-1.1-0.7-0.10.30.9of which(1) Primary balance (1.1+1.2+1.3)2.62.42.11.81.30.90.30.20.0-0.2-0.4-0.8-1.1(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)2.11.20.70.60.50.50.30.20.0-0.2-0.4-0.8-1.1(1.1.1) Structural primary balance (bef. CoA)2.11.20.70.60.60.60.60.60.60.60.60.60.6(1.1.2) Cost of ageing0.00.00.20.40.50.71.01.31.6(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component0.51.31.41.20.80.40.00.00.00.00.00.00.0(1.3) One-off and other temporary measures-0.1-0.10.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-2.3-2.6-2.3-1.9-1.7-1.4-1.2-1.4-1.1-0.9-0.6-0.4-0.2(2.1) Interest expenditure2.52.01.71.61.51.41.41.41.51.61.71.81.9(2.2) Growth effect-3.6-3.0-2.2-1.9-1.7-1.6-1.5-1.8-1.5-1.4-1.2-1.2-1.1(2.3) Inflation effect-1.2-1.6-1.7-1.6-1.4-1.3-1.1-1.1-1.1-1.0-1.0-1.0-1.0(3) Stock-flow adjustments0.31.20.50.00.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Fiscal Sustainability Report (FSR) 2018. b. For the medium-term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained thereafter) to bring the debt-to-GDP ratio to 60 % by 2033. The critical values used are 0 and 2.5 pps. of GDP. The DSA classification is based on the results of 5 deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long-term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps. of GDP. The DSA results are used to further qualify the long-term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018.SI - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long-term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 3040506070809020162017201820192020202120222023202420252026202720282029Debt as % of GDP -SIBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario3040506070809020162017201820192020202120222023(% of GDP)Stochastic debt projections 2019-2023 -SIp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline3040506070809020162017201820192020202120222023202420252026202720282029Debt as % of GDP -SIBaselineHistorical SPB scenarioSGP scenario3040506070809020162017201820192020202120222023202420252026202720282029Debt as % of GDP -SIBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWMEDIUMLOWLOWLOWLOWDebt level (2029)53.560.456.456.356.4Debt peak year20182018201820182018Percentile rank48.0%62.0%Probability debt higher6.0%Dif. between percentiles23.5MEDIUMLong termDSALOWDebt sustainability analysis (detail)Medium termMEDIUMMEDIUMShort termLOW(S0 = 0.1)(S1 = 0.2)S2MEDIUM(S2 = 5.5)S1 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2018. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2018. 
(3) As per ECB definition of gross non-performing debt instruments. 
(4) Quarterly values are not annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators) 

48 

201320142015201620172018Total assets of the banking sector (% of GDP)1)127,8115,9107,199,694,188,3Share of assets of the five largest banks (% of total assets)57,155,659,261,061,5-Foreign ownership of banking system (% of total assets)2)31,333,634,046,145,845,6Financial soundness indicators:2)              - non-performing loans (% of total loans)-22,817,912,39,27,4              - capital adequacy ratio (%)13,717,918,619,118,118,8              - return on equity (%)3)-90,2-2,53,57,89,111,5Bank loans to the private sector (year-on-year % change)1)-9,5-9,1-4,22,85,93,9Lending for house purchase (year-on-year % change)1)1,30,51,84,25,54,4Loan to deposit ratio2)-79,474,174,074,775,5Central Bank liquidity as % of liabilities1)-3,32,82,33,53,3Private debt (% of GDP)107,297,486,780,675,6-Gross external debt (% of GDP)2) - public42,762,464,056,850,647,2    - private44,040,637,135,433,533,2Long-term interest rate spread versus Bund (basis points)*424,2210,7120,9105,964,351,3Credit default swap spreads for sovereign securities (5-year)*273,2138,5107,895,072,559,9 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI). 
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks. 
(3) Long-term unemployed are people who have been unemployed for at least 12 months. 
(4) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019. 
(5) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation). 
(6) Average of first three quarters of 2018 for the employment rate, long-term unemployment rate and gender employment 
gap. Data for unemployment rate is seasonally adjusted (annual series, for EE, EL, HU, IT and UK data based on first three 
quarters of 2018). 
Source:  Eurostat 

49 

201320142015201620172018 6Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)3,94,45,04,94,3:Gender employment gap (pps)8,28,08,66,67,27,4Income inequality, measured as quintile share ratio (S80/S20)3,63,73,63,63,4:At-risk-of-poverty or social exclusion rate1 (AROPE)20,420,419,218,417,1:Young people neither in employment nor in education and training (% of population aged 15-24)9,29,49,58,06,5:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)67,267,769,170,173,475,1Unemployment rate2 (15-74 years)10,19,79,08,06,65,4Long-term unemployment rate3 (as % of active population)5,25,34,74,33,12,3Gross disposable income of households in real terms per capita4 (Index 2008=100) 91,692,894,699,1101,9:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)14424147411495815049::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-0,7-0,50,51,2::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction542,742,242,342,844,6:Children aged less than 3 years in formal childcare39,037,437,439,644,8:Self-reported unmet need for medical care0,00,20,20,43,5:Individuals who have basic or above basic overall digital skills (% of population aged 16-74)::51,053,054,0: 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator. 
(1) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included. 
(2) PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(3) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science. 
(4) Average of first three quarters of 2018. Data for youth unemployment rate is seasonally adjusted (annual series, for EE, EL, 
HU, IT and UK data based on first three quarters of 2018). 
Source: Eurostat, OECD 

50 

Labour market indicators201320142015201620172018 4Activity rate (15-64)70,570,971,871,674,2:Employment in current job by durationFrom 0 to 11 months10,78,812,410,913,4:From 12 to 23 months7,07,17,88,38,0:From 24 to 59 months13,114,213,714,213,8:60 months or over69,268,366,266,564,8:Employment growth* (% change from previous year)-1,10,41,31,82,93,0Employment rate of women(% of female population aged 20-64)63,063,664,766,769,771,3Employment rate of men (% of male population aged 20-64)71,271,673,373,376,978,7Employment rate of older workers* (% of population aged 55-64)33,535,436,638,542,746,4Part-time employment* (% of total employment, aged 15-64)9,310,010,19,310,39,9Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)16,316,517,816,917,616,2Participation in activation labour market policies(per 100 persons wanting to work)10,510,67,86,1::Transition rate from temporary to permanent employment(3-year average)37,141,041,242,438,4:Youth unemployment rate (% active population aged 15-24)21,620,216,315,211,29,7Gender gap in part-time employment6,16,96,77,17,88,7Gender pay gap1 (in undadjusted form)6,37,08,17,8::Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)12,512,111,911,612,0:Underachievement in education2::16,1:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)40,141,043,444,246,4:Variation in performance explained by students' socio-economic status3::13,5::: 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator. 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income. 
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD 

51 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare7,97,57,27,57,6:Disability1,61,51,41,31,2:Old age and survivors11,511,911,511,311,0:Family/children2,11,91,81,81,7:Unemployment0,70,80,70,60,6:Housing0,00,00,00,00,0:Social exclusion n.e.c.0,60,60,70,70,7:Total24,424,323,523,322,9:of which: means-tested benefits1,91,81,81,81,8:General government expenditure by function (% of GDP, COFOG)Social protection18,518,617,817,316,7:Health7,16,86,56,76,7:Education6,46,56,05,55,6:Out-of-pocket expenditure on healthcare (% of total health expenditure)::13,012,512,0:Children at risk of poverty or social exclusion (% of people aged 0-17)*16,417,517,716,614,915,1At-risk-of-poverty  rate1 (% of total population)13,514,514,514,313,913,3In-work at-risk-of-poverty rate (% of persons employed)6,57,16,46,76,16,6Severe material deprivation rate2  (% of total population)6,66,76,65,85,44,6Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan5,64,54,73,53,33,0Tenant, rent at market price30,518,918,818,912,215,0Proportion of people living in low work intensity households4 (% of people aged 0-59)7,58,08,77,47,46,2Poverty thresholds, expressed in national currency at constant prices*632060105925611361576360Healthy life years (at the age of 65)Females6,97,68,67,68,2:Males7,37,27,88,28,4:Aggregate replacement ratio for pensions5 (at the age of 65)0,50,50,50,50,50,5Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::47,151,855,057,6GINI coefficient before taxes and transfers*46,147,247,046,746,145,7GINI coefficient after taxes and transfers*23,824,424,924,524,323,7 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

(1) Value added in constant prices divided by the number of persons employed. 
(2) Compensation of employees in current prices divided by value added in constant prices. 
(3) The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology. 
(4) Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing 
over the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if 
received 75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the 
application is still pending or don't know. 
(5) Percentage population aged 15-64 having completed tertiary education. 
(6) Percentage population aged 20-24 having attained at least upper secondary education. 
(7) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm. 
(8) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR). 
Source: European Commission; World Bank - Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

52 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry-1,391,754,52-0,172,214,27Labour productivity growth in construction-0,12-1,9111,60-1,89-2,725,70Labour productivity growth in market services-2,100,612,461,310,931,55Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry3,410,24-1,292,000,70-1,13ULC growth in construction-1,832,77-6,185,034,89-0,81ULC growth in market services-0,44-1,72-0,56-0,201,511,78Business environment201220132014201520162017Time needed to enforce contracts3 (days)129012701270116011601160Time needed to start a business3 (days)6,06,06,06,06,06,0Outcome of applications by SMEs for bank loans4:0,381,080,410,670,61Research and innovation201220132014201520162017R&D intensity2,572,582,372,202,011,86General government expenditure on education as % of GDP6,406,506,005,505,60:Employed people with tertiary education and/or people employed in science and technology as % of total employment424343444445Population having completed tertiary education5232425272729Young people with upper secondary education6909290919191Trade balance of high technology products as % of GDP-0,83-0,60-0,83-0,62-0,65-0,72Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall:1,891,70OECD PMR7, retail:0,900,63OECD PMR7, professional services::2,56OECD PMR7, network industries84,843,412,90 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
(i) Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR) 
(ii) Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
(iii) Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
(iv) Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP. 
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP. 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change). 
Real unit energy cost: real energy costs as % of total value added for the economy. 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 
EUR). 
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors. 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP. 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste. 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP. 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions (excl 
land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR). 
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport industry. 
Energy import dependency: net energy imports divided by gross inland energy consumption plus consumption of 
international maritime bunkers. 
Aggregated supplier concentration index:  Herfindahl-Hirschman index for net imports of crude oil and NGL, natural gas and 
hard coal. Smaller values indicate larger diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl-Hirschman index of the main energy products in the gross inland consumption of 
energy. 
* European Commission and European Environment Agency. 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators)  

53 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0,200,190,180,170,180,17Carbon intensity kg / €0,540,520,460,460,46-Resource intensity (reciprocal of resource productivity)kg / €0,720,720,750,740,690,70Waste intensity kg / €0,13-0,13-0,14-Energy balance of trade % GDP-6,7-5,5-4,1-3,1-2,1-2,6Weighting of energy in HICP%14,514,414,714,213,011,9Difference between energy price change and inflation %2,90,6-0,9-2,9-2,60,2Real unit of energy cost% of value added10,110,19,59,79,9-Ratio of environmental taxes to labour taxesratio0,200,210,210,210,21-Environmental taxes% GDP3,93,93,93,93,93,7Sectoral Industry energy intensity kgoe / € 0,130,130,130,130,120,12Real unit energy cost for manufacturing industry excl. refining% of value added14,013,212,112,212,3-Share of energy-intensive industries in the economy% GDP11,211,311,511,011,311,5Electricity prices for medium-sized industrial users€ / kWh0,090,100,090,080,080,08Gas prices for medium-sized industrial users€ / kWh0,060,050,040,040,030,03Public R&D for energy % GDP0,010,010,010,010,010,02Public R&D for environmental protection% GDP0,020,010,010,030,020,03Municipal waste recycling rate%41,934,836,054,155,657,8Share of GHG emissions covered by ETS*%39,740,436,936,436,6-Transport energy intensitykgoe / €1,121,081,040,980,960,89Transport carbon intensitykg / €3,363,203,082,912,90-Security of energy supplyEnergy import dependency%52,147,845,549,749,350,4Aggregated supplier concentration indexHHI33,326,826,624,225,7-Diversification of energy mixHHI0,240,240,250,230,240,23 
 
 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR SLOVENIA 

Building  on  the  Commission  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027 of 2 May 2018 (COM (2018) 321), this Annex presents the preliminary Commission services 
views  on  priority  investment  areas  and  framework  conditions  for  effective  delivery  for  the  2021-2027 
Cohesion Policy (55). These priority investment areas are derived from the broader context of investment 
bottlenecks,  investment  needs  and  regional  disparities assessed  in  the  report.  This  Annex  provides the 
basis for a  dialogue between  Slovenia and the  Commission services in view of the  programming of the 
cohesion policy funds (European Regional Development Fund, Cohesion Fund and European Social Fund 
Plus). 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

The  national  targets  for  spending  on  research  and  development  remain  far  from  achieved  and  the 
proportion of innovative enterprises lags behind the EU average. High priority investment needs (56) have 
therefore  been  identified  to  enhance  research  and  innovation  capacities  and  uptake  of  advanced 
technologies, and in particular to: 

  strengthen research and innovation performance and foster productivity growth by identifying smart 

specialisation areas on the basis of national and regional needs and potential;  

 

 

increase the value added of the economy and strengthen the strong innovator position by increasing 
the number of innovative firms in the smart specialisation areas; 

foster cooperation between research and business including across the EU Strategy for the Adriatic-
Ionian  Region,  EU  Strategy  for  the  Alpine  Region  and  EU  strategy  for  the  Danube  Region  via 
strategic research and innovation partnerships, centres of competence, interregional projects and use 
of Cloud services. 

The  uptake  of  Information  and  Communications  Technology  services  in  small  and  medium-sized 
enterprises  and  further  development  of  digital  public  services  remain  a  challenge.  Priority  investment 
needs  have therefore been identified to  reap the benefits  of digitisation for citizens, companies and 
governments, and in particular to: 

 

increase  uptake  of  Information  and  Communication  Technology  in  small  and  medium-sized 
enterprises  ,  including  supporting  infrastructures  and  services;  all  with  a  view  to  improving  the 
number of enterprises reaching a high digital intensity; 

 

increase  the  uptake  of  e-Government  services  (e-inclusion,  e-health,  e-learning,  e-skilling)  and 
general use of internet services by citizens. 

Scale-up  and  growth  rates  of  enterprises  remain  low  which,  combined  with  a  challenging  business 
environment  and  low  capacities  for  technology  transfer,  hinders  the  growth  of  the  economy.  High 
priority  investment  needs  have  therefore  been  identified  to  enhance  growth  and  competitiveness  in 
small and medium-sized enterprises, and in particular to: 

  promote  entrepreneurship  and  increase  survival  rates  of  firms  in  particular  by  facilitating  the 
economic exploitation of new ideas and integration of business education in the business ecosystem; 

(55)  This Annex is to be considered in conjunction with the EC Proposal for a Regulation of the European Parliament and of the 
Council on the European Regional Development Fund and on the Cohesion Fund COM(2018) 372 and the EC Proposal for a 
Regulation of the European Parliament and of the Council on the European Social Fund Plus COM(2018) 382, in particular as 
regards the requirements for thematic concentration and urban earmarking outlined in these proposals. 

(56)  The intensity of needs is classified in three categories in a descending order – high priority needs, priority needs, needs. 

54 

 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Slovenia 

 

raise  competitiveness  and  internationalisation  of  small  and  medium-sized  enterprises,  through 
stronger  participation  in  industry  led  and  research  driven  international  and  macro-regional  clusters; 
This can be  the basis for further innovations and co-operation, in line  with the EU Strategy  for the 
Adriatic-Ionian Region, EU Strategy for the Alpine Region and EU strategy for the Danube Region;  

 

reduce barriers for doing business, especially in less developed regions at level 3 of the Nomenclature 
of Territorial Units for Statistics, through upgrading the entrepreneurial support ecosystem; 

  address  increasing  demographic  challenges  by  supporting  silver  economy  small  and  medium-sized 

enterprises. 

Skills shortages and  mismatches are  among the  main barriers for the further economic  development of 
Slovenia.  Priority  investment  needs  have  therefore  been  identified  to  develop  skills  for  smart 
specialisation, industrial transition and entrepreneurship, and in particular to: 

 

reduce the capacity constraints in the economy, address technological change and industrial transition 
challenges by providing training and skilling in smart specialisation areas;  

  support small and medium-sized enterprises growth and open up internationalisation opportunities by 
providing  skills  trainings  on  (innovation)  management,  stock  market  participation,  business 
development, internationalisation. 

Policy Objective 2: A low carbon and greener  Europe  – Clean and fair energy transition,  Green 
and blue investment, circular economy, climate adaptation and risk prevention 

Energy  intensity  performance  is  below  the  EU  average  in  industry,  services  and  the  residential  sector 
with  energy  consumption  increasing,  which  exacerbates  the  high  rate  of  energy  poverty.  Priority 
investment  needs  have  therefore  been  identified  to  promote  energy  efficiency  measures,  and  in 
particular to: 

 

reduce energy consumption in residential buildings with focus on energy-poor households (Integrated 
territorial investments ); 

 

reduce energy consumption by improving energy efficiency in services sector and industry.  

The share of renewable energy sources has stagnated or even deteriorated in recent years, with a lot of 
potential,  such  as  wind,  solar  and  geothermal  sources  remaining  largely  untapped.  High  priority 
investment needs have therefore been identified to promote renewable energy, and in particular to: 

  support  the  transition  to  renewables  in  heating  and  cooling,  especially  enabling  the  deployment  of 

renewable energy technologies, which are not yet widely developed (wind, solar, geothermal). 

Intelligent energy distribution systems have  been developing, however, there remains a need to ensure 
optimal utilisation of the energy distribution and storage network. Investment needs have therefore been 
identified to develop smart energy systems, grids and storage at local level, and in particular to: 

  upgrade the smart energy systems, including smart electricity distribution grids by development and 
deployment of new technologies for optimal energy utilisation, along with investing in energy storage 
(Integrated territorial investments). 

55 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Slovenia 

With  a  large  share  of  the  population  living  in  flood  risk  areas  and  increasing  flood  risks,  a  timely 
implementation of flood prevention measures is vital. High priority investment needs have therefore been 
identified  to  promote  climate  change  adaptation,  risk  prevention  and  disaster  resilience,  and  in 
particular to: 

  support flood prevention and protection measures through ecosystem-based approaches, including the 
implementation of disaster risk management strategies, including on the level of the EU Strategy for 
the  Adriatic-Ionian  Region,  EU  Strategy  for  the  Alpine  Region  and  EU  strategy  for  the  Danube 
Region. 

Slovenia lags behind in achieving waste water collection and treatment targets. Priority investment needs 
have therefore been identified to promote sustainable water management, and in particular to: 

 

invest in the collection and treatment of wastewater in agglomerations where it is needed to reach the 
targets, ensuring that bigger and more critical agglomerations are covered first, including in the frame 
of the EU Strategy for the Danube Region. 

Slovenia  faces  difficulties  in  the  waste  sector  and  is  highly  dependent  on  imported  materials.  Priority 
investment needs have therefore been identified to promote the transition to a circular economy, and 
in particular to: 

  develop alternatives to raw materials and promote recycled materials as secondary raw materials; 

 

increase  resource  efficiency  and  further  promote  the  circular  economy  in  small  and  medium-sized 
enterprises in synergy with policy objective 1 also through shared experience and best practices with 
other member states; 

  support actions/campaigns to raise awareness, sustainable consumption practices and behaviour. 

Slovenia’s biodiversity is declining, while air quality continues to raise concern despite improvements in 
recent  years.  Investment  needs  have  therefore  been  identified  to  enhance  biodiversity,  green 
infrastructure in the urban environment, and reduce pollution, and in particular to: 

  support  biodiversity  in  protected  areas,  as  well  as  green  infrastructure  in  the  urban  environment 
(preparation  of  management  plans,  ecosystem  restoration  projects,  improve  the  knowledge  base), 
including in the frame of the EU Strategy for the Danube Region (Integrated territorial investments); 

  support measures to improve air quality (environmentally friendly production, green infrastructure). 

Policy  Objective  3:  A  more  connected  Europe  –  Mobility  and  regional  Information  and 
Communications Technology connectivity 

The railway network is lagging behind the motorways in terms of quality and connectivity. High priority 
investment needs have therefore been identified to develop a sustainable, climate resilient, intelligent, 
secure and intermodal Trans-European Transport Network, and in particular to: 

  complete  and  upgrade  the  railway  Trans-European  Transport  Network,  including  cross-border 
sections, taking also into account the EU Strategy for the Adriatic-Ionian Region, EU Strategy for the 
Alpine Region and EU strategy for the Danube Region; 

 

invest  in  multi-modal  transport  with  priority  to  improve  the  connectivity  of  different  sustainable 

56 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Slovenia 

transport modes in conjunction with neighbouring networks, where relevant. 

Transport  is  the  biggest  source  of  CO2  emissions,  with  an  increasing  energy  consumption,  decreasing 
share of renewable energy sources and a fluctuating road fatalities rate. Priority investment needs have 
therefore  been  identified  to  develop  sustainable,  climate  resilient,  intelligent  and  intermodal 
national, regional and local mobility, including improved access to the Trans-European Transport 
Network and cross-border mobility, and in particular to: 

  address negative externalities (safety, greenhouse  gas, air pollution) by investing in sustainable and 

accessible modes of transport; 

 

 

invest  in  a  smarter,  more  connected  and  cleaner  transport  system  and  deploy  infrastructure  which 
decarbonises road transport (alternative fuels infrastructure facilitating integration of renewables); 

improve  connection  of  national  networks  to  the  Trans-European  Transport  Network,  with  positive 
economic impact, including in the frame of the EU Strategy for the Danube Region. 

Slovenia  is  highly  dependent  on  cars,  with  a  low  use  of  other  modes  of  passenger  transport  and 
challenges  in  implementing  sustainable  urban  mobility  plans.  Investment  needs  have  therefore  been 
identified to promote sustainable multimodal urban mobility, and in particular to: 

 

improve urban transport systems (in line with sustainable urban mobility plans) to reduce dependency 
on cars and enable a shift towards sustainable and accessible modes of transport (Integrated territorial 
investments); 

 

invest  into  reducing  the  negative  externalities  of  transport  and  developing  Intelligent  Transport 
System solutions. 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights 

Slovenia faces some structural labour market weaknesses, notably a weak employment situation of low-
skilled and older workers, as well as a mismatch of labour market needs and skills. Priority investment 
needs have therefore been identified to  modernise labour  market institutions and services to assess 
and anticipate skills needs  in particular to: 

 

improve targeting of active labour market policy measures for long term unemployed and inactive; 

  anticipate 

long-term  employment  challenges  and  provide 

lifelong  guidance  and 

learning 

opportunities; 

  promote prolonging working activity and elderly-friendly forms of work organisation and conditions; 

  support integration between various service providers and implement national skills strategies; 

  ensure the tools to analyse current labour market needs and anticipate future labour demand. 

Slovenia  has  a  relatively  well  performing  education  system,  but  there  are  still  discrepancies  between 
supply and demand for skills and at present, the adaptation to labour market changes is generally slow. 
Priority  investment  needs  have  therefore  been  identified  to  improve  the  quality,  effectiveness  and 
labour  market  relevance  of  education  and  training  and  support  the  acquisition  of  key 
competences;  to  promote  lifelong  learning    and  new  skills  requirements  based  on  labour  market 

57 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Slovenia 

needs, and in particular to: 

  promote vocational education and training as a quality and highly skilled career pathway; 

  modernise  education/training  sectors,  pedagogical  staff  policies, 

including  digital 

learning, 

transversal skills and other skills/knowledge for the future; 

  support access to inclusive and quality education, also focusing on enhancing digital skills (Integrated 

territorial investments); 

  support infrastructure and equipment aimed at up-re/skilling people; 

  upgrade skills of the adult population and increase overall participation in lifelong learning. 

The  share  of  people  at  risk  of  poverty  and  social  exclusion  has  decreased,  but  remains  high  for  the 
elderly  and  there  are  notable  regional  differences.  Priority  investment  needs  have  therefore  been 
identified to  promote the social integration of people at risk of poverty or social exclusion, and in 
particular to: 

 

foster  active  social  inclusion  and  alleviate  poverty,  including  by  supporting  transfer  to  community 
based care and home-care, with a focus on elderly, people with disabilities and mental conditions. 

Population ageing calls for improvements in the effectiveness and resilience of healthcare and long-term 
care systems. High priority investment needs have therefore been identified to  enhance  the equal and 
timely access to quality, sustainable and affordable services, and in particular to: 

  support  integration  of  healthcare  (primary  and  hospital),  long-term  care  and  social  care  services 
including through investing in preventive and outpatient healthcare infrastructure, and equipment and 
digital tools; 

 

tackle  geographical  disparities  in  access  to  healthcare,  with  a  focus  on  the  socioeconomically 
deprived; 

 

invest in healthcare equipment in order to optimize the  waiting times and improve transparency; 

  prolong healthier lives by promoting healthy lifestyles and tackling health-damaging behaviour and 

health risks arising from pollution. 

Policy Objective 5 –  A Europe  closer  to  citizens  by  fostering  the  sustainable  and  integrated  
development  of urban, rural and coastal areas and local initiatives 

Cities,  their  surrounding  functional  areas  and  rural  areas  face  different  challenges,  such  as  high  pupil 
underachievement  rates  in  socioeconomically  deprived  areas,  to  be  addressed  through  a  bottom-up 
approach. Other regional disparities are to be addressed through sectorial policies in policy objectives 1 
through  4,  while  an  optimal  implementation  is  to  be  ensured  by  limiting  investments  to  areas  with 
enough  administrative  capacity  to  prepare,  select  and  implement  projects.  Investment  needs  have 
therefore  been  identified  to  foster  the  integrated  socio-economic  development  in  urban  and  rural 
areas, and in particular to: 

  support  services  in  order  to  build  an  inclusive  society,  especially  focusing  on  socio-economically 

deprived persons/areas (Community Led Local Development). 

58 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Slovenia 

Factors for effective delivery of Cohesion policy 

Additional  efforts  are  needed  to  increase  the  administrative  capacity  necessary  for  the  effective 
administration and implementation of the Funds. 

  strong  support  and  involvement  of  social  partners,  local  authorities  and  other  public  bodies  and 

stakeholders, which are essential for effective implementation; 

  enhanced  dialogue  and  strengthened  capacities  of  intermediate  bodies  and  final  beneficiaries  to 
prepare and implement projects; focusing on continuing to build up the administrative capacity of the 
intermediate body in charge of integrated territorial investments; 

 

reduced  administrative  burden, 
documentation and over bureaucratic requirements to  project proposals; 

improved  and  simplified  procedures,  eliminating  excessive 

 

functioning of IT systems to enable proper monitoring and implementation of EU funds; 

 

Improved  public  procurement  performance  by  ensuring  sufficient  administrative  capacity  and  its 
support, as well as by reducing single bidder, one bidder or no bids rates; 

  development  and  implementation of a roadmap on administrative capacity building  – to  effectively 

manage and use EU funds; 

 

improved  and  more  efficient  measures  to  prevent  and  address  conflict  of  interest,  fraud  and 
corruption; 

  broader use of financial instruments and/or contributions to the Slovene compartment under InvestEU 

for revenue-generating and cost-saving activities, also ensuring synergies with other EU funds; 

 

taking  account  of  experience  available  under  different  initiatives,  such  as  the  Coal  Regions  in 
Transition  initiative  or  the  Regions  in  Industrial  Transition,  in  particular  about  the  impact  of  new 
technologies, decarbonisation and the promotion of inclusive growth. 

59 

 
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