COMMISSION STAFF WORKING DOCUMENT Country Report Slovenia 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Slovenia, economic situation, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, sustainable development, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 523 final  COMMISSION STAFF WORKING DOCUMENT Country Report Slovenia 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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(2020) 150}  
 
 
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 
3.5.  Environmental Sustainability 

Annex A: Overview table 

Annex B: Commission debt sustainability analysis and fiscal risks 

Annex C: Standard tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for Slovenia 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

LIST OF TABLES 

Table 1.1: 
Table 2.1: 

Table 3.2.1: 
Table C.1: 
Table C.2: 
Table C.3: 
Table C.4: 
Table C.5: 
Table C.6: 
Table E.1: 

Key economic and financial indicators – Slovenia 

Assessment of the implementation of the 2019 Country-Specific Recommendations 

(CSRs) 

Financial soundness indicators, all banks in Slovenia 

Financial market indicators 

Headline Social Scoreboard indicators 

Labour market and education indicators 

Social inclusion and health indicators 

Product market performance and policy indicators 

Green growth 

Indicators measuring Slovenia’s progress towards the SDGs 

1 

3 

7 

13 

17 

17 
23 
27 
33 
44 

48 

53 

54 

60 

62 

12 

15 
23 
54 
55 
56 
57 
58 
59 
62 

 
 
 
 
7 
7 
9 
9 
10 
11 
13 
18 
21 
25 

28 
30 
31 
33 
33 
34 
44 
45 

16 
32 
36 
38 

LIST OF GRAPHS 

Debt decomposition 

Composition of GDP growth 

Composition of potential growth 

Net international investment position (NIIP) by sector 

Compensation per employee and labour productivity, annual % change 

Graph 1.1: 
Graph 1.2: 
Graph 1.3: 
Graph 1.4: 
Graph 1.5: 
Graph 1.6:  GDP per capita in Slovenian regions, 2017 
Graph 2.1: 
Graph 3.1.1:  Pension expenditure as % of GDP 
Graph 3.1.2:  Dashboard on healthy ageing, 2017 
Graph 3.2.1:  Private equity investments as a % of GDP, average 2016-2018 
Graph 3.3.1:  Labour shortages as reported by employers in the industry, construction and services 

Level of implementation of 2011-2019 Country-Specific Recommendations (CSRs) 

sector, 2008-2019 

Graph 3.3.2:  Share of graduate employed in occupations that do not require tertiary education 
Graph 3.3.3:  At-risk-of-poverty-or-social exclusion rate in its components 
Graph 3.4.1:  Labour productivity in Slovenia as a ratio of labour productivity in the euro area 
Graph 3.4.2:  Productivity gap by sectors, 2009-2018 
Graph 3.4.3:  Productivity growth 
Graph 3.5.1:  Greenhouse gas intensity of the economy, Slovenia and the EU 
Graph 3.5.2:  Renewable energy: share in gross final energy consumption 

LIST OF BOXES 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth and 

competitiveness in Slovenia 

Box 3.3.1: Monitoring performance under the European Pillar of Social Rights 

Box 3.4.1: Drivers of Slovenia’s research and innovation performance 

Box 3.4.2: Investment challenges and reforms in Slovenia 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

is 
reforms.  The 

Slovenia’s  solid  growth  offers  the  opportunity 
to  improve  its  long-term  sustainability (1).  The 
economy  is  growing  strongly,  although  more 
slowly  than  in  recent  years.  The  efficiency  of  the 
improving,  helped  by  previous 
economy 
structural 
labour  market  has 
improved  to  record  levels,  with  a  continued 
increase in the employment rate accompanied by a 
decrease  in  both  the  overall  unemployment  rate 
and  the  long-term  unemployment  rate.  However, 
investment  remains  below  both  historical  and  EU 
averages,  dragging  down  productivity  growth. 
low  and  other  social 
Income 
indicators  are  good  and  improving  further.  The 
pace  of  reform  has  stalled  recently  despite  the 
urgent  need  for  comprehensive  reforms  to  the 
pensions,  healthcare  and  long-term  care  systems. 
These 
the 
challenge of an ageing population and ensure long-
term fiscal sustainability.  

reforms  are  necessary 

inequality 

tackle 

to 

is 

2019, 

economic 

Slovenia’s 

In 
growth 
decelerated  considerably,  but  remains  robust. 
After growing by more than 4% in 2017 and 2018, 
the economy is expected to grow at the slower rate 
of 2.5% in 2019, and 2.7% in 2020 and 2021. This 
is  somewhat  below  Slovenia’s  potential  growth 
rate.  There  are  also  risks  on  the  horizon.  As  a 
small, open economy, Slovenia remains vulnerable 
to  the  continued  uncertainty  at  global  level  and  a 
further  decline  in  international  trade  dynamics. 
However,  the  economy’s  diversification  should 
to  sector-specific 
make 
shocks.  

it  relatively  resilient 

Growth 
is  driven  by  domestic  demand. 
Consumption is expected to continue to grow at a 
robust  pace,  supported  by  rising  employment  and 
disposable income. Although growth of investment 
in  dwellings  and  other  construction  remains  quite 
strong, 
in  machinery  and 
equipment  has  weakened  substantially  in  2019, 
primarily  due  to  global  trade  uncertainty.  With 
exports  growing  more  slowly  than  imports,  the 
external  sector  has  a  negative  impact  on  growth. 

investment  growth 

(1)  This  report  assesses  Slovenia’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy,  published  on  17  December  2019.  In 
this 
document, the Commission sets out a new strategy on how 
to address not only the short-term economic challenges but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability. 

3 

The  inflation  rate  was  1.7%  in  2019,  and  is 
expected  to  increase  only  slightly  in  2020  and 
2021. 

by 

growth, 

economic 

The  unemployment  rate  is  below  its  pre-crisis 
level.  Helped 
the 
unemployment  rate  fell  to  4.6%in  2019,  and  is 
expected  to  stabilise  at  4.2%  in  2020  and  2021. 
The  long-term  unemployment  rate  continued  to 
decline in 2019, falling 2.2%, well below the euro-
area 
long-term 
unemployment  rate  of  older  workers  remains  a 
concern, and at the same time certain sectors face 
labour market shortages. 

average.  However, 

the 

Fiscal  policy  was  pro-cyclical  in  2019.  The 
general  government  budget  was  in  balance  in 
2017,  and  reached  a  surplus  of  0.8%  of  GDP  in 
2018.  The  surplus  fell  to  0.5%  of  GDP  in  2019, 
and  is  expected  to  remain  broadly  stable  over  the 
medium  term.  Although  revenues  continue  to 
increase  due  to  economic  growth,  this  effect  is 
more than offset by expenditure  increases and tax 
reductions.  Public  debt  is  forecast  to  fall  from 
70.4% of GDP in 2018 to below the 60% of GDP 
threshold in 2021, after having peaked at 82.6% of 
GDP in 2015.  

in 

innovation 

investment 

and 
Further 
infrastructure  (environmental,  transport  and 
energy) remains necessary to keep Slovenia on a 
sustainable  growth  path.  The 
innovation 
potential  of  the  economy  is  hampered  by:  rather 
low public investment in research and innovation, 
limited  science-industry  cooperation  and  uneven 
innovation  and  digital  capacities  among  firms. 
Waste 
is  well  managed  overall,  but  urban 
wastewater  and  water  losses  are  still  causes  for 
concern.  Sustainable  transport  connections,  in 
particular  rail,  are  not  sufficiently  developed  to 
fully  support  a  carbon-friendly  modal  shift  or  the 
economic  development  of  less-developed  regions. 
However,  investment  in  sustainable  transport  is 
increasing. The share of renewable energy remains 
low.  The  ageing  of  Slovenia’s  population  means 
that  significant  investments  are  necessary  to  ease 
pressure  on  the  healthcare  and  long-term  care 
systems.  The  transition  away  from  coalmines  and 
coal-powered  electricity  production  is  at  an  early 
stage.  

Overall,  Slovenia  has  made  limited  progress  in 
country-specific 
addressing 

2019 

the 

 
 
                                                           
Executive summary 

There  has  been  limited  progress  in  the  following 
areas: 

  Pensions - Although some measures have been 
adopted  to  improve  the  adequacy  of  pensions, 
no  measures  have  been  taken  to  ensure  the 
long-term sustainability of the pension system. 

  Equity  markets  -  Slovenia  tries  to  support 
equity markets financially, mainly by using EU 
funds.  However,  other  factors  hampering  the 
development  of  equity  markets  have  not  been 
addressed.  

recommendations (2).  This  assessment  does  not 
take into account the contribution of the EU 2021-
2027 cohesion policy funds. 

There  has  been  some  progress  in  the  following 
areas: 

  Older  and  low-skilled  workers  -  Slovenia 
implemented a number of measures to increase 
the  employability  of  low-skilled  and  older 
workers. Others  measures  are being discussed, 
awaiting 
awaiting 
implementation. 

adoption, 

and 

  Business  environment  -  Slovenia  has  taken 
measures  to  reduce  the  costs  of  compliance 
with regulations, in particular by promoting e-
procedures and e-services. 

  Healthcare  -  Slovenia  has  not  yet  presented  a 
legislative  proposal,  but  some  other  measures 
on  improving  the  performance  of  the  system 
are ongoing. 

  Public procurement - Slovenia adopted reforms 
to  strengthen  the  independent  oversight  of 
public procurement, and also continued to train 
procurement officers.  

  Focus  investment-related  economic  policy  on 
research  and  innovation  –  Slovenia  has  not 
fully  implemented  its  research  and  innovation 
strategy,  and 
little  harmonisation 
is 
there 
among different policies and strategies. 

transport, 

  Focus  investment-related  economic  policy  on 
sustainable 
in  particular  rail  – 
Slovenia  published  an  investment  plan  for 
transport  to  increase  the  funding  of  railways 
and  sustainable  mobility  in  the  period  2020-
2025.  It  also  adopted  an  action  plan  for 
alternative  fuels  in  transport  that  set  specific 
objectives and outlined specific measures. 

  Privatisations  –  Another  10%  of  the  shares  of 
the  largest  bank,  Nova  Ljubljanska  Banka, 
have  been  sold.  The  sale  of  Abanka,  the  third 
largest  Slovenian  bank,  was  also  finalised  in 
2019.  Both  these  measures  were  expected 
under  State  aid 
rules.  However,  other 
privatisations have come to a halt. 

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

is  presented 

in 

4 

change 

improved.  However, 
climate 

  Focus  investment-related  economic  policy  on 
the low-carbon and energy transition - Slovenia 
received  about  €90  million  for  climate  change 
adaptation  from  the  cohesion  policy  for  2014-
2020.  The  selection  and  implementation  of 
a 
has 
projects 
comprehensive 
strategy 
covering all sectors has not yet been drawn up. 
A  more  specific  regulatory  framework  for 
adaptation  to  climate  change  is  planned  to  be 
included in the Environmental Protection Law, 
which  is  currently  being  adopted.  The  use  of 
low-carbon 
The 
implementation  of  low-carbon  projects  in  the 
fields  of  transport  and  power  generation  is 
lagging  behind.  Slovenia  took  the  necessary 
steps  to  upgrade  its  draft  National  energy  and 
climate  plan,  but  failed  to  submit  it  by  the 
deadline.  

limited. 

energy 

is 

  Focus  investment-related  economic  policy  on 
investment  in  environmental  infrastructure  – 
Slovenia accelerated the implementation of the 
EU  co-financed  wastewater  projects  but 
investment  gap  still  prevail  in  this  sector.  In 
addition, 
integration  of  environmental 
aspects, particularly, nature considerations, into 
infrastructure 
planning  and 
implementing 
projects, 
the 
challenges in the water sector, the Government 
proposed  an  amendment  of  the  national  water 
legislation in December 2019.  

is  challenging.  To 

tackle 

the 

 
                                                           
There has been no progress in the following areas: 

  Long-term care  –  A proposal  was  not publicly 
available  by  the  end  of  2019.  However,  the 
Ministry  of  Health  announced  that  one  would 
be ready for early 2020.  

On  the  indicators  of  the  Social  Scoreboard 
supporting the European Pillar of Social Rights, 
Slovenia is performing well. Income inequality is 
low  and  the  risk  of  poverty  and  social  exclusion 
has  decreased  in  recent  years.  The  early  leaving 
rate  from  education  and  training  is  very  low  but 
significant gender gaps exist, with males achieving 
worse  educational  outcomes  at  the  age  of  15  and 
lower  tertiary  attainment  rates.  The  labour  market 
participation  of  older  workers  and  low-skilled 
workers  is  low,  and  old-age  poverty  remains  a 
challenge.  

to 

targets  under 

achieving –  national 

Slovenia  is  making  good  progress  towards  its 
national 
the  Europe  2020 
strategy.  It  has  already  achieved  –  or  is  well  on 
track 
for 
employment  the  early  school  leaving  rate,  tertiary 
educational  attainment,  energy  efficiency  and 
greenhouse  gas  emissions.  However,  the  2020 
target  for  R&D  and  renewable  energy  are  not 
likely to be reached.  

targets 

Slovenia is performing well on the SDGs (3). On 
most  sub-indicators,  in  particular  the  social  ones, 
Slovenia is performing better than the EU average. 
Slovenia  performs  particularly  well  in  sub-theme 
inequality within countries of SDG10 (see Section 
3.3.3).  However,  there  are  a  few  indicators  where 
Slovenia  is  below  the  EU  average  and  on  a 
deteriorating  path.  From  a  macroeconomic 
perspective, 
investment  as  a  share  of  GDP 
(SDG 9)  is  also  worth  mentioning.  It  stood  at 
19.2%  in  2018,  below  the  EU  average  of  20.9%, 
and has been falling in recent years. 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on the SDGs. A new annex (Annex E) presents a statistical 
assessment of trends in relation to SDGs in Slovenia during 
the past five years, based on Eurostat’s EU SDG indicator 
set. 

Executive summary 

The  key  structural  issues  analysed  in  this  report 
that  point  to  particular  challenges  for  Slovenia’s 
economy are set out in the paragraphs below. 

is  expected 

the  use  of 

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  about  6%  of  GDP  between  2016  and 
2070,  one  of  the  largest  increases  in  the  EU. 
Notably,  pension  expenditure 
to 
increase from 10.9% of GDP in 2016 to 14.9% of 
GDP  in  2070.  A  reform  aiming  at  improving 
pension  adequacy  and  encouraging  workers  to 
work longer  was adopted in  November 2019. The 
Fiscal  Council  estimates  that  this  reform  will 
increase  pension  expenditure  by  1pp.  of  GDP  by 
2040.  At  the  same  time,  no  concrete  action  has 
been  decided  for  the  second  pillar  of  the  reform, 
intended  to  improve  the  sustainability  of  the 
system.  Furthermore, 
long-term 
unemployment  and  long-term-sick-leave  schemes 
as  “bridges”  to  retirement  put  a  further  strain  on 
the  sustainability  of  the  pension  system.  Overall, 
healthcare  outcomes  are  good,  but  expenditure  is 
rising,  and  public  healthcare  financing  is  strongly 
cyclical.  There  is  therefore  a  risk  that  revenues 
might  not  cover  increased  expenditure  in  an 
economic  downturn.  The  government  is  currently 
re-initiating  the  process  for  a  comprehensive 
reform of the healthcare system (4). Slovenia does 
not have an overarching law that covers long-term 
care.  Slovenia’s  ageing  population  means  that 
chronic  conditions  will  be  more  prevalent  in  the 
future.  This  will  make  it  necessary  to:  (i)  devise 
new  care  models;  (ii)  place  greater  emphasis  on 
sickness prevention; and (iii) ensure the integration 
of  the  healthcare  system  with  the  long-term  care 
system.  The  government  intends  to  present  a 
legislative proposal covering long-term care in the 
first half of 2020. 

Boosting  investment  could  further  improve 
potential  growth  and  productivity.  Labour 
productivity  is  now  growing  again,  after  a  period 
in  which  it  failed  to  close  the  gap  with  the  EU 
improvement  has  been  driven 
average.  This 
primarily  by  efficiency  gains,  as  past  structural 
reforms are now paying off. However, investment 
remains  below  historical  and  EU  averages, 

(4)   The delivery of this and other government plans mentioned 
in this report might be delayed or not delivered, as since 29 
January 2020 the government is acting as care-taker only.  

5 

 
                                                           
                                                           
Executive summary 

in 

to 

remedy 

procedures 

remain  obstacles 

regulatory 
reduce  administrative  burden  and 
restrictions,  but  both 
for 
businesses. The justice system continues to reduce 
its backlog but commercial court proceedings often 
remain  lengthy  and  the  prosecution  of  economic 
and  financial  crime  faces  difficulties  affecting 
business  decisions.  Slovenia 
implementing 
is 
improve  professionalisation  and 
measures 
public 
strengthen 
procurement.  However,  competition 
in  public 
procurement  and  tender  aggregation  in  the  health 
sector  remain  problematic,  potentially  leading  to 
higher  costs  for  the  Slovenian  taxpayer  and  lost 
opportunities for its businesses.  
Balancing  trade-offs  to  achieve  clean  energy 
transition. The carbon intensity of the economy is 
rather  high,  primarily  due  to  transport,  electricity 
production, and heating. In order to reduce carbon 
intensity, 
for  cleaner  and 
renewable  energy  sources  will  need  to  be  built, 
which  could  have  an  impact  on  the  natural 
heritage, if not appropriately managed. 

infrastructure 

the 

impacts 

A  comprehensive  strategy  for  climate  change 
adaptation  has  not  yet  been  drawn  up.  Severe 
environmental 
and 
socioeconomic 
degradation  can  be  observed 
in  Slovenia’s 
coal-mining  regions.  The  Commission’s  proposal 
for  a  Just  Transition  Mechanism  under  the  next 
multi-annual  financial  framework  for  the  period 
2021-2027  includes  a  Just  Transition  Fund,  a 
dedicated  just  transition  scheme  under  InvestEU, 
and a new public sector loan facility with the EIB. 
It is designed to ensure that the transition towards 
EU  climate  neutrality  is  fair  by  helping  the  most 
affected  regions  in  Slovenia  to  address  the  social 
and  economic  consequences.  Key  priorities  for 
support by the Just Transition Fund, set up as part 
of the Just Transition Mechanism, are identified in 
Annex D, building on the analysis of the transition 
challenges outlined in this report. 

choking off a more rapid catch-up towards average 
EU  productivity 
is 
nevertheless  expected  to  stabilise  at  a  robust 
[3.5%] per year.  

levels.  Potential  growth 

the 

and 

rate, 

The  inactivity  rates  of  older  and  less  skilled 
workers  are  high  while  labour  shortages  are 
increasing.  The  inactivity  rate  of  55-64  year  olds 
is  significantly  higher  than  the  EU  average.  The 
unemployment 
long-term 
unemployment rate in particular, are also above the 
EU average for this cohort. This early exit from the 
labour  market  is  underpinned  by  several  factors, 
including  low  participation  in  life-long  learning 
and  certain  features  of  the  unemployment  and 
health  systems.  As  the  labour  market  tightens, 
labour  shortages  are  becoming  more  acute,  partly 
due  to  skills  mismatches  and  insufficient  digital 
literacy.  

sources  of 

The  banking  sector  has  improved  steadily,  but 
alternative 
finance  are  not 
sufficiently  developed  to  support  innovation 
and  growth.  Banks’  profitability,  solvency  and 
asset quality have improved significantly, although 
the low-interest-rate environment puts banks under 
pressure  to  reduce  costs  and  increase  revenues. 
Strong growth in consumer lending led the Bank of 
Slovenia  to  issue  binding  measures  to  mitigate 
risks.  Slovenia’s  equity  and  venture  capital 
markets are still not sufficiently developed and the 
market  capitalisation  of 
the  national  stock 
exchange  is  low.  The  underdeveloped  equity 
markets,  which partly reflect  the  small size  of the 
economy,  may  stifle  market  entry  and  the  growth 
of innovative and high-potential firms. 

its  stake 

Despite significant privatisation measures taken 
in  2018  and  2019,  the  State  still  plays  a 
significant  role  in  the  economy.  In  2018-2019, 
Slovenia  further  reduced 
in  Nova 
Ljubljanska  Banka  and  fully  privatised  Abanka. 
However,  the  State  still  plays  a  dominant  role  in 
some  crucial  sectors,  such  as  insurance  and 
telecommunications,  and 
to 
increase  its  role  in  the  tourism  sector.  This  could 
hamper 
resource 
allocation. 

there  are  plans 

competition 

efficient 

and 

the  business 

environment  has 
Although 
improved,  problems  remain  regards  public 
procurement  and  administrative/regulatory 
burden. Slovenia has taken measures to gradually 

6 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

In  2019,  Slovenia’s  economy  grew  at  a  solid 
rate, but the current economic cycle appears to 
have already peaked. Slovenia’s GDP is expected 
to  have  grown  by  2.5%in  2019,  after  growth  of 
4.1% in 2018. The slowdown was primarily due to 
the  declining  contribution  of  the  external  sector, 
related  to  a  global  slowdown  in  trade.  Over  the 
first 
three  quarters,  exports  grew  by  4.6% 
(compared  to  the  same  period  in  2018),  slightly 
less  than  imports,  which  rose  by  5.0%.  Domestic 
demand  remained  the  main  driver  of  growth. 
Private  consumption  continued  to  rise,  supported 
by  the  relatively  strong  increase  in  household 
Investment  growth  was 
income. 
disposable 
in  residential  construction 
particularly  strong 
(12.2%),  while 
in  machinery  and 
investment 
equipment increased by 3.1%. 

Graph 1.1:  Composition of GDP growth 

Source: European Commission Winter forecast 2020 

In  the  coming  years,  annual  GDP  growth  is 
expected  to  remain  at  2.7%.  As  in  2019, 
domestic  demand  is  expected  to  drive  economic 
development,  with  net  exports  making  a  negative 
contribution  (Graph  1.1).  Growing  disposable 
income  and  employment  will  continue  to  support 
private  consumption,  which 
to 
continue  to  increase  at  a  relatively  strong  pace. 
Investment is expected to be driven by demand for 
new housing, which had been sluggish in previous 
years. At the same time, the uncertainty prevailing 
in  global  markets  limits  firms’  willingness  to 

is  expected 

capacity  utilisation. 

in  machinery  and  equipment 

invest,  despite  the  tight  labour  market  and  high 
In  particular, 
rate  of 
investment 
is 
expected  to  continue  growing  at  the  relatively 
muted rate it recorded in 2019. In 2020 and 2021, 
the risks the country faces are mainly related to the 
external  environment.  However,  the  Slovenian 
economy  may  be  relatively  resilient  as  its  export 
structure is diversified and not particularly strongly 
affected by sector-specific shocks.  

Graph 1.2:  Composition of potential growth 

Source: European Commission Autumn forecast 2019 

is 

at 

total 

Slovenia’s  growth  potential 
increasing. 
Overall,  potential  growth  is  currently  expected  to 
factor 
3.5%.  Although 
stabilise 
productivity recovered quickly after the crisis, the 
contribution  of  capital  accumulation  remains  low. 
Looking  ahead, 
to  potential 
growth  from  investment  is  expected  to  increase, 
while  the  contribution  from  labour  is  expected  to 
decline  after  2021  due  to  the  ageing  population. 
(Graph 1.2).  

the  contribution 

Investment  remains  below 
the  EU’s  and 
Slovenia’s  long-term  average  levels.  Investment 
in  R&D  (‘other  investment’)  is  growing  at  rather 
low rate. This is detrimental to the achievement of 
SDG 8 and 9. In absolute terms, investment in the 
manufacturing  sector  has  increased  compared  to 
the  pre-crisis  period  (driven  by  metal  products, 
electrical equipment and motor vehicles) but it has 
decreased  in  sectors  such  as  wholesale  and  retail 
trade, 
transportation  and  storage  and  even 
information and communication.  

7 

-6-4-2024612131415161718192021% of GDPPublic consumptionNet exportsInventoriesPrivate consumptionInvestmentReal GDP (y-o-y%)forecast-1.0-0.50.00.51.01.52.02.53.03.54.007080910111213141516171819202124Annual % changeCapital accumulation contributionTotal factor productivity (TFP) contributionTotal labour contribution (hours)Potential growthforecast 
  
 
  
 
1. Economic situation and outlook 

increases, 

the  labour  market  participation  of  older  workers 
(aged  55-64).  Despite  recent 
their 
employment  rate  remained  well  below  the  EU 
average in 2018 (47.0% compared to 58.7% in the 
EU).  The  contrast  is  even  starker  for  low-skilled 
older  workers,  who  had  an  employment  rate  of 
30.5% (compared to 44.0% in the EU) in 2018. 

Social developments 

inequality. 

to  poverty  and 

Inequality is low and the share of people at risk 
of  poverty  or  social  exclusion  has  on  average 
decreased,  but  remains  high  for  the  elderly. 
Slovenia  is  performing  well  on  most  indicators 
related 
Income 
inequality is the lowest in the EU and the share of 
income of the poorest 40% of the population is one 
of  the  highest.  In  2018,  the  at-risk-of-poverty-or-
social  exclusion  rate  (AROPE)  decreased  by 
0.9pps to 16.2%. The decrease is due to a decrease 
in  the  severe  material  deprivation  rate  (-0.9pps) 
and  a  very  low  work  intensity  rate  (-0.8pps).  The 
at-risk-of-poverty  rate  (AROP)  was  the  same  in 
2018  as  in  the  previous  year  (13.3%)  and  below 
the EU average for 2018 (17.1%). Yet, the rate of 
old-age  poverty  (24.4%  compared  to  an  EU 
average  of  20.9%  in  2018),  which  mainly  affects 
women over the age of 65, remains a challenge. 

Competitiveness 

Sloveniaʼs export  market  share was increasing, 
labour  cost 
supported  by  moderate  unit 
developments and a favourable destination mix. 
Slovenia’s  export  market  share 
increased  by 
4.7 pps back in 2018. This increase is expected to 
continue,  for  both  goods  and  services,  also 
supported  by  the  relatively  stable  growth  in 
Slovenia’s destination markets. The nominal wage 
growth  has  led  to  an  increase  in  nominal  unit 
labour costs. Unit labour costs grew by 3% in 2018 
and  are  expected  to  peak  at  3.3%  in  2019,  still 
below  that  of  other  Member  States  in  the  region. 
Growth  in  unit  labour  costs  is  then  expected  to 
moderate gradually.  

Inflation 

Inflation remains moderate. After a deflationary 
period  2015-2016,  prices  in  Slovenia  developed 
closely in line  with those in the euro area in 2017 
and  2018.  Yet,  in  2019,  inflation  reached  1.7% 
markedly higher than the inflation rate of 1.2% in 
the euro area. Main driver of this growth, were the 
prices  of  services.  Price  increases,  particularly  in 
services, reflect also recent wage increases. For the 
coming  years,  it  is  expected  that  inflation  will 
remain  close  to  2.0%,  somewhat  above  the  euro 
area  inflation  rate.  Core  inflation  (net  of  energy 
and  food  prices)  is  expected  to  reach  above  1.6% 
over the forecast horizon.  

Labour market 

The  labour  market  continues  to  improve  with 
rising  employment  and  falling  unemployment. 
The  employment  rate  was  75.4%  in  2018  and 
improved to 76.5% by the third quarter of 2019. It 
is  forecast  to  further  improve  over  the  coming 
years.  This,  combined  with  an  inflow  of  foreign 
workers, is expected to help alleviate labour supply 
constraints to some extent. The unemployment rate 
further declined from the 2018 average of 5.1% in 
2018 to 4.6% in 2019. Over the coming years, it is 
expected to decline further.  

The  tightening  of  the  labour  market  has  been 
accompanied  by  growing  wage  pressures. 
Nominal compensation per employee (5) increased 
by  3.9%  in  2018  and  is  projected  to  continue 
growing  by  3.6% 
in  both  2019  and  2020 
respectively.  This  is  mainly  due  to  the  rise  in 
public sector pay (agreed in negotiations with trade 
unions  at  the  end  of  2018),  and  the  additional 
increase  in  the  net  minimum  wage  by  3.4%  to 
€700,  in  line  with  the  act  adopted  in  December 
2018 
(European  Commission,  2019 a).  Real 
compensation per employee, which grew by 1.7% 
in 2018, is projected to grow 2% in 2019. In 2020 
and 2021, the growth of real  compensation  would 
be  slightly  lower  as  inflation  is  projected  to 
accelerate. 

Despite  improved  labour  market  conditions, 
structural  challenges  are  still  a  concern.  The 
working  age  population  is  decreasing,  due  to  the 
rapidly  ageing  population.  Challenges  persist  in 

(5)  Total  compensation  of  employees  divided  by  the  total 

number of employees. 

8 

                                                           
1. Economic situation and outlook 

Graph 1.3:  Compensation per employee and labour 

productivity, annual % change 

maintain  this  position  afterwards.  Government 
liabilities  have  declined  sharply  since  2015.  Non-
financial  corporations  have  maintained  small 
international 
liabilities  since  2015.  The  net 
investment position is expected to improve further 
thanks to the current account surplus and the fall in 
government debt. 

Graph 1.4:  Net international investment position (NIIP) by 

sector 

Source: Eurostat 

External position 

Sloveniaʼs  current  account  has  been  in  surplus 
since  2012.  Slovenia’s  current  account  balance 
turned  positive  in  2012  and  peaked  at  6.1%  of 
GDP  in  2017.  After  posting  a  surplus  of  5.7%  of 
GDP  in  2018,  it  is  expected  to  have  declined 
further  in  2019,  as  imports  are  expected  to  have 
grown faster than exports due to stronger domestic 
demand.  Although  both  goods  and  services 
balances  are  in  surplus,  the  surplus  in  services  is 
especially  strong.  The  current  account  surplus  is 
higher  than  might  have  been  expected  based  on 
economic fundamentals (6). The same holds for the 
cyclically  adjusted  current  account  surplus,  which 
exceeded 8% of GDP in 2018, and is projected to 
remain  at  comparable  levels  in  2019-2021.  In 
addition  to  trade  balance,  the  surplus  is  driven  by 
public  and  private  deleveraging,  as  well  as  low 
investment.  

The  high  current  account  surplus  supported  a 
rapid  improvement  of  the  net  international 
investment  position.  Slovenia’s  passive  net 
international 
investment  position  has  broadly 
to  2019  (Graph  1.4).  In 
halved  from  2012 
particular,  the  banking  sector  has  built  up  net 
foreign  assets  since  2014  and  has  been  able  to 

(6)  The  benchmark  is  derived  from  reduced-form  regressions 
capturing  the  main  determinants  of  the  saving-investment 
balance, 
(e.g. 
demography, resources), policy factors and global financial 
conditions. See also Coutinho, Turrini and Zeugner (2018). 

fundamental  determinants 

including 

9 

Source: Eurostat 

Financial sector 

sector  has 

increased  and 

Slovenia’s  banking 
improved 
significantly, showing better profitability, better 
asset quality and strong liquidity. The return on 
equity  has 
the  ratio  of  non-
performing  loans  has  declined,  reaching  4.5%  in 
June 2019 (from 22.8% in 2014). Banks also enjoy 
a  relatively  stable  funding  basis  and  abundant 
liquidity. Despite the privatisation of a  number of 
its  bank  holdings,  the  Slovenian  state  still  plays  a 
substantial role in the financial sector (see Section 
3.2.1). 

Private debt 

The  private  indebtedness  ratio  continues  to 
decline.  Since  the  indebtedness  ratio  peaked  in 
2010 (at 115.2% of GDP), private  sector debt fell 
to  72.8%  of  GDP  in  2018,  and  was  below  both 
prudential  and  fundamental  benchmarks (7)  in 

(7)  Fundamental-based 

from 
benchmarks 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 

derived 

are 

-8-6-4-2024681012070809101112131415161718Annual % changeCompensation of employeeLabour productivity per hour workedUnit labour cost based on hours worked-70-60-50-40-30-20-10010203011Q312Q313Q314Q315Q316Q317Q318Q319Q3% of GDPGeneral GovernmentPrivate sectorFinancial Institutions (MFI, excl central bank)Central Bank (incl reserves)Net international investment position (NIIP)  
                                                           
  
                                                           
1. Economic situation and outlook 

growth has been less buoyant than in the run-up to 
the crisis. The banking system is less exposed and 
more resilient to potential shocks in the real estate 
market than during the last financial crisis. Banks’ 
exposure  is  further  limited  by  the  recent  macro-
prudential  measures 
the  Bank  of 
Slovenia. 

taken  by 

House prices are still growing, but first signs of 
a  slowdown  were  observed  in  2019.  A  gradual 
slowdown  in  the  demand  for  residential  buildings 
(due  to  diminishing  affordability)  and  an  increase 
in construction have started to mitigate house price 
growth  in 2019. It is expected that,  with a  further 
recovery in construction activity, house prices will 
continue to moderate in the near future.  

Regional disparities 

sub-regional  disparities 

Regional  and 
in 
Slovenia  persist.  Eastern  Slovenia  lags  behind 
Western  Slovenia  (which  includes  the  capital)  in 
GDP per capita (71% and 103% of the EU average 
in 2017 respectively). However, the cross-regional 
coefficient of variation of GDP per head weighted 
by population is one of the lowest in the euro area. 
The  disparities  are  pronounced  at  sub-regional 
(local)  level.  In  particular,  the  role  of  the  capital 
sub-region  around  Ljubljana  in  the  economy  is 
predominant: it produced 37% of national GDP in 
2017,  with  26%  of  country’s  population.  Its  GDP 
per capita in 2017 (120% of the EU average) was 
almost  three  times  higher  than  in  Slovenia’s 
poorest region (Zasavska, 45% of the EU average). 

The population is growing in Western Slovenia 
but shrinking in the Eastern. Between 2000 and 
2017, the population of Eastern Slovenia shrunk by 
0.4%, while it grew by 7.7% in Western Slovenia. 
The sub-regional picture is more complex. Two of 
the  least  developed  sub-regions  (Pomurska  and 
Zasavska) lost more than 7% and 5% respectively 
of their population due to both, natural population 
decrease (more deaths than births) and emigration. 
The  population  of  the  capital  sub-region  and  the 
grew 
coastal 
significantly (12% and 8% respectively). Although 
experienced  natural 
the 
population 
immigration, 
population  growth  in  other  sub-regions  was  only 
due to net immigration. 

Obalno-Kraska 

sub-region 

sub-region 

increase 

capital 

and 

net 

2019.  Credit  flow  has  turned  positive  and  is 
supporting  economic  growth,  but  rapid  nominal 
GDP growth until end 2018 still caused the private 
debt-to-GDP  ratio  to  decline.  In  November  2019, 
the  Bank  of  Slovenia 
line  with  slowing 
economic  fundamentals,  adopted  macroprudential 
measures  to  limit  the  growth  of  credit,  especially 
the 
consumer 
capping  of  consumer  loan  durations  and  limiting 
the  ratio  of  annual  debt  servicing  costs  to  a 
borrower’s net income. 

loans.  These  measures 

include 

in 

Graph 1.5:  Debt decomposition 

(1) * estimated figures using quarterly data 
Source: Eurostat 

Housing market 

The  strong  increase  in  house  prices  since  2016 
has been mainly driven by the lack of supply of 
residential  buildings.  Since the summer of 2016, 
prices  for  residential  buildings  in  Slovenia  have 
been  increasing  strongly.  In  2018,  house  prices 
recorded the highest pace of real growth since the 
financial  crisis  (7.4%,  which  is  faster  than  wage 
growth),  making  Slovenia  one  of  the  euro-area 
Member  States  that  registered  the  highest  annual 
growth  in  house  prices.  The  favourable  economic 
situation and buoyant labour market have played a 
role, but the low level of investment in residential 
buildings was the major factor in pushing up house 
prices. Despite the favourable interest rates, credit 

Prudential  thresholds  represent  the  debt  threshold  beyond 
which  the  probability  of  a  banking  crisis  is  high, 
minimising  the  probability  of  missing  the  potential  crisis 
and that of false alerts. 

10 

02040608010012014016018020007080910111213141516171819*% of GDPFinancial corporations (MFI)GovernmentHouseholdNon financial corporationsPrivate sectorPrivate sector EU  
                                                                                   
1. Economic situation and outlook 

government  surplus  and  privatisation  proceeds, 
public  debt  is  forecast  to  decline  below  the 
reference  value  of  60%  of  GDP  in  2021.  This 
would  help  Slovenia  achieve  SDG 17.  However, 
because  expenditure  on  pensions,  healthcare  and 
long-term care is projected to increase significantly 
(due  to  both  the  ageing  of  the  population  and  the 
pension  measures  adopted  in  2019),  the  debt-to-
GDP  ratio  could  start  increasing  again  in  the 
longer term. 

Sustainable development goals 

the  EU 

Overall,  Slovenia 
is  performing  well  with 
regard  to  the  SDGs.  On  most  sub-indicators,  in 
particular  the  social  ones,  it  is  performing  better 
average.  Slovenia  performs 
than 
particularly  well  with  regard  to  SDG 10,  sub-
theme  inequality  within  countries  (see  Section 
3.3.3). There are, however, a few indicators, where 
Slovenia  is  below  the  EU  average  and  showing  a 
negative 
a  macro-economic 
perspective,  the  share  of  investment  in  GDP 
(SDG 9) is worth mentioning. It stood at 19.2% in 
2018,  below  the  EU  average  of  20.9%.  This 
challenge is discussed in Chapter 1. The Slovenian 
development  strategy  2030  aims  to  reach  the 
average  EU  emission  productivity and  achieve  a 
27%  share  of  renewable  energy  sources  in  final 
energy consumption.  

trend. 

From 

Graph 1.6:  GDP per capita in Slovenian regions, 2017 

Source: Eurostat 

Divergent  population 
trends  underpinned 
convergence in GDP per capita, despite the slow 
economic  growth  in  the  less  developed  region. 
Between  2010  and  2017,  GDP  grew  faster  in 
Western  Slovenia  than  in  the  less  developed 
eastern part of the country (1.7% annually against 
1.4%).  However,  the  fast  growing  population  of 
the  western  regions  (in  particular  the  capital  sub-
region) resulted in convergence in GDP per capita 
(see Section 3.4).  

Public finances  

The  general  government  overall  balance  is 
expected  to  remain  in  surplus.  The  general 
government  surplus  is  forecast  to  have  decreased 
from  0.8%  of  GDP  in  2018  to  0.5%  of  GDP  in 
2019. This  reduction  was  driven  by  the  economic 
slowdown,  a  strong 
in  government 
expenditure  and  the  revenue-decreasing  measures 
adopted by the Parliament. The surplus is expected 
to stay at 0.5% of GDP in 2020, due to further tax 
reduction  measures,  and  to  increase  slightly  to 
0.6% of GDP in 2021. Slovenia’s  structural  fiscal 
position  is  expected  to  improve  gradually  in  the 
coming years. 

increase 

The debt-to-GDP ratio continues to decline but 
this  trend  could  change  again  in  the  longer 
term. Thanks to the low interest rate environment, 
general 
active 

debt  management, 

public 

11 

 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators – Slovenia 

(1) Net international investment position (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 ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HIPC, Autumn forecast 2019 otherwise) 

12 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)5.2-1.01.84.84.12.52.72.7Potential growth (y-o-y)3.51.50.81.82.32.52.93.1Private consumption (y-o-y)3.10.91.02.33.4...Public consumption (y-o-y)2.90.90.60.33.2...Gross fixed capital formation (y-o-y)7.8-8.9-0.410.49.4...Exports of goods and services (y-o-y)13.10.65.110.86.6...Imports of goods and services (y-o-y) 12.6-1.64.310.77.7...Contribution to GDP growth:Domestic demand (y-o-y)4.2-1.50.63.14.1...Inventories (y-o-y)0.8-0.90.40.70.2...Net exports (y-o-y)0.11.50.81.0-0.2...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.10.10.00.20.30.40.50.6Capital accumulation (y-o-y)1.60.6-0.3-0.20.10.30.50.7Total factor productivity (y-o-y)1.80.81.11.81.91.91.91.9Output gap3.2-1.5-4.01.43.23.33.12.7Unemployment rate5.96.99.26.65.14.44.24.2GDP deflator (y-o-y)2.81.71.01.62.22.72.42.3Harmonised index of consumer prices (HICP, y-o-y)3.12.70.31.61.91.71.92.0Nominal compensation per employee (y-o-y)6.32.71.63.03.93.63.63.6Labour productivity (real, person employed, y-o-y)4.0-0.21.11.80.9...Unit labour costs (ULC, whole economy, y-o-y)2.22.90.41.23.03.32.42.2Real unit labour costs (y-o-y)-0.61.2-0.5-0.40.70.70.0-0.2Real effective exchange rate (ULC, y-o-y)0.30.6-0.40.61.60.30.20.3Real effective exchange rate (HICP, y-o-y)-0.4-0.20.2-0.21.8-0.4-0.20.1Net savings rate of households (net saving as percentage of net disposable income)8.94.42.74.65.0...Private credit flow, consolidated (% of GDP)14.03.6-3.50.91.3...Private sector debt, consolidated (% of GDP)80.8111.993.476.372.8...of which household debt, consolidated (% of GDP)20.329.028.227.227.0...of which non-financial corporate debt, consolidated (% of GDP)60.583.065.249.145.7...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)..14.17.04.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)-6.20.46.91.50.50.40.0-0.3Corporations, gross operating surplus (% of GDP)18.818.919.420.220.019.920.020.2Households, net lending (+) or net borrowing (-) (% of GDP)4.33.23.64.04.14.44.64.4Deflated house price index (y-o-y)12.8-3.7-1.86.27.4...Residential investment (% of GDP)3.73.42.22.12.1...Current account balance (% of GDP), balance of payments-2.6-1.34.36.15.75.75.45.0Trade balance (% of GDP), balance of payments-0.70.87.48.98.3...Terms of trade of goods and services (y-o-y)-0.7-0.91.0-0.5-0.10.40.00.0Capital account balance (% of GDP)-0.30.00.2-0.8-0.5...Net international investment position (% of GDP)-15.2-41.4-34.4-24.2-18.9...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-8.0-37.8-24.3-10.6-1.9...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)72.5107.6108.392.283.8...Export performance vs. advanced countries (% change over 5 years)35.28.8-5.314.818.0...Export market share, goods and services (y-o-y)4.0-4.62.95.34.76.61.71.0Net FDI flows (% of GDP)0.5-0.3-1.8-1.2-2.0...General government balance (% of GDP)-1.1-4.7-6.20.00.80.50.50.6Structural budget balance (% of GDP)..-1.3-0.6-0.7-1.0-0.9-0.7General government gross debt (% of GDP)25.638.977.974.170.466.763.159.5Tax-to-GDP ratio (%) (3)38.837.937.837.637.937.837.637.5Tax rate for a single person earning the average wage (%) (4)34.533.233.333.734.1...Tax rate for a single person earning 50% of the average wage (%) (4)29.323.623.023.523.9...forecast 
 
  
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

track 

record 
in 
Slovenia  has  a  good 
implementing 
country-specific 
recommendations  (CSRs).  Since  the  start  of  the 
there  has  been 
European  Semester 
substantial  progress  or  full  implementation  of 
almost  60%  of  all  CSRs  addressed  to  Slovenia 
(Graph 2.1). However, more than 10% of the CSRs 
addressed  to  Slovenia  have  recorded  no  or  only 
limited progress in the implementation. 

in  2011, 

Graph 2.1: 

Level of implementation of 2011-2019 Country-
Specific Recommendations (CSRs) 

(1) The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability Growth Pact. 
(2) 2011-2012 annual assessment: Different country-specific 
recommendations assessment categories. 
(3) The multiannual country-specific recommendations' 
assessment looks at the implementation until 2020 Country 
Report since the country-specific recommendations were 
first adopted. 
Source: European Commission 

The  public  debt  ratio  is  decreasing  rapidly  but 
pressure  on  the  long-term  sustainability  of 
public  finances  remains.  The  public  debt  ratio 
increased  four-fold  with  the  crisis,  peaking  at 
82.6% of GDP in 2015. Also due to policy action, 
the  ratio  has  rapidly  decreased  to  70.4%  in  2018 
and  is  expected  to  fall  below  60%  in  2021.  In 
parallel, 
been 
strengthened.  At  the  same  time,  fiscal  policy  has 
become  pro-cyclical  due  to:  (i) the  expiration  of 
temporary  measures  taken  during  the  crisis;  and 
(ii) further  expansionary  measures 
introduced 
recently.  Due  to  ageing-related  costs,  particularly 
long-term 
the  pressure  on 
on  pensions, 
sustainability 
remains 
public 
of 
significant. 

the 
finances 

framework 

fiscal 

has 

the 

The  Slovenian  banking  sector  has  improved 
remarkably  since  2014.  Decisive  policy  action 
and  the  improving  macroeconomic  situation  have 

helped the banking sector to recover rapidly since 
2014. The non-performing loans ratio continues to 
decline. It reached 4.5% in June 2019, down from 
7.4% a year earlier. At the same time, profitability 
increased and the average capital adequacy ratio is 
solid  (18.1%  in  June  2019). The  sale  of  shares  of 
Nova  Ljubljanska  Banka  (NLB)  and  Abanka  in 
2018 and 2019, stemming from the 2013 State aid 
commitments, will further help ensure the viability 
of the sector in the long term. 

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

somewhat 

increased 

The  business  environment  has 
improved, 
although  progress  has  slowed  down  recently. 
Slovenia  has  reduced  the  number  of  regulated 
professions  significantly,  but  progress  has  slowed 
down in recent years. Measures have been taken to 
reduce  administrative  burden  and  efforts  are 
continuing.  A  comprehensive  framework  for  the 
governance  of  state-owned  enterprises  was  put  in 
place after the crisis. However, there is a risk that 
the capacity of the Slovenian Sovereign Holding is 
weakened  after  2020  when  its  assets  will  be 
gradually transferred back to the state (see Section 
3.1.5).  With  the  use  of  national  and  EU  funding, 
Slovenia  tries  to  improve  alternative  funding  for 
SMEs and fast-growing companies.  

In  2019,  Slovenia  made  limited  progress  in 
addressing  the  first  of  the  2019  CSRs.  Despite 
intensive discussions there is still no proposal for a 
comprehensive  healthcare  reform.  The  reform  is 
expected  to  be  discussed  by  the  government  only 
in  mid-2020.  Other  measures  were announced but 
these address  the  CSR only to a  limited extent.  A 
reform proposal for long-term care was announced 
for release in early 2020 but  no details have been 
revealed  or  discussed  with  stakeholders.  The 
pension  reform  adopted 
in  November  2019 
improves  the  adequacy  of  pensions  but  puts  a 
strain on the sustainability of the pension system in 
the long term. At the same time, measures taken in 
2012  to  limit  early  retirement  seem  to  be  having 

13 

No Progress4%Limited Progress11%Some Progress28%Substantial Progress32%Full Implementation25% 
  
 
2. Progress with country-specific recommendations 

pension 

supplementary 

projects.  In  2019,  several  projects  were  delivered 
on  the  ground.  The  Commission,  for  example, 
facilitated  the  exchange  of  good  practices  on 
savings. 
promoting 
Support  for  improving  the  healthcare  system  also 
continued. Tools were developed to: (i) assess the 
performance  of  the  health  system;  (ii)  plan  the 
healthcare  workforce;  (iii)  assess  patient  safety; 
and  (iv)  measure  the  quality  of  care.  In  addition, 
Slovenia received assistance from the Commission 
for  deploying  integrated  long-term  care  services 
and  for  updating  the  system  for  reimbursing 
hospital  services.  In  2019,  work  also  started  on 
promoting  the  labour-market  integration  of  the 
those  not 
long-term  unemployed 
in 
employment, 
training.  The 
Commission is also assisting the authorities in the 
preparation  of 
the  Strategic  Environmental 
Assessment  of  the  Slovenia’s  draft  integrated 
national energy and climate plan. 

education, 

and 
or 

some  effect,  but  the  early  exit  from  the  labour 
market 
remains  a  challenge.  Slovenia  also 
implemented a number of measures to increase the 
employability  of  low-skilled  and  older  workers. 
Other  initiatives  (such  as  on  digital  literacy)  are 
still at the proposal stage. 

Slovenia made some progress in addressing the 
second  of  the  2019  CSRs.  Slovenia  tries  to 
support equity markets, mainly using EU funds but 
the still significant state ownership in some sectors 
and  the  regulatory  framework  continue  to  reduce 
the  potential  of  Slovenia’s  capital  markets  to 
further  develop  (see  Section  3.2.2).  Slovenia 
continued  improving  the  business  environment. 
However,  instruments  like  the  Single  Document, 
the  regulatory  impact  assessments  and  the  SMEs 
test  are  not  fully  effective  yet  (see  Section  3.4.2). 
Slovenia  also  adopted  an  important  reform  of  the 
National 
thereby 
strengthening  independent  oversight  of  public 
procurement. Slovenia is also training procurement 
officers  and  providing  guidance 
improve 
professionalisation  of  tendering  authorities.  There 
has  been  progress  with  e-procurement  and  the 
SME participation in tenders has increased. While 
the privatisation of state-owned or state-controlled 
banks,  in  line  with  obligations  under  state  aid 
rules,  was  finalised  in  2019  (see  Section  3.1.5), 
other planned privatisations have come to a halt.  

Commission, 

Review 

to 

Slovenia  made  limited  progress  in  addressing 
the  third  of  the  2019  CSRs.  The  country  is 
adopting and implementing relevant strategies and 
developing investment plans. This assessment does 
not  take  into  account  the  contribution  of  the  EU 
2021-2027 cohesion policy funds (8). To tackle the 
challenges  in  the  water  sector,  the  Government 
proposed  an  amendment  of  the  national  water 
legislation in December 2019. 

Upon  request  from  a  Member  State,  the 
European Commission can provide tailor-made 
expertise  via  the  Structural  Reform  Support 
Programme  to  help  design  and  implement 
growth-enhancing  reforms.  Since  2016,  such 
support has been provided to Slovenia for about 40 

(8)  The assessment of this CSR does not take into account the 
contribution  of  the  EU  2021-2027  cohesion  policy  funds. 
The  regulatory  framework  underpinning  the  programming 
of  the  2021-2027  EU  cohesion  policy  funds  has  not  yet 
been  adopted  by  the  co-legislator,  pending  inter  alia  an 
agreement on the multiannual financial framework. 

14 

                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of the implementation of the 2019 Country-Specific Recommendations (CSRs) 

(*) This does not include an assessment of compliance with the Stability Growth Pact. 
Source: European Commission 
For CSR 3: The regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet 
been adopted by the co-legislators, pending inter alia an agreement on the multiannual financial framework (MFF). 

15 

2019 Country-Specific Recommendations (CSRs) Overall assessment of progress with 2019 CSRs: CSR 1: Achieve the medium-term budgetary objective in 2020. Adopt and implement reforms in healthcare and long-term care that ensure quality, accessibility and long-term fiscal sustainability. Ensure the long-term sustainability and adequacy of the pension system, including by adjusting the statutory retirement age restricting early retirement and other forms of early exit from the labour market. Increase the employability of low-skilled and older workers by improving labour market relevance of education and training, lifelong learning and activation measures, including through better digital literacy.  Slovenia has made limited progress in addressing CSR 1 (*):  Limited progress in the reform of health care.  No progress in the reform of long-term care.  Limited progress in reforming the pension system.  Some progress in increasing the employability of low-skilled and older workers. CSR 2: Support the development of equity markets. Improve the business environment by reducing regulatory restrictions and administrative burden. Improve competition, professionalization and independent oversight in public procurement. Some progress in carrying out privatisations in line with the existing plans. Slovenia has made some progress in addressing CSR 2:  Limited progress in developing equity markets.  Some progress in improving the business environment.  Some progress in improving competition, professionalization and independent oversight in public procurement.  Some progress in carrying out privatisations in line with the existing plans.  CSR 3: Focus investment-related economic policy on research and innovation, low carbon and energy transition, sustainable transport, in particular rail, and environmental infrastructure, taking into account regional disparities. Slovenia has made limited progress in addressing CSR 3:  Some progress in focussing investment-related economic policy on research and innovation.  Limited progress in focussing investment-related economic policy on low-carbon and energy transition.  Some progress in focussing investment-related economic policy on sustainable transport, in particular rail.  Limited progress in focussing investment-related economic policy on environmental infrastructure.   
 
  
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth 
and competitiveness in Slovenia 

Slovenia  is  an  important  beneficiary  of  the  EU  funds.  The  financial  allocation  from  the  EU  Cohesion 
policy  funds (1)  for  Slovenia  amounts  to  €3.8  billion  in  the  current  Multiannual  Financial  Framework, 
equivalent to around 1.2% of the GDP annually. By the end of 2019, some €3.5 billion (around 93% of the 
total) was allocated to specific projects, while €1.6 billion was reported as spent by the selected projects (2), 
showing a level of implementation above the EU average. 

While  bringing  about  a  more  harmonious  development  through  reducing  economic,  social  and 
territorial disparities, EU Cohesion policy funding also contributes to addressing structural challenges 
in Slovenia. The Cohesion policy programme for Slovenia has allocated EU funding of almost €1 billion to 
smart growth, almost €1.2 billion to sustainable growth and sustainable transport and more than €800 million 
to inclusive growth. 

EU Cohesion policy funding is  contributing to  major transformations  of the Slovenian  economy.  It is 
doing so by promoting growth and employment through investments in areas such as research, technological 
development  and  innovation,  competitiveness  of  enterprises,  in  low-carbon  economy,  sustainable  transport, 
employment,  social  inclusion  and  education.  By  2019,  investments  driven  by  European  Regional 
Development Fund and Cohesion Fund have already supported cooperation of 180 enterprises with research 
institutions,  over  15,000  people  are  already  benefitting  from  improved  water  supply  and  almost  320,000 
square metres of public buildings were renovated to be more energy efficient. The funds have also supported 
flood protection measures, which will benefit almost 18,000 people. More than 950 educational institutions 
will  be  connected  to  wireless  networks  and  more  than  310  new  export  companies  will  be  supported.  The 
European Social Fund focuses on helping people to find a job, in particular for young people (23,460 young 
people)  and  low-skilled  and  older  workers  (25,000  people).  It  also  contributes  to  the  promotion  of  social 
inclusion and the fight against poverty (19,000 people). 42,900 participants will be involved in programmes 
to acquire new skills and to raise their level of education (3). 

Agricultural  and  fisheries  funds  and  other  EU  programmes  also  support  the  investment  needs.  The 
European  Agricultural  Fund  for Rural  Development  makes  available  in  total  €1.1  billion  and the European 
Maritime and Fisheries Fund in total €30.2 million (including the national co-financing for both). Slovenia 
benefits  also  from  other  EU  programmes,  such  as  the  Connecting  Europe  Facility,  which  allocated  EU 
funding of €331 million to specific projects on strategic transport networks, and Horizon 2020 allocated EU 
funding of €257 million (including 153 SMEs with about €68 million). 

EU funding helps to mobilise important private investment. By the end of 2018, European Structural and 
Investment Funds (4) supported programmes mobilised additional capital by committing about €333 million 
in the form of loans, guarantees and equity (5). This amount accounted for 8.8% of all decided allocations of 
the European Structural and Investment Funds. 

EU  funds  already  invest  substantial  amounts  on  actions  in  line  with  the  Sustainable  Development 
Goals (SDGs). In Slovenia, European Structural and Investment Funds support 12 of the 17 SDGs and up to 
95% of the expenditure is contributing to those. 

(1)  European  Regional  Development  Fund,  Cohesion  Fund,  European  Social  Fund,  Youth  Employment  Initiative 

including national co-financing.  

(2)  https://cohesiondata.ec.europa.eu/countries/SI 
(3)  The source for indicators and data is the Annual Implementation Report 2018.  
(4)  European Regional Development Fund, Cohesion Fund, European Social Fund, European Agricultural Fund for Rural 

Development Fund and European Maritime and Fisheries Fund 

(5)  Member States’ reporting on financial instruments based on Article 46 Regulation 1303/2013, cut-off date 31/12/2018. 

16 

 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL POLICY 

The  general  government  headline  balance 
remains  in  surplus,  and  the  public  debt  ratio 
continues  to  fall.  According  to  the  Autumn  2019 
Economic Forecast, the budget surplus is expected 
to  have  decreased  from  0.8%  of  GDP  in  2018  to 
0.5%  of  GDP  in  2019,  due  to  the  economic 
slowdown  and  tax  relief  on  the  annual  holiday 
allowance  (European  Commission,  2019 b).  The 
surplus is forecast to remain broadly stable in 2020 
and  2021.  In  structural  terms,  the  government 
deficit is expected to have deteriorated from 0.7% 
of GDP in 2018 to 1.0% in 2019 but is expected to 
improve slightly in the coming years. Supported by 
the 
active  public  debt 
management, the low interest rate environment and 
privatisation  proceeds,  public  debt  is  projected  to 
fall from 66.7% of GDP in 2019 to below 60% in 
2021. 

headline 

surplus, 

New  tax  measures  adopted  in  October  2019 
lower the tax burden on labour, while revenues 
from  the  recurrent  taxation  of  immovable 
property  and  capital  remain  below  the  EU 
average.  In  addition  to  exempting  the  annual 
holiday  allowance  from  income  tax  and  social 
security  contributions,  the  Parliament  has  adopted 
changes to the tax code to reduce labour taxes by 
lowering  tax  rates,  increasing  tax  brackets  and 
increasing the general allowance. The tax changes, 
which  became  effective  at  the  beginning  of  2020, 
mostly  benefit  middle-income  and  high-income 
earners,  while  low-income  and  secondary  earners 
(spouses with lower labour income) keep facing a 
high  labour  tax  wedge  (European  Commission, 
forthcoming).  To  compensate  partially  for  the 
revenue loss, taxes on capital gains, rental income 
and corporate income have been slightly increased, 
and there are plans to improve tax collection. The 
government  has  withdrawn 
the  new  reform 
proposal  on  real  estate  taxation  planned  for  2020, 
although  recurrent  taxes  on  immovable  property 
are  considered  to  be  less  detrimental  to  growth 
than corporate taxes, and its revenues are currently 
low (0.5% of GDP compared to an EU average of 
1.5% in 2018). Slovenia is also significantly below 
the  EU  average  in  its  tax  revenues  from  both 
capital  stock  and  the  various  types  of  capital 

income  (these  tax  revenues  amount  to  4.9%  of 
GDP  in  Slovenia,  ranking  21st  among  Member 
States,  compared  to  an  EU  average  of  8.5%  in 
2018),  which  should  be  part  of  a  balanced  and 
inclusive tax system. 

expenditure  has  been 

Public 
increasing 
strongly.  In  2019,  expenditure  is  forecast  to  have 
grown faster than revenues, due to: (i) a substantial 
public sector pay rise negotiated with trade unions 
in late 2018; (ii) a further relaxation of temporary 
consolidation  measures  in  the  area  of  social 
transfers;  (iii) an  additional  increase  of  social 
transfers;  (iv) indexation  of  pensions;  and  (v) an 
increase  in  public  investment.  For  2020,  the 
restricted  payment  of  the  performance  bonus, 
stricter  conditions  for  receiving  unemployment 
benefits and lower public investment are expected 
to  attenuate  expenditure  growth.  However, 
expenditure growth will still remain high. 

to  medium 

Ageing-related  expenditure,  particularly  on 
pensions,  puts  pressure  on  the  sustainability  of 
Slovenia’s  public  finances  in  the  long  term (9). 
The  sustainability  gap  indicator  S2  shows  that  a 
fiscal  adjustment  of  5.4%  of  GDP  is  required  to 
stabilise  the  debt-to-GDP  ratio  in  the  long  term, 
pointing 
long-term 
sustainability (10).  This  result  is  primarily  driven 
by  the projected increase in spending on pensions 
(contributing 3.6% of GDP to the increase). It does 
not  yet  take  into  account  the  pension  measures 
adopted in November 2019, which are expected to 
increase the gap further (see Section 3.1.3). Health 
long-term  care  expenditure  also 
care  and 
contributed to the sustainability gap. 

risks 

to 

3.1.2.  FISCAL FRAMEWORK 

independent 

Slovenia’s 
institutions 
fulfilled their obligations mandated by law. The 
scope  of  the  mandate  of  both  the  Fiscal  Council 
and the macroeconomic forecaster IMAD is one of 

fiscal 

(9)  For  an  overview  of  fiscal  sustainability  assessment  in  the 
short,  medium  and  long  term,  see  Annex  B and European 
Commission, 2020. 

(10)  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. 

17 

 
                                                           
3.1. Public finances and taxation 

the  broadest  among  the  new  Member  States  and 
close  to the EU average (11). While the deviations 
of  the  annual  budget  from  the  medium-term 
budgetary  framework  are  overall  limited,  the 
revised  budgetary  documents 
for  2019  are 
currently  being  reviewed  by  the  Constitutional 
Court for not fully respecting the ceilings set in the 
framework (12).  The  Fiscal  Council 
adopted 
assessed that  fiscal rules  will be complied  with in 
2020  and  2021.  However,  it  also  highlighted 
significant  risks  to  compliance  stemming  from: 
(i) inconsistencies between the projections and the 
adopted  or  proposed  measures;  (ii) the  possibility 
of  adopting  some  pending  measures  with  a 
negative budgetary impact; and (iii) risks related to 
the  macroeconomic  environment (13).  In  addition, 
the  Fiscal  Council  has  repeatedly  pointed  to  the 
absence  of  comprehensive  policies  to  ensure  the 
long-term  sustainability  of  Slovenia’s  public 
finances  (see  Section  3.1.1) (14).  In  response,  the 
government confirmed its assessment that the draft 
budget for 2020 and 2021 is appropriate (15). 

3.1.3.  PENSION SYSTEM 

The  pension  reform (16)  in  2012  had  positive 
short-term  and  medium-term  effects  on  the 
adequacy  and  sustainability  of  pensions.  The 
2012  reform  gradually  increased  the  statutory 
retirement age to 65 for men (in 2016) and women 
(in 2020) and introduced higher penalties for early 
introduced 
retirement.  The  2012  reform  also 
bonuses  for  prolonging  working  lives (European 
Commission, 2017 a). The number of new old-age 
and  other  types  of  pensioners  has  been  slowly 
decreasing  since  2012,  while  the  number  of  those 
contributing  to  the  pension  system  has  been 
increasing.  The  ratio  between  those  contributing 
and those receiving pensions is thus improving. In 
2018,  it  rose  to  1.51,  up  from  1.38  in  2013. 
Another  positive  factor  affecting  this  ratio  is  the 

(11)  https://ec.europa.eu/info/publications/fiscal-institutions-

database_en.  

(12)  The  framework  for  the  preparation  of  budgets  over  2018-

2020 adopted in December 2018. 

(13)  http://www.fs-rs.si/assessment-by-the-fiscal-council-

compliance-of-the-proposal-of-budgets-of-the-republic-of-
slovenia-for-2020-and-2021-with-the-fiscal-rules/. 
(14)  http://www.fs-rs.si/wp-content/uploads/2019/08/Position-

of-the-Fiscal-Council-July-2019.pdf. 

(15)  http://www.fs-rs.si/wp-

content/uploads/2019/10/mnenje7a.pdf. 
(16)  Pension and Disability Insurance Act (2012). 

inclusion  of  younger  contributors  in  the  pension 
and  disability  insurance  system  on  the  basis  of 
student work (Government of Slovenia, 2019). The 
measures  to  limit  early  retirement  appear  to  be 
successful.  In  2018, 318 people  retired  early  (less 
than 2% of new retirees) compared to 475 in 2017. 

indicate  a  considerable 
Recent  projections 
increase  in  pension  expenditure  in  the  long 
term.  The  2012  pension  reform  is  expected  to 
provide  a  stable  pension  environment  for  a  ten-
year period only. As a percentage of GDP, pension 
expenditure  in  Slovenia  is  projected  to  increase 
from  10.9%  in  2016  to  14.9%  in  2070,  which  is 
one  of  the  largest  increases  in  the  EU (European 
Commission,  2018 a).  This  can  mostly  be 
explained by: (i) the early exit of workers from the 
labour  force,  itself  largely  a  result  of  previous 
pension  legislation;  and  (ii)  the  retirement  of  the 
largest  age  cohorts,  which  will  also  enjoy  longer 
retirement due to increased longevity (Government 
of  Slovenia,  2019;  IMAD,  2018;  MoLFSAEO, 
2018). Further delaying a pension reform aimed at 
improving  the  fiscal  sustainability  of  the  system 
increases  pressure  on  government  expenditure. 
Even  though  the  transfer  from  the  state  budget  to 
recent  years  as 
in 
pensions  has  declined 
employment  has 
it  still  exceeded 
improved, 
€1 billion (2% of GDP) in 2018 (IMAD, 2019 a). 

Graph 3.1.1:  Pension expenditure as % of GDP 

Source: The 2018 Ageing Report: Economic and Budgetary 
Projections for the EU Member States (2016-2070), European 
Commission 

Long-term  unemployment  and  long-term  sick 
leave  are  often  used  as  an  early  exit  from  the 
labour  market  and  as  a  ‘bridge’  to  retirement. 

18 

0246810121416182016202020302040205020602070% of GDPSloveniaEU                                                           
    
3.1. Public finances and taxation 

The  amendment  to  the  Pension  and  Disability 
Insurance Act (ZPIZ-2G) adopted in November 
2019  will  improve  the  adequacy  of  pensions. 
The  amendment  has  two  main  objectives,  namely 
to support longer work activity  without increasing 
the  statutory  retirement  age,  and  ensure  a  decent 
income  in  retirement.  Provided  that  the  pension-
qualifying  period  of  40  years  of  work  has  been 
attained, the pension rate for men will be raised to 
the  level  applicable  to  women  (from  57.3%  to 
63.5%  of  the  long-term  average  pay)  by  2025, 
which  should  improve  the  pension  adequacy  of 
future  pensioners.  Furthermore,  the  pension  rate 
for  both  men  and  women  who  have  worked  for  a 
minimum  period  of  15  years  is  also  being  raised 
from 26% to 29.5% of the long-term average pay. 
Higher  pension  rates  will  improve  the  income 
adequacy of the most vulnerable groups within the 
pension  system,  in  particular  the  recipients  of  the 
lowest old-age, invalidity and survivors’ pensions. 
Higher  pension  rates  will  also  increase  disability 
insurance benefits. The new law also introduces an 
additional  bonus  (an  accrual  rate  of  1.36%  per 
child for up to three children), which would mainly 
for  women.  To 
improve  pension  adequacy 
encourage workers to work longer, major changes 
are  envisaged  in  the  so-called  ‘dual  status’. 
Pensioners,  who  qualify  for  the  old  age  pension 
and  continue  to  work,  would  for  3  years  receive 
40% of the pension they are entitled to, in addition 
to their salary. After that, their pension will drop to 
only  20%,  as  is  the  case  now.  However,  the  new 
law does not improve the social situation of current 
pensioners.  Nor  does  it  address  the  longstanding 
issue  that  social  security  contributions  of  active 
self-employed  persons  may  be  calculated  on  the 
basis  of  the  minimum  income  amount.  Currently 
80%  of  self-employed  persons  make  use  of  this 
possibility (19).  Unless 
for 
retirement  purposes  through  other  channels,  they 
would  have  to  depend  on  the  minimum  old-age 
pension  after  retirement.  (European  Commission, 
2019 a).  

they  have  saved 

strain  on 

The  amendment  puts  a 
the 
sustainability  of  the  pension  system.  The  Fiscal 
Council has estimated that the new legislation will 
see pension expenditure increase by 1 pp. of GDP 
by  2040  and  even  more  in  the  following  years, 

(19)  Internal data provided by the PDIIS. 

Nearly 1 in 4 new retirees in 2018 previously had 
the  status  of  an  unemployed  person  in  the  year 
before their retirement. However, recent legislative 
changes  imposed  stricter  eligibility  conditions  on 
unemployment  benefits  for  older  workers.  Data 
indicate  that  long-term  sick  leave  might  also  be 
used to exit the labour  market early. The  share  of 
employees  on  long-term  sick  leave  is  increasing, 
and  this  is  especially  notable  among  women  aged 
over  60.  This  development  is  not  necessarily  the 
result  of  severe  illness.  Instead,  it  may  partly 
reflect  the  increase  in  the  statutory  retirement  age 
introduced by the 2012 pension reform, which led 
to  an  increase  in  the  number  of  older  workers. 
Other  features  of  the  labour  market,  such  as  the 
absence of appropriate structural measures to adapt 
jobs  to  an  ageing  population  and the  lack  of 
effective vocational rehabilitation of workers, may 
have  contributed  to  this  increase  as  well.  These 
shortcomings potentially have a negative effect on 
the  sustainability  of  public  finances,  through  the 
pension and health funds (HIIS, 2018). 

and 

23.7%, 

(20.1% 

Poverty among elderly people, especially among 
women, is still a concern. In 2018, the at-risk-of-
poverty or social exclusion (AROPE) rates for the 
age groups 65+  and 75+  were higher than the EU 
average 
respectively, 
compared  to  EU  averages  of  18.6%  and  20.1%). 
These  rates  are  especially  high  for  women. 
Compared  with  the  EU  average,  the  Slovenian 
pension  system  produced,  in  2018,  relatively  low 
aggregate  replacement  ratios  (0.58  and  0.45, 
respectively) (17) and low median relative incomes 
of  people  aged  65+ (European  Commission  and 
Social  Protection  Committee,  2018).  The  fiscal 
consolidation  measures  adopted  after  2012 
considerably  reduced  current  pensions  as  well  as 
the  minimum  income  provision  for  old  people.  In 
September  2019,  around  8%  of 
the  old-age 
pensioners 
in  Slovenia  received  net  monthly 
pensions  lower  than  €300 (18).  The  average  gross 
old-age pension is substantially higher (about €640 
in  2018) (PDIIS, 2018), but  it  still  does  not  cover 
the  full  costs  of  care  in  a  public  nursing  home, 
only basic care in public nursing homes (Republic 
of Slovenia, Court of Audit, 2019). 

(17)  The  replacement  ratio  is  the  median  individual  gross 
pension  benefits  of  65-74  age  category  expressed  as  a 
percentage  of  the  median individual gross  salary  of  50-59 
age category. Source Eurostat [TESPN070]. 

(18)  Internal  data  provided  by  the  Pension  and  Disability 

Insurance Institute of Slovenia (PDIIS). 

19 

                                                           
                                                           
3.1. Public finances and taxation 

of-pocket  expenditure  (12.3%  of  total  health 
spending), which is one of the lowest shares in the 
EU (OECD/EOHSP, 2019). 

to 

sector 

revenues 

Previous  attempts  to  reform  and  broaden  the 
funding  sources  for  the  health  system  have 
failed. The government relaunched the preparation 
of a new draft healthcare and health insurance act 
in  autumn  2019.  Given  the  current  sensitivity  of 
health 
labour  market 
fluctuations,  the  draft  act  is  expected  to  propose 
measures  to  diversify  funding  streams,  such  as 
replacing  the  current  voluntary-health-insurance 
with  a  compulsory  lump-sum  contribution.  The 
government intends to transform the health insurer 
into an active buyer of  health services, promoting 
efficiency  in  contracting  and  quality.  It  plans  to 
launch  a  consultation  in  mid-2020  and  submit  the 
proposal to the Parliament by autumn 2020. 

although 

Slovenia  has  experienced  an  increase  in  life 
expectancy  at  birth  in  recent  years  and  has 
achieved  most  of  the  targets  of  the  United 
Nations’  SDGs  for  health.  Life  expectancy  at 
birth was 81.2 years in 2017, up from 76.2 years in 
2000.  Preventive  measures  and  concerted  efforts 
across policy areas have contributed to declines in 
preventable  mortality, 
preventable 
mortality  rates  are  still  above  the  EU  average. 
Suicide  rates 
in  Slovenia  have  considerably 
decreased  since  2000.  The  growing  number  of 
cases of lung cancer in  women is still of concern, 
progressing  with 
the 
Slovenia 
but 
implementation 
reduction 
smoking 
a 
programme  and  achieving  SDG 3.  However,  in 
2017, more than 12 of the almost 20  years of  life 
expectancy gained for Slovenians aged 65 were on 
they  would  have 
average  years 
disabilities (Graph 3.1.2). 

in  which 

is 
of 

Primary care helps to limit hospital admissions 
but the number of physicians remains low. The 
primary  care  system  contributes  to  low  rates  of 
avoidable hospital admissions compared to the EU 
average.  However,  the  number  of  doctors  in 
Slovenia  (3.1  per  1,000 population)  is  well  below 
the  EU  average  and  patients  report  difficulties 
registering  with  a  general  practitioner,  even  in 
densely populated urban areas. The authorities are 
trying  to  increase  the  attractiveness  of  working  in 
the  system,  and  more  general  practitioners  are 
currently being trained. 

further adding to long-term sustainability risks (20). 
Discussions  have  already  started  at  the  technical 
level  between  the  government  and  social  partners 
about a possible second reform step to improve the 
sustainability  of  the  pension  system.  This  second 
step  may  include  updating  the  current  indexation 
mechanism 
statutory 
retirement  age.  However,  no  concrete  measures 
have been agreed yet.  

increasing 

and/or 

the 

3.1.4.  HEALTHCARE AND LONG-TERM CARE 

The  projected  increase  in  healthcare  spending 
due to ageing is weighing on the long-term fiscal 
sustainability  of  the  system.  In  2016,  Slovenia’s 
public spending on healthcare accounted for 5.6% 
of  GDP,  which  was  below  the  EU  average  of 
6.8%. However, driven by changes in demographic 
structure,  public  spending  on  healthcare 
is 
projected  to  increase  by  1.0%  of  GDP  between 
now and 2070 (EU: 0.9%) according to the ‘AWG 
reference  scenario’ (21)  of  the  Council’s  Ageing 
Working  Group  (European  Commission,  2017 a). 
When  taking  into  account  the  impact  of  non-
demographic  drivers  on  future  spending  growth 
(‘AWG risk scenario’ (22)), healthcare expenditure 
is  expected  to  increase  by  2%  of  GDP  between 
now and 2070 (EU: 1.6 pps). 

The  share  of  health  spending  financed  by  the 
general  government  has  been  increasing,  but 
remains below the EU average. The public share 
of total health spending has gradually grown since 
2014  and  reached  72.2%  in  2017.  This  was  still 
below  the  EU  average  of  79.4%.  However,  about 
half  of  private  spending  in  Slovenia  comes  from 
voluntary  healthcare  insurance,  which  is  almost  a 
synonym  for  obligatory  health  insurance  as  the 
vast  majority  of  citizens  has  taken  out  such 
insurance.  Accordingly,  voluntary  healthcare 
insurance  accounts  for  14.3%  of  current  health 
expenditure,  the  highest  share  in  the  EU.  Other 
private  spending  comes  almost  entirely  from  out-

(20)  http://www.fs-rs.si/wp-content/uploads/2019/09/Position-

of-the-Fiscal-Council-September-2019.pdf. 

(21)  In  this  scenario, healthcare  expenditures  are  driven  by  the 
assumption  that:  (i)  half  of  the  future  gains  in  life 
expectancy  are  spent  in  good  health;  and  (ii)  an  income 
elasticity  of  healthcare  spending  is  converging  linearly 
from 1.1 in 2016 to unity in 2070. 

(22)  The  AWG  risk  scenario  attempts  to  take  into  account 
technological changes and institutional mechanisms  which 
have stimulated expenditure growth in recent decades. 

20 

                                                           
3.1. Public finances and taxation 

to  assess 

the 
quarter  of  2019.  A  system 
performance  of 
the  health  system  has  been 
designed  and  is  being  implemented.  Slovenia  has 
also  taken  a  first  step  to  update  the  hospital 
financing  system.  This  step  aims  to  better  match 
insurance 
the  costs  of  hospital  care  with 
reimbursement 
for 
levels, 
providing appropriate levels of care. The European 
Commission is helping Slovenia to implement key 
health-sector  reforms  in  these  areas,  including 
health  system  governance,  hospital  financing, 
quality of care, and long-term care. In addition, the 
European  Structural  and  Investment  Funds  are 
supporting  the  shift  from  inpatient  to  outpatient 
treatment of mental health conditions. 

incentives 

setting 

in  the  health  of  the 
Regional  disparities 
population  have  somewhat  decreased,  but 
differences remain. From 2011 to 2017, regional 
disparities  in  life  expectancy  declined,  which  was 
factors.  The 
to  socio-economic 
mostly  due 
Obalno-kraška region in Western Slovenia had the 
highest  life  expectancy  at  birth  for  women.  In 
contrast, the life expectancy at birth for women in 
the  Podravska  region  in  Eastern  Slovenia  was 
more than two years lower. For men, the difference 
between the best and worst performing region was 
even more than three years (IMAD, 2019 a). 

of 

care 

17% 

community 

(OECD/EOHSP, 

Needs  for  long-term  care  are  growing  even 
faster  than  for  regular  healthcare,  but  under 
the  current  system,  the  integrated  provision  of 
services  are 
long-term 
underdeveloped.  In 2017, spending on the  health 
component  of  long-term  care  was  9.8%  of  total 
health  expenditure,  significantly  less  than  the  EU 
average 
2019). 
Furthermore,  the  share  of  out-of-pocket  financing 
of long-term care costs  has been steadily  growing 
over  the  last  decade  and  has  reached  almost  27% 
of  these  costs  in  2017.  In  September  2019,  the 
Slovenian  Court  of  Auditors  found  that  the  state 
had 
financially 
to  provide  a  viable, 
sustainable  solution  for  long-term  care  during  the 
last  10  years  and  to  guarantee  equal  treatment  for 
all.  There  is  a  risk  that  these  costs  will  soon 
increase  as  the  Slovenian  population  is  ageing 
rapidly. 

failed 

Efforts  to  regulate  long-term  care  as  part  of  a 
unified system in Slovenia have been underway 
for over 15 years. This is due in particular to the 
the 
complexity  of 

requiring 

system, 

the 

Graph 3.1.2:  Dashboard on healthy ageing, 2017 

(1) Chronic diseases include heart attack, stroke, diabetes, 
Parkinson's disease, Alzheimer’s disease and rheumatoid 
arthritis or osteoarthritis. 
(2) Basic activities of daily living include dressing, walking 
across a room, bathing or showering, eating, getting in or 
out of bed or using the toilet. 
Source: Eurostat database for life expectancy and healthy 
life years (data refer to 2017); SHARE survey for other 
indicators (data refer to 2017) 

Action  is  being  taken  to  reduce  waiting  times. 
Some 3.3% of the population reported unmet needs 
for  medical  care  in  2018,  mainly  due  to  long 
waiting times for medical treatment. Waiting times 
affect all income groups equally. Several measures 
are  being  introduced  or  planned  to  improve 
management  and  reduce  waiting 
lists.  These 
include  a  mapping  of  healthcare  and  long-term 
care  resources  (infrastructure,  equipment  and 
healthcare  workforce),  an  e-referral  scheme  and 
restricting unnecessary referrals to specialists. This 
will contribute to the achievement of SDG 3. 

Inefficiencies  in  pharmaceutical  spending  exist 
despite  recent  efforts  by  the  government. 
Spending on pharmaceuticals and medical devices 
is  the  third  largest  category  of  health  expenditure 
in  Slovenia  and  a  major  component  of  private 
spending  on  health  (OECD/EOHSP,  2019).  The 
authorities  consider  pharmaceutical  policies  to 
improve  the  situation  in  some  hospitals  or  the 
competition  in  off-patent  medicines,  including 
regular updates on pricing and reimbursement and 
alternative  procurement  methods  (see  Section 
3.4.4).  

Slovenia  has  started  a  process  to  improve  the 
governance  of  both  the  health  system  and  the 
hospital financing system. New governance tools 
on  health-workforce  planning  at  national  and 
regional  level  have  been  available  since  the  third 

21 

 
3.1. Public finances and taxation 

sales, Slovenia has fulfilled commitments given to 
the European Commission in response to the State 
aid  provided  to  banks  in  2013  (as  amended  in 
2018).  No  further  relevant  privatisations  were 
conducted  in  2019  or  are  planned  for  2020  and 
beyond,  despite  the  SSH’s  2019  annual  asset 
management plan (SSH, 2018), which still lists 25 
‘portfolio’  and  19  ‘important’  assets  (including 
Abanka  and  NLB).  Instead,  the  authorities  ha 
implementing  the  government’s  tourism  strategy, 
which 
and 
the 
development  of  state-owned  tourism  companies. 
This would increase state ownership in the tourism 
sector,  at  least  temporarily,  although  most  of  the 
relevant  assets  are  classified  as  ‘portfolio’  or 
‘important’.  

consolidation 

envisages 

At  the  end  of  2020,  the  operational  capacity  of 
the  SSH  may  be  weakened.  In  2017,  a  law  was 
passed  mandating  that  the  ownership  of  strategic 
and important assets should be transferred from the 
SSH back to the state by the end of 2020. For SSH, 
this  would  imply  the  loss  of  dividends  from  its 
holdings,  which  have  been  hovering  around  €40 
million a year in recent years. If sufficient funding 
for  SSH  is  not  ensured,  this  could  impinge  on  its 
capacity  to  perform  its  duties  effectively.  It  could 
also  weaken  the  separation  between  the  state’s 
exercise  of  its  ownership  function  and  other  - 
potentially  conflicting  -  state  activities,  such  as 
market  regulation  or  industrial  policy  (OECD, 
2015).  

The  performance  of  state-owned  enterprises 
was  relatively  good  in  2018.  With  a  6.2%  net 
return  on  equity  on  an  aggregated  basis,  the 
performance  of  state-owned  enterprises,  that  are 
fully managed by the SSH was slightly lower than 
in 2017 (6.5%) but above the target value of 6.1% 
set in the management plan (SSH, 2019). 

reform 

support 

structural 

interconnection  of  activities  under  the  purview  of 
several  ministries,  and  the  unresolved  issue  of 
financing. In 2019, Slovenia, with assistance under 
programme, 
the 
progressed for the design of core parameters of the 
future long-term care system. Pilot schemes testing 
the  future  roll-out  of  the  system  at  national  level 
are ongoing. The government also announced that 
it would present a draft of a comprehensive law in 
April  2020  and  that  it  expects  the  law  to  pass  the 
parliamentary procedure by the end of 2020. 

3.1.5.  STATE-OWNED ENTERPRISES 

Since  the  financial  crisis,  the  presence  of  the 
state in the economy has been reduced and the 
management  of  state  shareholdings  improved. 
The  interlinkages  between  state-owned  banks  and 
state-owned  enterprises  and  political  interference 
in  corporate  governance  were  one  of  the  main 
causes of the deep crisis that hit Slovenia in 2012-
2013.  Bold  policy  actions  had  to  be  taken  in 
response.  In  the  aftermath  of  the  crisis,  a  list  of 
state-owned  entities  for  privatisation  was  set  up 
and  the  management  of  state  shareholdings  was 
centralised.  In  2015,  a  state-asset-management 
strategy  classified  state  shareholdings  into  three 
categories:  portfolio,  important  and  strategic.  The 
strategy  considered  that  only  the  latter  category 
should  obtain  or  maintain  a  majority  government 
stake.  For 
state 
shareholding  could  be  reduced  to  25%  plus  one 
share,  while  ‘portfolio’  entities  could  be  sold  off 
entirely. 
achieved 
subsequently.  The  state  reduced  its  shareholdings 
in several sectors of the economy, albeit with some 
delays.  The  average  net  return  on  equity  in  these 
state-owned  bodies  almost  doubled  compared  to 
2013. The governance  framework for state-owned 
enterprises  was  also  brought  in  line  with  the 
relevant  international  guidelines  (OECD,  2015; 
Vitale, forthcoming).  

results  were 

‘important’ 

Important 

entities, 

the 

After  two  major  divestments  in  2019,  the 
privatisation process is  stalling and  might  even 
be partially reversed. In June 2019, the Slovenian 
Sovereign  Holding  (SSH)  sold  Abanka,  the  third 
largest bank in Slovenia, to a private  investor and 
reduced  the  state’s  ownership  in  NLB,  the  largest 
bank, to 25% plus one share. The state remains by 
far  the  largest  individual  shareholder  in  NLB  and 
can  effectively  control  the  bank.  With  these  two 

22 

3.2.  FINANCIAL SECTOR 

3.2.1.  BANKING AND INSURANCE 

thanks 

The  profitability,  solvency  and  asset  quality  of 
the  banking  sector  continue  to  improve.  Return 
on equity reached 10.7% in 2018, up from 9.1% in 
2017,  mainly 
the  net  release  of 
to 
impairments.  However,  profitability  might  come 
the  current  release  of 
under  pressure  when 
provisions  comes  to  an  end.  The  average  capital 
adequacy  ratio  has  slightly  deteriorated  (18.1%  in 
June 2019) due to strong credit growth, but banks 
remain well capitalised. The non-performing loans 
ratio  has  improved  further  and  reached  4.5%  in 
June  2019,  down  from  7.4%  one  year  earlier. 
Credit  to  households  continues  to  grow  at  a 
dynamic  year-on-year  rate  of  6.4%  in  July  2019, 
while lending to non-financial corporations is more 
moderate with a year-on-year rate of around 3.0%. 
With  a  loan-to-deposit  ratio  of  74.4%  in  June 
2019,  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. 

Banks  need  to  find  new  sources  of  income  and 
control  costs  to  maintain  profitability.  Current 
is  mainly  driven  by  decreasing 
profitability 
impairments  and  by 
the  release  of  previous 
impairments.  This  is  bound  to  change  as  new 
lending  progressively  generates  new  impairments. 
Bank  profitability  is  also  likely  to  come  under 
pressure  from  persistently  low  interest  rates  and 
increases  in  compliance,  prudential,  supervisory 

and  investment  costs.  One  possible  strategy  to 
offset  these  negative  factors  is  to  focus  on  fee 
income  and  develop  new  lending  products  and 
services,  while  enforcing  strict  and  prudent  risk 
management  practices.  Banks  could  also  opt  for 
partnerships  or  acquisitions  to  reduce  their  costs 
and achieve economies of scale. 

Residential  real  estate  prices  grew  strongly  in 
2018.  As  highlighted  by  the  Bank  of  Slovenia, 
growth in residential real estate prices picked up in 
2018, particularly in Ljubljana and Koper, and was 
among  the  highest  in  the  euro  area  (Bank  of 
Slovenia,  2019).  There  are  first  signs  of  a 
slowdown in 2019 (see Chapter 1). 

Consumer lending is a source of concern, due to 
its  high  growth  and  long  maturities.  Consumer 
lending grew by 11.8% year-on-year in July 2019, 
partly driven by the aggressive behaviour of some 
medium-sized  banks  underwriting  non-purpose-
specific  consumer  loans  of  longer  maturities. 
Consumer  lending  represents  27%  of  the  total 
stock of household loans, the highest percentage in 
the EU. The average maturity of consumer loans at 
approval  has  lengthened  markedly  over  the  last  3 
years.  The  original  maturity  of  new  consumer 
loans averaged 7 years in the first quarter of 2019, 
and exceeded 9 years at certain banks.  

On  1  November  2019,  the  Bank  of  Slovenia 
activated  binding  borrower  based  measures  to 
mitigate  risks  related  to  household  lending.  To 
prevent  the  relaxation  of  credit  standards  and  to 
improve  banks’  resilience,  the  Bank  of  Slovenia 

Table 3.2.1: 

Financial soundness indicators, all banks in Slovenia 

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

23 

2014q42015q42016q42017q42018q42019q2Non-performing loans22.817.912.39.26.04.5o/w foreign entities13.9-11.49.05.73.8o/w NFC & HH sectors28.5-16.412.28.05.9o/w NFC sector43.536.826.820.213.39.3o/w HH sector7.87.24.83.93.02.7Coverage ratio53.359.360.359.657.757.1Return on equity(1)-2.53.57.89.110.712.3Return on assets(1)-0.30.41.01.11.31.5Total capital ratio17.918.619.118.117.918.1CET 1 ratio17.118.018.517.717.617.6Tier 1 ratio17.118.018.517.717.617.6Loan to deposit ratio79.474.174.074.773.174.4 
 
  
 
3.2. Financial sector 

in  December  2022.  The  BAMC 

generated  cumulative  cash  flows  of  over  €1.5 
billion,  representing  about  74.1%  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. Its objective is to reduce 
its  assets  to  €126.7  million  by  the  end  of  its 
mandate 
is 
confronted  with  a  number  of  challenges.  Firstly, 
achieving  the  cost  efficiency  ratio  set  by  the 
government  will  become  more  and  more  difficult 
as  residual  assets  are  more  costly  to  manage. 
Secondly, keeping skilled staff with knowledge of 
the  files  in  a  company  with  such  a  short  life 
expectancy  is  challenging  as  their  skills  can 
sometimes be better remunerated elsewhere. 

Although  it  has  significantly  decreased,  the 
stake  of  the  Slovenian  state  in  the  financial 
sector  remains  substantial.  The  sale  of  75%  of 
the shares of Nova  Ljubljanska  Banka (NLB) and 
the  privatisation  of  Abanka  are  steps  in  the  right 
direction.  However, 
the  Slovenian  state  still 
controls  a  significant  share  of  the  financial  sector 
through  its  stakes in NLB and Sava Re. The  state 
directly or indirectly controls 60% of the insurance 
sector  in  terms  of  gross  written  premiums,  an 
unusually high share in such a non-strategic sector 
and  an  outlier  in  the  EU.  Several  attempts  by  a 
foreign  insurance  group  to  increase  its  stake  in 
Sava Re were rejected. Maintaining a high level of 
state involvement may entail in the longer run risks 
for  financial  stability,  economic  efficiency  and 
public finances (see Section 3.1.5). 

3.2.2.  ACCESS TO FINANCE FOR SMALL AND 

MEDIUM-SIZED COMPANIES 

In  a  context  of  very  low  interest  rates,  banks 
financing  constitute  the  bulk  of  the  external 
funding  of  SMEs.  Credit  lines,  leasing  and  bank 
loans  were  more  relevant  and  more  used  for 
Slovenian  SMEs  than  on  average  in  the  EU.  In 
Slovenia,  bank  loans  were  relevant  for  52%  of 
SMEs  (and  used  by  23%  of  them),  while  credit 
lines  were  relevant  for  60%  (used  by  40%). 
Leasing was relevant for 53% and equity for 17% 
(European Commission, 2019 c).  

Equity funding remains underdeveloped in light 
of  the  ambitions  of  the  Capital  Market  Union. 
The  limited  availability  of  equity  funding  in 
Slovenia  adversely  affects  its  innovative  start-up 

had already decided on 22 October 2018 to expand 
the  existing  macroprudential  recommendation  for 
housing  loans  to  all  consumer  loans  (European 
Commission, 2019 a). Despite these measures, the 
risks  associated  with  consumer  lending  remained 
to  deviate 
elevated 
significantly 
recommendations. 
Therefore,  as  of  November  2019,  the  Bank  of 
Slovenia  changed  the  recommendation  into  a 
binding instrument, placing caps on the maturity of 
consumer loans (7 years) and on the debt service-
to-income ratio for all household loans. 

continued 
the 

and  banks 

from 

The  Bank  of  Slovenia  has  faced  considerable 
public  and  political  pressure  to  withdraw  its 
macroprudential  measures.  The  Banking 
Association,  and  some  important  members  of  the 
government 
the 
macroprudential initiative of the Bank of Slovenia, 
some of them even asking the Bank of Slovenia to 
reverse  it.  Such  pressures  should  not  hamper  the 
independency of the Bank of Slovenia. 

criticised 

strongly 

have 

Non-performing  loans  (NPLs)  have  continued 
their  downward  trend.  Declining  NPLs  are 
reported  by  both  the  Bank  of  Slovenia  and  the 
European Central Bank. The segment of the credit 
portfolio most heavily burdened with NPLs is non-
financial corporations, despite the improving credit 
quality of this segment. According to the European 
Central  Bank,  NPLs  to  non-financial  corporations 
fell  from  16.3%  in  June  2018  to  9.3%  in  June 
economic 
2019, 
environment,  solid  credit  growth  and  resolute 
actions  by  the  banks  and  regulators.  Repayments, 
sales  of 
collateral 
liquidation  accounted  respectively  for  33%,  25%, 
25% and 10 % of the reduction in non-performing 
exposures 
is 
projected  to  grow  in  2019  and  2020,  while  sales 
are likely to decrease significantly. 

in  2018.  Collateral 

claims,  write-offs 

liquidation 

favourable 

thanks 

and 

to 

a 

in 

its  mandate,  especially 

The  Bank  Asset  Management  Company 
(BAMC)  is  progressing  towards  fulfilling  most 
of 
terms  of 
profitability  and  assets  reduction.  The  state-
owned  BAMC,  which  bought  up  bad  loans  from 
the  country's  banks  in  2013  and  2014,  made  a 
profit of €57.7 million in 2018 (compared with €67 
million  in  2017),  after  two  years  of  moderate 
losses.  This  translates  into  an  average  annual 
return  on  equity  of  28.9%  in  2018.  Between  its 
inception in 2013 and December 2018, the BAMC 

24 

remains 

scarce,  partly  due 

and  scale-up  environment.  Slovenia  lags  behind 
other  EU  and  central  and  eastern  European 
countries  (e.g.  Czechia,  Slovakia,  Croatia)  in  the 
share  of  private  equity  funding  for  businesses 
(Invest  Europe,  2019).  Private  equity  is  important 
for  scale-ups,  notably  those  that  are  looking  for 
more  than  €500 000  of  external  funding.  Venture 
to  an 
capital 
unfavourable  regulatory  environment  and  low 
inflows of venture capital from abroad. According 
to  the  European  Investment  Fund  (EIF,  2019), 
venture capital investment in Slovenia as a share of 
GDP is one of the lowest in the EU. Slovenia also 
ranks low in terms of SMEs’ confidence in talking 
about  financing  with  equity  investors  and  venture 
capital  firms  and  in  obtaining  the  desired  equity, 
with  only  9%  of  the  respondents  reporting  that 
they 
is 
significantly  below  the  EU  average  of  22% 
(European Commission, 2019 c). Lack of financial 
and  investment  literacy  among  some  types  of 
SMEs  and  lack  of  trust  in  alternative  financial 
sources  and  the  continuity  of  public  financial 
incentives are contributing to the challenge. 

felt  confident  doing 

this,  which 

limited 
The  Slovenian  capital  market  has 
effectiveness  and  attractiveness 
in  bringing 
investors  and  companies  together.  The  liquidity 
of  the  Slovenian  stock  exchange  is  limited (23). 
Low trading volumes lead to high per-trade costs. 
This may be one explanation for why Slovenia lags 
behind  the  EU  average  in  its  stock  market 
capitalisation. The development of the local capital 
market  could  be  stimulated  by  growth  funds, 
further listings (including of currently state-owned 
enterprises),  and  allowing  private  and  public 
pension funds to invest more in equity. 

(23)  About  40  companies  are  listed  on  the  Ljubljana  Stock 

Exchange.  

3.2. Financial sector 

Graph 3.2.1:  Private equity investments as a % of GDP, 

average 2016-2018 

(1) CEE: Central and Eastern Europe. 
Source: Invest Europe 

After  a  period  of  rapid  growth,  Slovenia’s 
FinTech markets have entered a calmer period. 
Slovenian companies have had a high success rate 
on  several  international  crowdfunding  platforms. 
Slovenian  companies  also 
raised  significant 
funding  through  initial  coin  offerings.  In  2017, 
around  5%  of  funds  raised  in  global  initial  coin 
offerings  went 
to  Slovenian  projects.  More 
recently,  the  FinTech  scene  has  seen  a  period  of 
calm,  with  less  projects  initiated.  Slovenia  is 
preparing  a  new  regulatory  framework  for  block-
chain  technology.  This  could  include  the  creation 
of  a  regulatory  sandbox  to  facilitate  further 
FinTech innovation. 

Slovenia 
its  equity 
is  actively  beefing  up 
markets with the help of EU funds. According to 
the  2018/19  Global  Entrepreneurship  Monitor 
survey,  Slovenia  ranks  above  the  average  of 
high-income  countries  in  the  support  it  gives  to 
SMEs to access finance. The government supports 
the development of the capital market in particular 
through  studies  and  pilot  projects  aimed  at 
improving capital  market conditions  for SMEs. In 
August  2019,  the  Slovene  Enterprise  Fund  (SEF) 
launched  a  public  call  “Seed  Capital  –  Co-
investors”,  aimed  at 
investment  with  private 
supporting  innovative  start-ups  with  high  growth 
potential  for  equity  capital,  and  at  encouraging 
private  investors  to  invest  into  the  seed  stage  of 
company  development.  After  favourable  first 
experiences,  the  government  plans  to  increase  the 
scope of this investment fund in the coming years, 
mainly  by  using  the  EU  cohesion  policy  funds. 

25 

0.00.10.20.30.4EEPLLVLTCEEROCZHUHRSIBGSK% of GDP                                                           
  
 
3.2. Financial sector 

investment 

Investment  Fund 

Furthermore, in 2018, the SEF invested €8 million 
in  the  Central  European  Fund  of  Funds  with  the 
aim  of  raising  equity 
in  SMEs. 
Slovenia’s  development  bank  (SID  Bank)  and  the 
European 
(EIF)  with  EU 
guarantee (EFSI) back the Slovene Equity Growth 
Investment  Programme,  each  providing  €50 
million. The programme supports Slovenian SMEs 
and  midcaps  (i.e.  companies  employing  up  to 
3,000 employees), with equity investments aiming 
to  support  business  growth  and  expansion, 
including internationalisation. 

26 

3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  LABOUR MARKET 

to 

long-term  unemployment 

labour  market  continues 

The 
to  record 
improvements,  in  line  with  economic  growth. 
The  employment  rate  continued 
increase 
accompanied  by  a  decline  in  the  unemployment 
rate (see Chapter 1). The activity rate increased to 
80.2%  in  Q3  2019,  above  the  EU  average  of 
78.8%.  The 
rate 
decreased to 2.2% in 2018, compared with the EU 
average of 2.9%. Labour market improvements are 
also  evident  for  young  people,  as  the  youth 
unemployment  rate  decreased  sharply  (8.8%  in 
2018 from 11.2% in 2017). Slovenia is performing 
well  on  the  gender  employment  gap,  which  in 
2018 was 7.3 pps (against the EU average of 11.5 
pps).  However,  the  country  is  moving  away  from 
the  SDG  target  to  close  ‘the  gender  gap  in  the 
inactivity  rate  due  to  caring  responsibilities’. 
Furthermore,  as  a  result  of  the  ageing  population, 
challenges, in terms of labour market participation, 
still persist for older workers (employment rate of 
48.9% in Q3 2019 compared to 60.2% in the EU), 
and,  particularly,  the  low-skilled  older  workers 
(employment rate of 27.5% in Q3 2019 compared 
to 45.3% in the EU).  

The long-term  unemployment  of older workers 
remains  a  major  challenge.  In  2018,  the  long-
term  unemployment  as  a  percentage  of  total 
unemployment of the 55-64 age group was 63.7% 
(versus  an  EU  average  of  58.9%).  This  is  also 
because  unemployment  benefits  and  long-term 
sick  leave  are  used  as  a  ‘bridge’  to  (early) 
retirement  (see  Section  3.2).  The  wage-setting 
mechanisms,  where  wages  increase  rapidly  with 
seniority,  may  also  contribute  to  reducing  the 
(European 
employability  of  older  workers 
Commission, 2017 a). The government focused its 
efforts  on  reducing  the  low  employment  rate  of 
workers in the 45-54 and 55-64 age categories, by 
for 
imposing 
receiving unemployment benefits. The inactivity of 
people in these age categories has a direct negative 
impact  on  the  sustainability  of  the  pension  and 
health  systems  (see  Section  3.1.3).  One  of  the 
remedial measures taken by Slovenia to tackle this 
issue  was  the  introduction  of  a  subsidy  for 
employers  that  hire  people  older  than  58  on  a 
the 
permanent  basis,  with  priority  given 
employment  of 
recipients  of  unemployment 
benefits and cash social assistance. The measure is 

conditions 

eligibility 

stricter 

to 

co-financed 
Fund (European Commission, 2019 a). 

European 

the 

by 

Social 

In  2019,  the  authorities  continued  their  efforts 
to  reform  the  unemployment  benefit  schemes. 
Following  the  amendments  to  the  Labour  Market 
Regulation Act passed by the Slovenian Parliament 
the  minimum  monthly 
in  November  2019, 
unemployment  benefit  will  significantly  increase 
from  €350  to  €530  gross.  This  will  bring  it  up  to 
the  same  level  as  the  net  basic  minimum  income 
for  single-person  households,  which  is  €402  net. 
At  the  same  time,  the  eligibility  conditions  to 
access unemployment benefits have been tightened 
across the board.  

Consultation of social partners in the Economic 
and  Social  Council  on  legislative  proposals  has 
been  standard  for  a  long  time,  but  some 
challenges  remain  concerning  the  practical 
effectiveness of social dialogue. In autumn 2019, 
the  government  and  the  Economic  and  Social 
Council  agreed  to  widen  the  consultation  of  the 
social  partners  from  legislative  proposals  of  the 
government  to  all  legislative  proposals  tabled  in 
the  Parliament.  However,  late  involvement  of 
social  partners  in  the  consultations  and  lack  of 
resources  rather  often  limit  the  social  partners’ 
ability  to  participate  effectively  in  the  social 
dialogue (European Commission, 2018 b). 

accounted 

the 
for  53.3%  of 

Active  labour  market  policies  are  still  not 
sufficiently  effective  in  addressing  long-term 
long-term 
unemployment. 
In  Q2-2019, 
unemployed 
all 
unemployed  persons  (ESS,  2019),  but  only  for 
30%  of  those  included  in  active  labour  market 
policies, although they would have priority. Active 
labour market policies lack sufficient funding, and 
funding is not efficiently allocated across different 
measures  and  regions.  The  lack  of  flexibility  in 
their design and delivery reduces the efficiency of 
these  measures.  As  a  result,  current  active  labour 
market  policies  are  not  suited  to  address  regional 
differences  and  specific  needs,  which  limits  their 
are 
targeting.  Furthermore, 
effective 
challenges 
the 
unemployed  to  search  for  work.  These  challenges 
are  partly  due  to  a  lack  of  consistency  and  policy 
coordination  between  the  design  of  active  labour-
market  policies  and  other  related  social-policy 
areas  (notably 
the  social  protection  system). 
Evaluations  of  active  labour-market  policies  to 

there 
for 

incentives 

creating 

in 

27 

 
3.3. Labour market, education and social policies 

assume 

re-skilling 

As Slovenia’s population ages, adult up-skilling 
and 
considerable 
importance.  Only  70,000  jobs  are  categorised  as 
belonging  to  elementary  occupations  while  the 
total  number  of  adults  with  lower  secondary 
qualification  or  less  is  around  210,000  and  only 
around  1,000  adults  acquire  an  upper-secondary 
qualification  each  year  (European  Commission, 
2019 d).  This  highlights  the  need  for  a  more 
substantial  upskilling  and  reskilling  effort.  The 
participation  of  older  employees 
lifelong 
learning  is  also  too  low  to  facilitate  adaptation  to 
job  digitalisation  and  automation  or  for  bridging 
the  knowledge  and  skills  mismatch  (IMAD, 
2019 a). As a  share of GDP, Slovenia spends less 
than a half as the OECD countries on average, on 
active labour market policies, including re- and up-
skilling  measures  (0.24%  compared  to  0.52%, 
respectively, in 2016). 

in 

3.3.2.  EDUCATION AND SKILLS 

Participation  in  early  childhood  education  and 
care  is  growing,  but  there  are  gaps  for  certain 
groups. Participation for children over 4 years was 
92.1%  in  2017,  close  to,  but  still  below,  both  the 
EU  benchmark  of  95%  for  2020  and  the  EU 
average  of  95.4%.  Participation  is  low  among 
children  from  migrant  and  low  socioeconomic 
backgrounds. These are precisely the children who 
could benefit substantially from the proven social, 
impact  of  early 
intercultural  and  educational 
childhood education and care. Since autumn 2018, 
kindergartens  can  apply  for  funds  to  offer  short 
free programmes of 240 hours to children in their 
last  year  before  primary  education  who  have  not 
childhood 
previously  participated 
education (European Commission, 2019 d).  

early 

in 

The  early-school-leaving  rate  is  low,  and  the 
achievement  of basic skills is good,  but there is 
a  large  gender  gap  in  reading  skills.  Slovenia’s 
early-school-leaving  rate  of  4.2%  (2018) 
is 
significantly below both the EU average of 10.6%, 
and Slovenia’s own Europe 2020 national target of 
5% (European Commission, 2019 d). It also ranks 
the  Social 
among 
Scoreboard.  The  OECD’s  Programme 
for 
International Skills Assessment (PISA) shows that 
the share of underperformers in Slovenia is below 

“best  performers” 

on 

date are not sufficiently formalised nor focused on 
long-term effects.  

the 
Despite  recent  positive  developments, 
persistently  high  segmentation  in  the  labour 
market  for  young  people  remains  a  challenge. 
The share of employees in precarious contracts (24) 
is  at  3.7%  (2018)  significantly  above  the  EU 
average of 2.1%. The employment recovery led to 
the  creation  of  many  permanent  jobs,  but  young 
people  are  still  more  likely  than  other  age  groups 
to  be  employed  in  non-standard  types  of  work. 
These  non-standard  types  of  work  include  self-
employment; 
jobs; 
involuntary  part-time  work;  and  low-paid  jobs. 
While  the  share  of  temporarily  employed  young 
people has declined in recent years, it remains very 
high:  67%  in  2018,  significantly  above  the  EU 
average of 43.5%.  

temporary  or  part-time 

Labour shortages occur in all sectors. The share 
of  employers  reporting  labour  shortages  in  2019 
has  been  high  across  all  sectors  (Graph  3.3.1), 
particularly  in  construction  and  industry  (40.1% 
and  38.0%,  respectively).  However,  in  both  these 
sectors,  it  has  declined  compared  to  2018.  In  the 
services  sector,  22.8%  of  employers  reported 
labour  shortages  in  2019  (an  increase  of  2.6pps 
compared to 2018). 

Graph 3.3.1:  Labour shortages as reported by employers in 
the industry, construction and services sector, 
2008-2019 

Source: Eurostat 

(24)  Precarious  work,  which  is  characterised  by  low  job  and 
income  security,  does  not  have  a  universally  accepted 
definition. According to Eurostat, the term precarious work 
covers all forms of employment with a contract duration of 
less than three months. 

28 

051015202530354045080910111213141516171819% of employersIndustryConstructionServices     
                                                           
3.3. Labour market, education and social policies 

appearing  in  certain  fields.  More  than  50%  of 
tertiary  education  teachers  are  over  50  years  old. 
The  proportion  of  teachers  over  50  is  somewhat 
lower  at  lower  education  levels.  There  is  a 
shortage of special education experts, and in some 
rural  areas  also  for  teachers  of  subjects  such  as 
science, technology, engineering, and mathematics 
(European  Commission,  2019 d).  The  proportion 
of teachers who feel well or very well prepared in 
using information and communications technology 
for  teaching  (67%)  is  much  higher  than  the  EU 
average  (39.4%).  The  percentage  of  teachers  who 
believe  that  teaching  is  a  valued  profession  in 
society  (5.6%)  is  one  of  the  lowest  in  the  EU 
(OECD, 2019 c). 

Tertiary  attainment  is  high,  but  significant 
differences  between  men  and  women  and 
between  native-born  and  foreign-born  raise 
concerns.  The  percentage  of  people  aged  30-34 
with  tertiary  qualifications  in  2018  was  42.7%, 
above  the  EU  average  of  40.7%,  but  declined 
significantly from 46.4% in 2017, which might be 
partially due to the deadline for completion of pre-
Bologna studies by 2016. This percentage is much 
higher  for  women  (56.3%)  than  for  men  (31.6%), 
with the gap being the largest in the EU (26). This 
is  detrimental  to  meeting  SDG 5.  There  is  also  a 
tertiary 
very 
attainment  of  native-born  (45.3%)  and  that  of 
foreign-born 
(European  Commission, 
2019 d).  

large  difference  between 

(22.1%) 

the 

Slovenia  has  developed  a  graduate  tracking 
mechanism that could help  improve the labour 
market relevance of tertiary education. It should 
make 
the  careers  of 
graduates  (MIZS,  2019)  and  provide  information 
on labour market needs for different disciplines to 
policy makers, universities and students. 

to  monitor 

it  possible 

The  discrepancy  between  the  qualifications  of 
the  Slovenian  labour  force  and  the  labour 
market  needs  has  significantly  increased  in  the 
last  decade.  In  2018,  almost  one  in  six  (15.6%) 
highly qualified people in Slovenia were employed 
in  occupations 
tertiary 
education  (Graph  3.3.2).  This  share  is  lower  than 
in  the  EU.  It  has,  however,  more  than  doubled 
since  2008  (7.1%),  although  this  may  be  due  to 

that  do  not  require 

(26)  This  gender  difference  seems  set  to  continue.  Almost  two 

thirds of students in Slovenia in 2017 were female. 

two 

skills. 

In  December  2019 

the EU average in all three skills (25). However, the 
share of underperformers increased by 2.7 pps for 
reading  while  remaining  largely  stable  for  the 
the 
other 
Government  adopted  national  strategy  for  the 
development  of  reading  literacy  2019-2030.  The 
share  of  top  performers  is  above  the  EU  average 
for mathematics and science, but below for reading 
(OECD,  2019 a).  The  gender  gap  in  the  share  of 
low  achievers  in  all  three  skills  is  above  the  EU 
average and growing, with boys performing worse, 
especially in reading (13.9 pps gap, 1.8 pps higher 
than in 2015, EU average: 9.4 pps).  

Migrant background and school characteristics 
significantly  affect  educational  outcomes.  The 
difference  between  the  average  performance  of 
learners  with  a  migrant  background  and  that  of 
native students is one of the largest in the EU and 
has  grown  since  2015.  The  gap  between  schools 
with  many  pupils  with  the  migrant  background  –
often vocational schools- and other schools is one 
of  the  largest  in  the  EU  (OECD,  2019 b).  The 
number  of  hours  of  Slovenian  language  lessons 
available  to  migrants  significantly  increased  in 
2019  from  35  hours  to  a  minimum  of  120  hours 
per pupil in the first year of education.  

Despite a post-crisis decline, education spending 
remains  significantly  higher  than  the  EU 
average and is set to increase further in 2020. In 
2017,  general  government 
expenditure  on 
education was higher than the EU average, both as 
a  proportion  of  GDP  (5.4%  compared  to  an  EU 
average  of  4.6%)  and  as  a  proportion  of  total 
general government expenditure (12.6% compared 
to  an  EU  average  of  10.2%) 
(European 
Commission, 2019 d). However, the GDP share is 
significantly lower than the 6.6% of GDP in 2009. 
The  government  has,  in  the  coalition  agreement, 
agreed 
to  6%  of  GDP.  The 
government agreed a three-step increase in salaries 
in  the  public  sector  (including  teachers)  in  2019 
and  2020,  with  a  4%  increase  for  each  step.  The 
first two steps were implemented in January and in 
November 2019. 

increase 

to 

it 

A growing number of teachers are approaching 
retirement  age  and  shortages  are  already 

(25)  The 2018 results were as follows: mathematics: 16.4%, EU 
average:  22.4%;  science  14.6%,  EU  average:  21.6%; 
reading: 17.9%, EU average: 21.7%. 

29 

                                                           
                                                           
3.3. Labour market, education and social policies 

intensity 

fares  better 

(OECD,  2019 d).  However, 
R&D 
Western  Slovenia 
than  Eastern 
Slovenia,  in  particular  concerning  the  share  of 
adults with tertiary education and the participation 
rate in life-long learning. Disparities of the above-
mentioned  areas  are  higher  at  a  more  granular 
geographical  level.  The  participation  rate  in  life-
long  learning  in  Osrednjeslovenska  is  more  than 
15%,  whereas  it  was  less  than  5%  in  Prekmurje 
(IMAD, 2019 a). 

Slovenia’s  2030  strategy  for  development  sets 
2030  targets  for  sustainable  development  goals 
in  education.  Slovenia  wants  to  significantly 
improve the participation rate in lifelong learning. 
From  12%  in  2017  it  should  rise  to  at  least  19%. 
The share of adults  with tertiary education should 
rise  from  32.5%  in  2017  to  35%  in  2030.  This 
would contribute to SDG 4.  

3.3.3.  SOCIAL POLICY  

Since the economic recovery, the risk of poverty 
or social exclusion has been falling, but remains 
higher in the eastern than in the western region. 
Two  of  the  areas  with  the  highest  share  of 
materially  deprived  people  are  in  the  eastern 
region.  For  both  areas,  the  share  of  materially 
deprived  people  was  above  19%.  In  2017,  almost 
10%  of  households  in  Zasavska  were  receiving 
some form of assistance, which is five times more 
than  the  share  in  the  regions  with  the  lowest 
unemployment rates.  

There  is  a  downward  trend  in  the  share  of 
people  at  risk  of  poverty  or  social  exclusion, 
except  for the elderly.  Compared  to the previous 
year, the at-risk-of-poverty or social exclusion rate 
(AROPE) (27)  decreased  by  0.9  pps  to  16.2%  in 
2018,  below  the  EU  average  of  21.9%  (Graph 
3.3.4).  Slovenia  has  the  lowest  child  (0-17  years) 
poverty  rate  (13.1%)  in  the  EU.  However,  for 
people  aged  over  65,  the  AROPE  rate  increased 
from 18.3% in 2017 to 20.1% in 2018, well above 
the  EU  average  (18.6%).  This  rate  deteriorated 
even more evidently for elderly women, increasing 
to 24.4% in 2018, against an EU average of 20.9%.  

methodological  changes  in  2011  and  2014.  Some 
skills anticipation activities take place in Slovenia, 
although 
and 
there 
coordinated system in place. 

comprehensive 

is  no 

for 

Although  Slovenia  ranks  close  to  the  EU 
average regarding digital skills, a major source 
of concern is the low level of inclusion of digital 
skills in the curricula of primary and secondary 
schools 
2019 e). 
(European  Commission, 
Slovenia  did  not  advance  in  integrating  digital 
skills into the educational curricula, but changes in 
this area have been announced and progress will be 
monitored. Development and assessment of digital 
competences is not yet comprehensively integrated 
into  the  curricula.  The  specific  standards  of 
their 
knowledge 
assessments  and  the  use  of  information  and 
communication  technologies  for  this  purpose  are 
still  in  the  pipeline.  Digital  skills  improve  at 
tertiary level, with a share of graduates in science, 
technology, engineering, and mathematics close to 
the  EU  average.  The  percentage  of  female 
graduates in these subjects is the highest in the EU 
(European  Commission,  2019 e). 
at  20.5% 
According  to  a  2017  business  survey  of  foreign 
investors  in  Slovenia,  64%  of  them  encountered 
difficulties  when  searching  for  adequately  skilled 
personnel (SPIRIT, 2017). However, this difficulty 
may partly be caused by brain drain. 

competences, 

these 

Graph 3.3.2:  Share of graduate employed in occupations 

that do not require tertiary education 

(1) Breaks in the time series in 2011 and 2014 
Source: Eurostat 

Regional  differences  in  education  and  learning 
are  not  very  pronounced.  Indicators  of  regional 
disparities  in  education  are  less  pronounced  than 
for  other  indicators,  such  as  GDP  per  capita  or 

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

30 

010203040LUPTHRCZHUDKNLSI(1)SEROFIDEMTPLBEEEITLVFRLTBGSKUKATIEELCYES20182008%  
 
                                                           
3.3. Labour market, education and social policies 

Graph 3.3.3:  At-risk-of-poverty-or-social exclusion rate in its 

components 

The  drop  in  the  at-risk-of-poverty  or  social 
exclusion  rate  is  due  to  the  decrease  in  the 
severe material deprivation rate (by 0.9pps) and 
the  very  low  work  intensity  rate  (by  0.8pps). 
The  at-risk-of-poverty  rate  (AROP)  remained  the 
same  as  in  2018  (13.3%),  which  is  below  the  EU 
average  (17.1%).  Out  of  about  268,000  people  in 
the  at-risk-of-poverty 
Slovenia, 
threshold  in  2018,  89,000  were  retired  (18.1%  of 
all retired persons), of which 60,000 were women. 
(SURS, 2019). 

living  below 

Source: Eurostat, European Commission 

Overall, social benefits in Slovenia reduce both 
the incidence of poverty and its depth. In 2018, 
social  benefits  played  a  significant  role 
in 
alleviating poverty by reducing the poverty rate by 
43.16%  and  the  depth  of  poverty  rate  by  67%. 
Sickness  and  disability  benefits  had  the  largest 
effect  on  both  the  poverty  rate  (reducing  it  by 
28%) and its depth (reducing it by 45%). 

31 

05101520250506070809101112131415161718% 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 under the European Pillar of Social Rights 

The European Pillar of Social Rights is a compass  for a renewed  process of upward convergence  towards 
better working and living conditions in the European Union. It sets out 20 essential principles and rights in 
the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working  conditions;  and  social 
protection and inclusion. 

Slovenia  performs  relatively  well  on  most  indicators  of  the  Social  Scoreboard  supporting  the 
European  Pillar  of  Social  Rights.  Strong  economic  growth  contributed  to  the  continued  increase  in 
employment  and  the  further  decrease  in  unemployment.  The  share  of  people  at  risk  of  poverty  or  social 
exclusion  has  further  declined,  although  it 
remains  well  above  the  EU  average  for 
elderly  people,  and  especially  for  elderly 
women.  The 
ratio 
income 
(S80/S20)  is  well  below  the  EU  average, 
making  Slovenia  one  of  the  most  equal 
countries  in  the  EU.  The  net  earnings  of  a 
full-time single worker earning the average 
wage  are  slowly  increasing  but  should  be 
monitored.  Self-reported  unmet  needs  for 
medical care reached the EU average. 

quintile 

The  participation  of  older  and  low-
skilled  workers  in  the  labour  market 
remains  a  challenge.  Despite  positive 
trends  in  recent  years,  the  activity  and 
employment  rates  of  these  workers  remain 
well  below 
the  EU  average.  Their 
participation rate in lifelong learning is also 
below  the  EU  average.  Slovenia  developed 
to 
a  number  of  ‘activation’  measures 
address this issue (see Section 3.3.1.). 

Slovenia  is  one  of  the  countries  leading 
the EU in the prevention of early leaving 
from  education  and  training.  With  a  rate 
of only 4.2% of early leaving from education and training in 2018, Slovenia continues to be well below the 
EU  average  (10.6%)  and  its  Europe  2020  national  target  of  5%.  The  country  has  put  in  place  preventive 
measures to identify students who are at risk of leaving school early; and to offer professional/educational 
assistance and inclusion in the school counselling process. In addition, the ESF-financed programme Project 
Learning for Young Adults targets the vulnerable group of young adults who leave school early and are not 
in  employment,  education,  or  training.  Project  Learning  for  Young  Adults  helps  them  to  develop  their 
potentials  for  successful  participation  in  education;  and  to  build  professional  identity  to  facilitate  their 
integration  into  employment  and  the  wider  society.  Slovenia  also  adopted  many  measures  to  create  a 
supportive  school  environment  for  pupils  with  migrant  backgrounds,  a  group  with  a  higher  rate  of  early 
school leaving than their non-migrant peers both in Slovenia and in other EU Member States.  

32 

3.4. COMPETITIVENESS REFORMS AND INVESTMENT  

3.4.1.  PRODUCTIVITY ENHANCING INVESTMENT 

Labour productivity growth is resuming after a 
period of rather limited convergence with euro 
area levels. Labour productivity  grew by 2.3% in 
2018,  substantially  more  than  the  average  of  the 
EU  and  the  euro  area.  This  helped  Slovenia’s 
towards  the 
ongoing  process  of  convergence 
average level of productivity in the euro area (see 
Chart  3.4.1).  Labour  productivity  growth  in  2018 
was  especially  concentrated  in  services,  but  was 
weak in manufacturing. 

Graph 3.4.1:  Labour productivity in Slovenia as a ratio of 

labour productivity in the euro area 

wholesale  and  retail  trade;  professional,  technical 
and  scientific  activities)  have  seen  rapid  catching 
up with the euro area average. This is possibly due 
to  the  market-opening  measures  taken  after  the 
crisis (Graph 3.4.2). Significant productivity gains 
have  also  been  recorded  in  administrative  and 
support  services.  This  is  largely  due  to  the  rapid 
in  private  employment 
productivity  growth 
agencies  (IMAD,  2019 b).  Two  sectors  have  seen 
their  productivity  diverging  further  from  the  euro 
area  average  in  recent  years.  The  first  of  these  is 
information 
technology 
telecommunications.  The 
services,  especially 
second is the construction sector, which since 2009 
has  been  faced  with  lower  demand  and  structural 
changes. 

communication 

and 

Graph 3.4.2:  Productivity gap by sectors, 2009-2018 

(1) GDP per hour worked in purchasing power standard. 
Source: European Commission 

Source: Eurostat, European Commission 

The recovery of productivity has been driven by 
efficiency  gains,  while  investment  remains  low. 
Since  2012,  total  factor  productivity  has  grown 
strongly, indicating that the economy is becoming 
investment  remains 
more  efficient.  However, 
relatively 
investment 
low. 
accounted for only 15.7% of GDP, 2% of GDP pps 
above  the  trough  of  2015,  but  still  2.4%  of  GDP 
below the  euro area average.  Investment  has been 
particularly 
transport 
in  areas  such  as 
infrastructure and housing construction. 

In  2018,  private 

low 

Certain  service  sectors  are  rapidly  catching  up 
to the euro area average. Supported by relatively 
fast  growth  in  foreign  demand  since  the  financial 
crisis,  the  strongest  productivity  growth  has  been 
recorded 
technologically 
export-oriented  manufacturing 
intensive 
in 
activities.  However,  productivity  growth 
manufacturing as a whole has remained broadly in 
line  with  the  euro  area  average,  leaving  the  gap 
almost  unchanged.  Certain  service  sectors  (e.g. 

transport  and 

in 
and 

in 

the  restructuring  process 

The  productivity  gap  between  Western  and 
Eastern  Slovenia  is  closing,  accompanied  by 
in  the  east.  Labour 
declining  employment 
productivity  in  Eastern  Slovenia  grew  by  1.4% 
annually  between  2010  and  2017,  considerably 
more  than  in  the  western  part  (1.0%)  and  the  EU 
average (0.8%) (Graph 3.4.3). Productivity growth 
in the eastern region went with employment losses 
(-0.4% annually in the same period), which points 
to 
the  regional 
economy.  On  the  other  hand,  the  western  region 
in  both  productivity  and 
experienced  growth 
employment.  Eastern  Slovenia 
shows 
considerably  higher  employment  concentration  in 
and 
total 
industry 
agriculture (11% of total employment), both with a 
lower  productivity 
average. 
than 
Productivity  in  Eastern  Slovenia  is  lower  than  in 
Western  Slovenia  in  all  sectors  except  ‘financial 
and other services’. 

employment) 

(28%  of 

the  EU 

still 

in 

33 

60626466687072747678800002040608101214161820%forecast-10-5051015-50-40-30-20-100Change in productivty gap 2009-2017Gap to EA average productivity 2018Administrative and support service activitiesConstructionFinancial and insurance activitiesInformation and communicationManufacturingProfessional, scientific and technical activitiesWholesale and retail trade 
  
 
  
 
3.4. Competitiveness reforms and investment  

Graph 3.4.3:  Productivity growth 

(1) Unit: Real gross value added (GVA) in thousands EUR 
(2015 prices) per employed person. 
Source: Eurostat, European Commission 

Western Slovenia scores better than the eastern 
region across a number of economic and social 
indicators.  Western  Slovenia  scores  significantly 
better than the eastern region in the 2019 regional 
competitiveness  index.  The  gap  is  considerable  in 
all the areas that are important for the development 
of  a  modern  economy.  Eastern  Slovenia  has  a 
lower  share  of  people  with  tertiary  education;  a 
higher  share  of  people  with  low  educational 
attainment; 
lower  public  and  private  R&D 
investment; lower employment in high-technology 
sectors and knowledge-intensive services; and less 
internet use by individuals. 

Research and development 

Slovenian  firms  actively  innovate,  although 
certain  indicators  of  innovation  performance 
showed  some  decline  in  2018.  Slovenia  has  lost 
some  ground  on  innovation  performance:  while 
Slovenia  has  ranked  very  high  on  the  European 
Innovation Scoreboard since 2011, its performance 
fell in 2018 (European Commission, 2019 f). This 
fall  can  be  attributed  to  decreases  in  specific 
indicators 
investment,  human 
like 
resources, linkages or sales of product innovations. 
As  a  result,  Slovenia  is  no  longer  a  ‘strong 
innovator’ but only a ‘moderate innovator’, a one-
scale drop in the ranking. There is still a significant 
difference  in  innovation  performance  between  the 
stronger  western  region  and  the  weaker  eastern 
region.  However,  there  are  innovation  hubs  not 
only  in  Ljubljana  but  also  in  the  eastern  cities  of 
Celje  and  Maribor.  Both  employment  in  high-

in  areas 

tech (28)  and  knowledge-intensive  services (29) 
sectors  are  concentrated  in  the  western  region 
(European Commission, 2019 d).  

innovative  than 

Domestic  firms,  notably  SMEs,  are  on  average 
less 
in  the  past.  Half  of 
Slovenian  firms  developed  or  introduced  new 
products,  processes  or  services  in  2019.  This  is 
above the EU average and twice the share recorded 
in previous years. Furthermore, almost four in ten 
firms  in  Slovenia  portray  themselves  as  either 
active  innovators  or  developers,  more  than  the 
current  EU  average  (28%).  However,  innovation 
activity  of  enterprises  has  declined  across  all  size 
classes of company since 2010. In the past 3 years, 
small  enterprises  and  the  manufacturing  sector 
recorded  the  largest  decline  (EIB,  2019;  IMAD, 
2019 a). Foreign-owned  firms account  for 39% of 
the country’s total business enterprise  expenditure 
on R&D. They perform innovation activities in the 
medium-  and  high-tech  manufacturing  sectors. 
More  than  half  of  the  patent  applications  filed  by 
Slovenian  businesses  with  the  European  Patent 
Office in 2010-2018 were filed by large enterprises 
from these technological fields.  

Business  R&D  intensity  is  relatively  high  but 
public R&D expenditure is modest and the 3% 
R&D  intensity  target  seems  out  of  reach.  R&D 
intensity was 1.95% of GDP in 2018 (EU average: 
2.11%), returning to its 2010 level, after peaking at 
2.56%  in  2013.  This  has  been  driven  by  business 
R&D expenditure which stood at 1.45% of GDP in 
2018  (above  the  EU  average  of  1.41%),  also 
returning to its 2010 level, after peaking at 1.96% 
of  GDP  in  2013.  The  peak  in  2013  followed  the 
introduction  of  substantial  R&D  tax  reliefs  in 
2010 (30). The subsequent decline can be explained 
by stricter controls on business R&D reporting and 
the termination of the financing of R&D in centres 
for  excellence,  competence  and  development, 
which  were  co-financed  by  the  EU  (IMAD, 

(28)  7.3% of total workforce in Western Slovenia against 4.3% 

in Eastern Slovenia. 

(29)  40.4%  of  total  workforce  in  Western  Slovenia  against 

31.2% in Eastern Slovenia. 

(30)  The level of tax subsidy was increased in 2010 from 20% 
to  40%  of  allowed  deduction  of  R&D  expenses  from 
corporate  income  tax  with  additional  deduction  in  lower 
income  regions.  Since  2012,  the  research  tax  subsidy  is 
100%.  In  the  case  of  insufficient  tax  liability,  unused 
credits  can  be  carried  forward  for  5  years.  No  ceiling 
applies  to  the  amount  of  qualifying  R&D  expenditure  or 
value of R&D tax relief. 

34 

25303540455055606570000102030405060708091011121314151617Thousands EUR per employed personWestern SloveniaEastern SloveniaEUSI average  
 
                                                           
3.4. Competitiveness reforms and investment  

innovation 

More  and  better  cooperation  between  science 
and industry could improve Slovenia’s research 
and 
capacity.  Science-industry 
cooperation  is  limited  mainly  to  the  medium-  and 
high-tech 
pharmaceuticals, 
machinery).  The  effectiveness  of  knowledge-
transfer  offices  set  up  by  research  organisations 
varies 
higher 
and 
considerably. 

institutions 

education 

sectors 

(e.g. 

Several  structural  reforms  to  improve  the 
governance  and  effectiveness  of  public  R&D 
investment are still pending. Approximately 87% 
of the structural funds’ support measures are aimed 
at scientific and technological excellence; research 
infrastructures;  and  science-business  cooperation. 
However,  an  effective  governance  structure  still 
needs  to  be  fostered  for  cooperation  in  research 
and  innovation  among  different  ministries  and 
agencies  as  well  as  for  closer  collaboration 
between  players  in  research  and  innovation.  The 
draft R&D  law,  which lays the  foundation  for the 
implementation  of  the  research  and  innovation 
strategy  2011-2020,  is  yet  to  be  adopted  by  the 
institutional-
Parliament.  The 
performance-based  funding  could  facilitate  their 
development 
the 
government  is  committed  to  structural  reforms  in 
the 
this 
recommendations  of  the  European  Commission’s 
policy  support  facility  for  Slovenia  (European 
Commission, 2018 b) on the internationalisation of 
academia-business 
the 
cooperation.  The  government  also  plans  for  the 
smart specialisation strategy to become an integral 
part of the research and innovation strategy and the 
R&D law. 

growth.  Although 

introduction  of 

address 

science 

area, 

base 

and 

and 

has 

yet 

to 

it 

funds. 

in  2018 

investment 

In  addition, 

investment  for 

(0.5%  of  GDP),  but 

2019 a).  Business 
in  R&D  still 
represents about 75% of total R&D expenditure in 
the  country,  around  10 pps  more  than  the  average 
in the EU. Business expenditure on R&D is mainly 
concentrated 
in  pharmaceuticals,  machinery, 
computer  technology  and  technologies  related  to 
electrical  energy.  Public  expenditure  on  R&D  is 
the 
modest 
government  increased  it,  partly  boosted  by  EU 
structural 
the  Slovenian 
government  planned  a  gradual  increase  in  public 
R&D 
the  period  2019-2021. 
However,  the  3%  of  GDP  R&D  intensity  target 
seems  out  of  reach  by  2020.  Slovenia  ranked 
average  among  EU  countries  in  international  co-
publications  in  2018.  Investment  continues  to  be 
unevenly spread between the two regions with the 
R&D intensity at 2.27% in the western region and 
1.4%  in  the  eastern  one,  resulting  also  in  an 
unequal  share  of  human  resources  in  science  and 
technology  in  the  active  population  (51%  in 
Western Slovenia against 40% in Eastern Slovenia 
in 2018). There is also regional discrepancy in co-
publication activity, which is greater in the western 
region,  both  at  public-private  and  at  international 
level.  

There  has  been  an  increase  in  the  number  of 
researchers  and  the  share  of  PhD  graduates  is 
very high. Since 2008, the  number of researchers 
employed  by  businesses (31)  rose  considerably. 
Slovenia  still  leads  the  OECD  countries  in  the 
share  of  PhD  graduates  in  the  population (32) 
(OECD,  2019 d).  In  2018,  there  was  a  net  inflow 
of  PhD  students  into  the  country.  While  104  left 
Slovenia, 163 moved in. 

(31)  Expressed as the number of full-time employees employed 
in R&D by businesses per thousand active population. The 
business sector employs nearly 2/3 of all researchers. 
(32)  Percentage of 25-64 year olds with a PhD degree (3.8% in 

Slovenia, OECD average 1.1%). 

35 

                                                           
3.4. Competitiveness reforms and investment  

Box 3.4.1: Drivers of Slovenia’s research and innovation performance 

The fourth industrial revolution, i.e. the convergence of digital, biological, and physical technologies, poses a 
challenge  for  the  Slovenian  research  community  and  economic  performance  in  general.  The  technological 
disruption  brought  about  by  big  data,  the  internet  of  things,  artificial  intelligence  and  robotics  will  have  a 
significant  impact  on  the  Slovenian  economy,  its  productivity  and  competitiveness  as  well  as  on  the 
workforce.  According  to  some  estimates,  up  to  40-70%  of  jobs  could  be  affected  by  automation  (OECD, 
2018).  Some  jobs  might  be  replaced,  the  nature  of  many  others  might  change  significantly  and  new  ones 
might  be  created.  The  net  effect  will  also  depend  on  how  well  Slovenia  prepares  itself  for  the  industrial 
transition, including with changes in the science, technology and innovation policy mix (see Section 3.3). The 
development and implementation of digital technologies and new business models calls for increased research 
activities, improved engineering,  mathematics and digital skills (see Section 3.4.1), for efficient changes in 
public and private R&D as well as its integration into the economy (see Section 3.4.1). 

While  Slovenia’s  research  and  innovation  performance  remains  below  the  EU  average  (ranked  ‘moderate 
innovator’  in  the  2019 European  Innovation  Scoreboard),  the  country  has  a  competitive  advantage  in  areas 
such as artificial intelligence and robotics (see Section 3.4.1). Slovenia has also an excellent track record in 
scientific and technological fields such as physics, materials, biochemistry and more recently in areas tackling 
climate-related  challenges  (e.g.  development  of  new  generation  of  batteries  and  cooling  systems).  The 
country  has  successfully  conducted  scientific  research  in  artificial  intelligence  since  the  early  1970’s.  The 
first UNESCO-sponsored international centre for artificial intelligence will open in early 2020. The country is 
also aiming to develop a national artificial intelligence strategy, covering the entire innovative lifecycle and 
cross-sectoral up-take. While block-chain technologies are already used in the Slovenian FinTech sector (see 
Section 3.2), these technologies potentially have a much wider reach for the economy.  

Slovenia’s  dynamic  start-up  ecosystem  in  information  and  communication  technologies,  backed  by  solid 
business  support  services,  is  an  important  driver  for  the  country’s  industrial  transition.  Academia-business 
linkages  are  particularly  important  for  the  successful  translation  of  knowledge  into  innovation  in  the  first 
place,  and  in  the  second  place  into  industry  and  higher  productivity  and  improved  competitiveness 
performance  of  Slovenian  economy.  Several  examples  of  fruitful  public-private  cooperation  can  be  found 
within the framework of the Strategic Research and Innovation Partnerships (SRIP). The academia-business 
partnership  led  by  the  public  Jozef  Stefan  R&D  Institute  brings  together  key  stakeholders  involved  in 
developing  breakthrough  innovations  for  the  factories  of  the  future.  A  project  in  the  field  of  control 
technologies,  tooling,  robotics,  and  photonics  constitutes  another  example  of  successful  public-private 
cooperation, where innovative solutions for production facilities were jointly developed by 13 companies and 
6 research organisations (GOSTOP). By building on previous projects, the faculty of mechanical engineering 
in Ljubljana successfully launched the first “smart factory demonstrator” in 2019 supporting the inclusion of 
innovative  ‘Industry  4.0’  solutions  in  production  processes.  Building  on  the  lessons  learnt  in  successful 
projects as well as ensuring stability and continuation of R&I support will be key for improving the country’s 
research and innovation performance and a key driver of economic growth.  

To increase economic productivity and improve competitiveness of Slovene economy, the country should aim 
to approach the EU top performers in research and development. This would require an increase in public and 
private investments and a build-up of an adequate research infrastructure and research capacity, as well as to 
ensure that the potential is used to full capacity. In some sectors, this could be achieved relatively quickly as 
the infrastructure already exists and only needs to be upgraded and its usage optimised. 

The funding of research and innovation should reward performance, while gaps in the innovation system will 
have  to  be  addressed.  Policy  design  might  give  attention  to:  (i)  the  strengthening  of  the  capacities  of 
responsible  decision-making  and  executive  bodies,  (ii)  the  (re)introduction  of  schemes  for  public-private 
agenda-setting, (iii) the support of clusters, of collaborations between universities, public research institutes 
and  the  private  sector  (for  example  through  doctoral  candidates  in  companies)  as  well  as  of  start-ups  and 
scale-ups of SMEs.  

36 

 
 
 
 
Digitalisation 

The  adoption  of  digital 
technologies  and 
business models is generally well advanced, but 
some  sectors are lagging behind. Slovenia ranks 
16th  among  EU  Member  States  in  the  European 
Commission  digital  economy  and  society  index 
is  a 
(European  Commission,  2019 e).  There 
growing awareness of the need to integrate digital 
technologies  into  business  processes.  75%  of 
Slovenian firms have implemented - either fully or 
partially - at least one digital technology (33). This 
is  more  than the EU average  of 58% (EIB, 2019). 
integration  varies 
However, 
considerably  across  different  sectors  of 
the 
economy.  The  digital  transformation  is  strong  in 
tourism, 
the  automotive  sector,  e-commerce, 
innovation  of  composite  materials  and  companies 
integrated  into  foreign  value  chains.  Furthermore, 
Slovenia  is  strong  in  some  niche  areas  such  as 
robotics,  fin-tech,  cyber  security  and  artificial 
intelligence  (see  Box  3.4.1).  Slovenia  is  now 
implementing  its  national  digital  strategy (34)  and 
currently  drafting  a  comprehensive  artificial 
intelligence strategy.  

the  degree  of 

Slovenia  performs  well  in  the  data  economy. 
Slovenian  companies  rank  among  the  best  in  the 
EU  in  the  re-use  of  public  sector  data,  profiting 
from  the  wide  scope  of  large  databases  that  are 
open  to  the  public.  Slovenia  is  drafting  a  data 
strategy and plans an integrated data warehouse to 
make  access  to  public  sector  data  more  user-
friendly. 

(33)  Firms 

least  one  of 

implemented  at 

the  following 
technologies:  3-D  printing,  automation  via  advanced 
technologies, 
robotics, 
augmented or virtual reality, drones, platform technologies. 
(34)  https://www.gov.si/assets/ministrstva/MJU/DID/Strategija-

things,  cognitive 

internet  of 

Slovenia  ranks  in  the  middle  of  EU  countries 
for digital public services. A wide range of basic 
online  services  for  businesses  is  available  in 
Slovenia  (80%  of  such  services  are  online). 
Citizens and companies have unique identification 
numbers (personal registration number, company’s 
registration  number,  tax  number,  etc.),  that  are 
used  for  identification.  However,  these  are  not 
electronic identification means. At present, most of 
the  e-services  rely  on  qualified  digital  certificates 
issued  by  public  or  private  sector  used  for 
authentication  and  e-signature.  A  significant 
reform  was  implemented  in  2019  of  sickness 
certificates,  which  can  now  be  submitted  fully 
electronically.  The  reform  is  expected  to  reduce 
administrative  burden  for  businesses  by  €16 
million  per  year.  Fully  electronic  reporting  of 
work-related  accidents  and  injuries  will  follow  in 
April 2020. 

its 

increased 

(Ultra)  fast  and  mobile  broadband  coverage  is 
very  high  but  other  areas  are  lagging  behind. 
Slovenia has improved its broadband connectivity, 
but  it  still  ranks  below  the  EU  average  for  this 
measure.  Although  fixed  broadband  coverage 
remained  stable  with  98%  of  homes  covered  (EU 
average  77%),  Slovenia 
fast 
broadband  (new  generation  networks  that  are 
capable of providing speeds from 30 to 100 Mbps) 
coverage  to  86%,  exceeding  the  EU  average. 
About 80% of households in Slovenia are covered 
by  ultrafast  broadband  (100  Mbps  and  above), 
outperforming the EU average by 20 pps. Slovenia 
increased its mobile broadband take-up to 74% of 
people, but remains well below the EU average of 
96% 
(European  Commission,  2019 e).  Fast 
networks  are  comparatively  new  and  take-up  of 
fast internet is still below the EU average.  

razvoja-informacijske-druzbe-2020.pdf. 

37 

 
                                                           
3.4. Competitiveness reforms and investment  

Box 3.4.2: Investment challenges and reforms in Slovenia 

Section 1. Macroeconomic perspective  

Following  rapid  growth  in  2017  and  2018,  investment  slowed  down  considerably  in  2019, 
particularly for machinery and equipment. Investment in construction remains strong. At 15.7% of 
GDP in 2018, private investment was still 2.4 pps below the euro area average. Public investment 
relies  significantly  on  EU  funds.  Private  R&D  investment  is  slightly  above  the  EU  average  but 
insufficiently  supported  by  the  low  levels  of  public  R&D  spending.  Both  private  and  public 
investment are influenced by EU funds. 

Section 2. Assessment of barriers to investment and ongoing reforms  

Despite  some  progress  in  recent  years,  barriers  to  investment  still  exist  in  many  areas.  The 
reduction of red tape remains one of the key  challenges to boost investment. Other challenges to 
overcome include the high perceived level of corruption, in particular in energy, construction and 
urban planning; and the (perceived) legal uncertainty in public procurement. The significant role 
of state-owned or state-controlled companies risks distorting competition and resource allocation. 
Furthermore,  poor  transport  connections  between  regions  reduce  productivity,  as  time  is  lost  in 
traffic jams and delays in transport are expensive. 

Box: Investment challenges and reforms in Slovenia 

Selected barriers to investment and priority actions underway 

1.  The  government  of  Slovenia  makes  considerable  efforts  to  improve  public  procurement  (see 
Section 3.4.3) including through the promotion of e-procurement and SME participation in public 
procurement.  Some  measures,  like  the  professionalisation  of  public  buyers,  are  only  gradually 
being  implemented  and  little  progress  has  been  made  in  public  procurement  in  the  healthcare 
sector (see Section 3.4.3). Overall, competition in public procurement remains very low. 

2.  Improvements  in  the  transport  networks,  particularly  in  remote  areas,  would  help  to  better 
integrate these areas into the economy. Economic activity would then be less concentrated in the 
capital (and a few other economic centres) with all the congestion costs for employees, companies, 
residents,  and  the  environment/climate,  that  come  with  it.  A  more  effective  transport  network 
could therefore help to increase economic growth and reduce discrepancies across regions.  

Work  on  the  next  generation  broadband 
network  faces  delays.  All  major  operators  are 
investing  in  very-high-capacity  networks  and  the 
penetration  of  fibre-to-the-home  technology  is 
rising.  The  co-financing  of 
in 
broadband  infrastructure  from  EU  funds  amounts 

investment 

to approximately €35 million, which covers almost 
the entire costs of the project. Slovenia still lacks a 
the 
dedicated 
strategy 
management  of 
the  radiofrequency  spectrum 
necessary  for  the  timely  assignment  of  the  5G 
pioneer spectrum bands and 5G deployment. 

comprehensive 

for 

38 

Regulatory/administrative burdenCSRTaxationPublic administrationAccess to financePublic 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 / telecomEducationEnergyTransportCSRLegend: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  

3.4.2.  MARKET FUNCTIONING AND BUSINESS 

ENVIRONMENT 

Entrepreneurship and scale-up 

legislation  in  Slovenia  to  be  disruptive  for  the 
business  environment.  Moreover,  SMEs  still 
perceive  administrative  burden  as  significant  and 
say  it  is  being  reduced  too  slowly  (European 
Commission, 2019 g). 

largely 

reflects 

Slovenia’s  business  demography 
remains 
dynamic,  masking  some  structural  weaknesses. 
The  number  of  nascent  and  new  companies  has 
recent  years.  This  positive 
increased  over 
development 
the  continued 
robustness  of  Slovenia’s  economic  growth. 
However, 
the  still  relatively  high  regulatory 
density  and  administrative  burden  continue  to 
hamper  business  entry  and  scale-up  (IMAD, 
2019 a;  see  below).  Small-  and  medium-sized 
enterprises  constitute  a  share  of  the  economy  in 
Slovenia  that  is  higher  than  the  EU  average  in 
terms of employment (72.0% compared to 66.6%) 
and 
to 
56.4%) (European  Commission,  2019 g).  Smaller 
firms  find  it  typically  more  difficult  to  cope  with 
complex regulation.  

compared 

(64.5% 

valued 

added 

to 

tools 

its  efforts 

January  2017)  are 

Slovenia  continues 
to  reduce 
regulatory  restrictiveness  and  administrative 
burden.  The  Single  Document,  the  regulatory 
impact  assessment  and  the  SME  test  (mandatory 
since 
reduce 
administrative  burden  and  improve  regulation. 
foreign 
Business  portals 
entrepreneurs (e-VEM and EUGO) have also been 
set up. In 2017, this system was integrated into the 
newly 
point 
(Slovenska poslovna tocka, SPOT) portal. It is now 
easier  to  set  up  a  business,  and  tax  regulation  for 
micro companies has been simplified. E-invoicing 
and  a  simpler  system  to  pay  compulsory  duties 
have also been introduced (see Section 3.4.1). 

for  domestic  and 

established 

business 

national 

The  proportion  of 
female  entrepreneurs 
remains  among  the  lowest  in  the  EU.  Slovenia 
advanced in the field of women’s entrepreneurship 
with  the  introduction  of  training  programmes  for 
unemployed  women  and  subsidies 
for  self-
employed  women.  Between  2016  and  2018,  the 
vast  majority  of  participants 
training 
programmes  started  their  own  business.  Despite 
this 
of  women 
entrepreneurs still remains among the lowest in the 
EU (European Commission, 2019 g; GEM, 2019). 

proportion 

progress, 

the 

the 

in 

Regulatory and administrative burden 

in  Slovenia  has  been 
Regulatory  burden 
gradually  decreasing  but  remains  relatively 
high  in  some  areas.  Between  2010  and  2019, 
Slovenia’s  position  in  the  World  Bank’s  ease-of-
doing-business index ranking (World Bank,  2019) 
improved  from  53rd  to  40th  place.  In  the  world 
competitiveness index of the International Institute 
for Management Development, Slovenia improved 
its ranking from the 49th in 2015 to the 37th place 
in  2019  among  the  63  countries  covered  (IMD, 
2019).  The  time  it  takes  to  pay  taxes  in  Slovenia 
has decreased slightly (from 245 hours in 2018 to 
233  hours  in  2019),  but  this  remains  high  in 
comparison  with  the  EU  average  (172  hours) 
(European  Commission,  2019 g).  Companies  still 
frequent  unpredictable  changes  of 
consider 

The  overall  effectiveness  of  Slovenia’s  burden 
reduction  efforts  suffers  from  implementation 
deficits.  Most  of  the  measures  in  the  ’Single 
Document’  are  deemed  to  have  been  fully  or  at 
least  partially 
implemented.  However,  SME 
representatives  continue  to  complain  that  many 
measures are still pending and that the  impacts of 
these  measures  do  not  always  meet 
their 
expectations,  even 
the  measures  are 
though 
reported  as  implemented.  Public  participation  in 
devising  burden-reduction  measures  under  the 
Single Document is still rather low. The SME test 
is  being  used  more  frequently.  Nevertheless,  the 
SME  test  and  assessments  of  impacts  on  business 
competitiveness 
to 
implementing  regulations  and  rules.  This  may 
result in unnecessary burdens for SMEs (European 
Commission,  2019 g).  Finally,  there  is  still  room 
for  improvement  in:  (i)  the  often  outdated  or 
incomplete  content  on  official  websites;  and  (ii) 
the  non-availability  of  fully  electronic  procedures 
for  many  services  such  as  the  recognition  of 
professional qualifications. 

applied 

not 

are 

yet 

Challenges  remain  concerning  the  practical 
involvement  of  social  partners  and  other 
the  drafting  of 
business  stakeholders 
reform 
legislative  proposals 
measures.  Slovenia  has  been  consulting  social 
partners 
and  outside 
stakeholders  on  legislative  proposals  for  some 

(see  Section  3.3.1) 

in 
and 

other 

39 

3.4. Competitiveness reforms and investment  

competition,  notably  in  a  small  country  like 
Slovenia,  typically  leads  to  higher  prices,  less 
choice  and  may  also  facilitate  collusion  among 
bidders.  Slovenian  authorities  are  aware  of  these 
risks  and  are  working  with 
the  European 
Commission  and  the  OECD  on  a  systematic 
review  of  the  country’s  procurement  approach. 
The proportion of procedures awarded only on the 
basis  of  the  lowest  price,  although  decreasing, 
remains  higher  than  the  EU  average.  Giving 
environmental  criteria  a  higher  importance  in 
award  decisions  would  help  Slovenia  in  the 
transition  towards  a  more  sustainable  economy 
(see Section 3.5).  

Slovenia  has  adopted  reforms  to  improve  the 
effectiveness  of  the  remedy  system.  Slovenia 
introduced the possibility of challenging  decisions 
of  the  National  Review  Commission  before  the 
Administrative  Court.  The  National  Review 
Commission’s  independence  will  be  strengthened 
by  the  introduction  of  a  consultative  panel,  with 
members of the Judicial Council. However, as part 
of the reforms, the non-appointment of a candidate 
member will in the future not be subject to judicial 
review,  and  the  Parliament  itself  will  have  the 
power to appoint the consultative panel and decide 
on 
of  National  Review 
Commission’s members. 

dismissal 

the 

to 

also  helps 

in 
Slovenia  promotes  SME  participation 
tenders,  which 
increase 
competition.  SMEs  are  awarded  a  significant 
share  of  public  contracts:  in  2018,  78%  of 
contractors  were  SMEs.  This  can  be  taken  as  an 
indication  that  barriers  preventing  SMEs  from 
participating  in  public  tenders  are  comparatively 
low.  Slovenia  frequently  divides  contracts  into 
lots, which makes bidding easier for SMEs. Many 
global firms have little or no presence in Slovenia, 
leaving more room for Slovenian firms.  

E-procurement  software  tools  have  increased 
transparency.  An  e-submission  functionality  for 
tenders  has  been  widely  used.  The  e-procurement 
system  relies  on  structured  data  that  is  shared 
between  different  databases.  Slovenia  is  currently 
preparing  a  data-warehouse  of  procurement  data 
feeding  into  a  new  business  analytics  tool.  This 
will  make  it  possible  for  tendering  authorities  to 
get better information on price levels and bidders. 

time.  These  consultations,  however,  often  take 
place  late  in  the  process,  when  there  might  be 
limited flexibility on the side of the administration 
to substantively change a draft. This contributes to 
the  insufficient impact of their participation noted 
by businesses (IMAD, 2019 a).  

In spite of some improvements, key professions 
remain  highly  regulated.  Slovenia  has  followed 
some of the Commission's recommendations from 
January 2017 (European Commission, 2017 b) and 
removed  certain  restrictions  on  the  access  to  the 
professions  of  lawyers  and  real  estate  agents. 
Nevertheless, 
(lawyers  and 
legal  professions 
notaries)  remain  highly  regulated  in  Slovenia, 
which is confirmed by the OECD's Product Market 
Regulation Indicator for 2018 (35). 

Transparency 

from  Slovenia 

Slovenia  notified  comparatively  few  technical 
regulations between 2016 and 2018. Only 32 out 
of  an  EU-wide  total  of  2,196  draft  technical 
regulations  notified  in  the  area  of  the  Single 
Directive (Directive 
Market 
2015/1535)  came 
(Technical 
Regulation  Information  System  database).  This 
low  level  of  notifications  may  be  related  to  the 
the  Single  Market 
lack  of  awareness  of 
Transparency  Directive 
limited 
a 
administrative  capacity.  Barriers  to  trade  affect 
economic growth and the functioning of the single 
market  as  a  tool  for  competitiveness.  Slovenia  is 
thus missing an opportunity to further improve its 
integration  in  the  single  market  and  obtain  the 
related economic benefits. 

and 

3.4.3.  INSTITUTIONAL QUALITY AND 

GOVERNANCE 

Public procurement 

Competition in public procurement remains an 
issue.  Slovenia  has  a  comparatively  high  number 
of single bids in tenders and a low average number 
of bids received per tender. Furthermore, the share 
of negotiated procedures without prior publication 
recorded  in  the  TED  database  was  high  in  EU 
(36).Less 
recent 
comparison 

years 

over 

(35)  http://www.oecd.org/economy/reform/indicators-of-

product-market-regulation/. 

(36) EU-harmonised TED data for 2015-2018; 2019 data is not 
yet  available.  National  data  can  be  found  in  Slovenia’s 
annual statistical reports. 

40 

                                                           
3.4. Competitiveness reforms and investment  

the European Competition Network+ Directive (37) 
into national law. While not underfunded as such, 
the agency lacks the means to procure the services 
of  experts  that  can  temporarily  assist  staff  in 
complex 
investigations.  This  situation  could 
severely limit the agency’s capacity to investigate 
and prosecute competition cases efficiently. 

framework 

safeguarding 

the  CPC  and 

The  Commission 
the  Prevention  of 
for 
Corruption (CPC) operates within a good legal 
framework but with limited resources. Although 
the 
the 
legal 
the  material 
independence  of 
conditions  for  its  work  are  generally  satisfactory, 
the  CPC  remains  understaffed  relative  to  its 
mandate. For asset verification, the CPC currently 
staff.  This  and  other 
has 
insufficiencies  have  been  pointed  out 
in 
evaluations  by  the  Council  of  Europe.  These 
resource limitations affect activity and output, with 
the  number  of  CPC  reports  at  its  lowest  since 
2007.  The  CPC  also  suffers  from  a  low  level  of 
trust,  with  76%  of  Slovenian  businesses  of  the 
view  that  measures  against  corruption  are  not 
applied impartially and without ulterior motives. 

time 

two 

full 

Justice system and fight against corruption 

been 

have 

The  justice  system  has  continued  to  reduce 
backlogs,  and  new  measures  increasing  its 
quality 
introduced,  which 
contributes  to  the  overall  improved  business 
environment.  The  2020  EU  Justice  Scoreboard 
(European  Commission,  forthcoming a)  shows 
continued  efficiency  improvements  in  nearly  all 
categories  of  cases.  In  2019,  the  total  backlog  of 
cases  decreased  by  more  than  7%,  compared  to 
2018  (Supreme  Court  data).  The  courts  again 
resolved  more  cases  than  they  received  (total 
clearance  rate  of  101%),  despite  resolving  fewer 
cases  than  in  the  past.  The  average  length  of 
proceedings  rose  to  around  13  months  in  litigious 
civil cases and stagnated at 11 months in litigious 
commercial  cases,  as  older  cases  were  prioritised. 
It  still  takes  more  than  12  months  until  the  first 
hearing  in  a  commercial  case  trial.  On  appeal, 
these cases are resolved quickly, usually in around 
3 months. Nearly one quarter of litigious civil and 

(37)  Directive (EU) 2019/1 to empower competition authorities 
of Member States in the European Competition Network to 
be  more  effective  enforcers  and  to  ensure  the  proper 
functioning of the internal market. 

Slovenia  is  professionalising  its  public  buyers. 
In  May  2018,  Slovenia  adopted  an  action  plan  on 
the professionalisation of its public buyers with 27 
being 
that 
different  measures 
implemented. Slovenia also plans to implement the 
European  competency  framework  for  contracting 
authorities. The framework identifies a set of skills 
required of contracting authority employees. 

now 

are 

Public  procurement  aggregation  in  Slovenia’s 
health sector  remains below its potential. Apart 
from  the  extension  of  a  database  on  prices,  not 
much  headway  was  made  in  2019  to  improve 
procurement aggregation. An earlier plan to set up 
a  specific  central  purchase  body  for  the  health 
sector has been abandoned. Slovenia instead opted 
for  a  looser  structure  of  joint  public  procurement 
between different public hospitals with the support 
of the Ministry of Health. This set-up suffers from 
a lack of coordination between the different public 
hospitals  over  what  supplies  and  services  to 
procure  jointly.  So  far,  only  the  two  largest 
hospitals,  covering  60%  of  the  market,  agreed  to 
publish  joint  tenders.  Slovenia  also  lacks  any 
strategy for procurement in the healthcare system. 
This  limits  its  ability  to  harmonise  tenders,  share 
expertise  and  effectively  mitigate  the  risk  of  bid-
rigging (see Section 3.1.4). 

Corruption  in  public  procurement  remains  a 
concern  for  Slovenia’s  businesses.  In  Slovenia, 
78%  of  businesses  consider  corruption  in  public 
procurement managed by national authorities to be 
widespread,  the  highest  increase  amongst  EU 
Member  States  since  2017  (+29  pps).  Similarly, 
72% of businesses consider it widespread in public 
procurement  managed  by 
local  and  regional 
authorities, a 12-point increase on 2017. Although 
the  share  of  businesses  reporting 
they  had 
experienced  corruption  in  practice  is  quite  low, 
50%  think  that  corruption  has  prevented  their 
company from winning a public tender or a public 
procurement contract in the last 3 years (European 
Commission, 2019 h).  

Regulatory oversight 

The  national  competition  agency  still  shows 
some operational weaknesses. The independence 
of  the  competition  protection  agency  requires 
continued  safeguarding  when  Slovenia  transposes 

41 

                                                           
3.4. Competitiveness reforms and investment  

concern  is  that  90%  of  businesses  consider  that 
corruption  is  widespread,  a  16-point  increase  on 
2017.  Moreover, only 10% of businesses  feel that 
people  and  businesses  caught  for  bribing  a  senior 
official  are  appropriately  punished,  the  lowest 
percentage among EU Member States.  

Some anti-corruption reforms are still pending. 
No  major  developments  have  occurred  in  the 
legislation on conflicts of interest; whistleblowing; 
revolving doors between government and business; 
or a code of ethics for members of Parliament. The 
National Assembly has delayed the adoption of the 
amended  Integrity  and  Prevention  of  Corruption 
Act.  Although  the  expected  amendments  will 
broaden 
lobbying,  shadow 
lobbying  is  still  perceived  as  a  major  issue, 
because  it  does  not  cover  third  parties  seeking  to 
influence  government  decision  making.  Slovenia 
has  also  not  implemented  rules  on  contacts  with 
lobbyists  by  members  of  the  National  Assembly 
and  the  National  Council.  This  is  all  the  more 
striking  given  that  76%  of  businesses  in  Slovenia 
consider  that  the  only  way  to  succeed  in  business 
is to have political connections. 

the  regulation  of 

3.4.4.  ENERGY AND INFRASTRUCTURE 

The lack of a clear and predictable framework 
for  investment  in  the  decarbonisation  of  the 
energy  sector  increases  the  risk  of  stranded 
assets. Significant investments have been made in 
a new power unit using coal for electricity and heat 
production over the past years. The rapidly falling 
costs  of  generating  electricity  from  renewable 
resources  and 
for  an  ambitious 
decarbonisation  of  the  energy  sector  are  bound  to 
affect  the  viability  of  such  recent  investments. 
About 30% of Slovenia’s electricity is produced by 
coal  plants,  and  25%  of  the  total  electricity 
generation capacity of these coal plants is less than 
5 years old (electricity production in Šoštanj Unit 6 
started in 2016). 

the  need 

The  gas  and  electricity  infrastructure  is  well 
developed,  but  problems  remain  with  storage 
and  operational  issues  on  the  interconnections. 
Electricity  interconnection  in  Slovenia  is  already 
above  the  minimum  of  10%  expected  for  2020  as 
well  as  above  the  minimum  target  of  15%  for 
2030.  Strengthening  power  interconnections  with 
Croatia  and  Hungary  could  make  it  possible  to 

and 

justice 

proceedings, 

commercial  cases  are  resolved  through  a  court 
settlement. However, it still takes between 14 and 
17 months until a written judgment is delivered in 
those  types  of  cases.  The  Judicial  Council  is  also 
becoming more active in its efforts to improve the 
through  evaluations, 
quality  of 
(e.g. 
disciplinary 
improving 
remuneration and careers of judges). However, this 
work  requires  additional  resources  to  increase  the 
Judicial  Council’s 
capacity, 
including resources to improve the reasoning in its 
decisions  and  opinions,  and  particularly 
in 
selecting national and international judges. Results 
of  the  internationally  awarded  Supreme  Court’s 
survey  of  court  users  are  being  used  to  further 
improve the quality of justice. The Supreme Court 
published  brochures  on  proceedings  before  courts 
and manuals for new judges, and it offered focused 
training  for  court  staff.  The  judicial  map  reform 
remains pending. 

administrative 

in 

increased 

efficiency 

Despite 
resolving 
criminal  notifications,  challenges  remain  in 
prosecuting  economic  and  financial  crime,  and 
court  proceedings  are  lengthy.  Despite  some 
improvements, investigations by the police and the 
prosecution  service  into  financial  and  economic 
crime can sometimes take several years, partly due 
to a lack of resources. These efficiency and quality 
challenges  are  being  addressed  through  focused 
training  (including  on  anti-money  laundering); 
exchange  of  good  practices;  and  analyses  of 
prosecutors’  efficiency.  The  State  Prosecutorial 
Council  still  lacks  staff,  which  means  that  it  is 
unable to work on improving the general quality of 
the Prosecution Service. Criminal courts continued 
to resolve more cases than they received (clearance 
rate  of  102%).  However,  the  length  of  criminal 
cases decreased in local courts to about 9.5 months 
and  increased  in  district  courts  (to  more  than  14 
months). 

index 

perception 

corruption 

scores  have 
Although  Slovenia’s 
trends 
improved, 
indicate  diminished 
trust.  The  2017-2019 
government anticorruption plan focused on raising 
awareness  amongst  public  officials,  strengthening 
efficiency in the use of public funds and increasing 
transparency 
regulations  and  procedures. 
Although  Slovenia’s  score  in  the  World  Bank’s 
control  of  corruption  indicator  has  continued  to 
improve  since  2015,  its  corruption  perception 
index  score  and  rank  fell  in  2018.  One  issue  of 

in 

42 

3.4. Competitiveness reforms and investment  

is slightly below the EU average of 5.7% of GDP. 
In  addition,  the  total  infrastructure  costs  for  land 
modes  amounted  to  around  €1.4  billion  for  2016, 
of  which  around  €1  billion  for  road  and  €400 
million  for  rail.  Road  users  pay  a  considerably 
higher  share  of  their  external  and  infrastructure 
costs  in  the  form  of  taxes  and  charges  than  rail 
users  (88%  for  passenger  transport  and  72%  for 
freight,  compared  to  20%  and  16%,  respectively) 
(CE Delft, 2019). 

Slovenia  is  faced  with  challenges  to  promote 
sustainable mobility. Slovenia still has a high use 
of  passenger  cars.  In  2017,  car  trips  represented 
86.5% of all passenger-kilometres travelled (5 pps 
above  the  EU  average),  with  buses  and  coaches 
accounting  for  around  11.7%  and  trains  for  only 
1.8% (European  Commission,  2019 j).  Use  of 
public  transport  is  very  low  by  international 
standards,  and  is  partially  due  to  a  lower  rate  of 
urbanisation; higher dispersion of settlements; and 
the  outdated/limited  public 
transport  options 
(IMAD, 2019 a). 

in 

though 

investment 

is  still  an 

The  modernisation  and  upgrading  of  the 
Slovenian  rail  network  is  progressing  very 
slowly.  Even 
rail 
infrastructure  has  been  increasing  in  recent  years, 
investment  backlog,  which 
there 
contributes to the slow modal shift. Perceptions of 
the railway infrastructure are better than for roads. 
However, according to  the 2019 World Economic 
Forum ranking, the efficiency of train services has 
further declined and is below the EU average. This 
is  reflected  in  the  low  use  of  rail  passenger 
transport services in Slovenia, which remains well 
below  the  EU  average.  The  share  of  rail  freight 
transport,  however,  is  still  significantly  above  the 
EU  average  (European  Commission,  2019 k).  At 
the  same  time,  the  perception  of  the  quality  of 
roads,  which  is  below  the  EU  average,  improved 
between 2017 and 2018 (WEF, 2019). 

energy 

existing 

issues.  Moreover, 
solve  existing  operational 
Slovenia’s 
is 
storage 
underdeveloped and thus fails to address the needs 
local  production  of 
of 
renewable  energy  sources.  The  draft  energy 
concept  of  Slovenia  has  identified  energy  storage 
as one of the priorities for the country. 

the  non-integrated 

Slovenia is increasing its efforts for a transition 
towards a circular economy. The government has 
drawn  up  a  circular-economy  policy  framework. 
Slovenia  also  has  a  sound  waste  management 
system  overall,  with  advanced  rates  of  separate 
collection and a high recycling rate of 58.9% (EU 
average  of  47  %)  in  2018. In  addition,  Slovenia’s 
overall  eco-innovation  index  was  107  in  2018, 
placing  it  10th  in  the  EU  (an  improvement  since 
2015) and above the EU average of 100 (European 
Commission,  2018 c).  At 
time, 
Slovenia’s  low  material  productivity  and  high-
energy  intensity  are  cause  for  concern.  Some 
recycled materials cannot compete against cheaper 
primary resources. This is reflected in the circular 
(secondary)  use  of  materials  in  Slovenia,  which 
was only 8.5%  in 2016, below  the EU average of 
11.7% (European Commission, 2019 i). 

same 

the 

faces 

difficulties  with 

invested  significantly 

Although  the  quality  of  water  has  improved, 
urban 
Slovenia 
wastewater  and  water  loss.  Supported  by  EU 
funds,  Slovenia  has 
in 
wastewater treatment. Water losses remain high: in 
2018,  29%  of  water  resources  were  lost  in  the 
distribution network (SURS, 2019), which is above 
the  EU  average  of  23%  and  considerably  higher 
than the best performers, which have leakage rates 
below  10%.  Such  leakages  are  a  waste  of  surface 
and ground water, and they result in higher energy 
use  for  water  treatment  and  distribution  purposes. 
They  also  bring 
risks  of  water 
increased 
contamination.  To  tackle  the  challenges  in  the 
the  challenge  of 
water  sector, 
financing  the  municipal  water  infrastructure,  the 
government  proposed  an  amendment  of 
the 
national water legislation in December 2019. 

in  particular 

Similar to other EU countries, the total external 
costs of road transport in Slovenia significantly 
exceed  those  of  rail  transport.  A  recent  study 
published by the European Commission (CE Delft, 
2019) estimates the total external costs of road and 
rail  transport  in  Slovenia  at  €2.7  billion  annually. 
This  corresponds  to  5.5%  of  Slovenia’s  GDP  and 

43 

3.5.  ENVIRONMENTAL SUSTAINABILITY 

Main sustainability challenges 

Production  and  consumption  patterns  are 
putting  pressure  on  the  environment.  The 
ecological  footprint (38)  of  Slovenia  has  been 
increasing  since  the  financial  crisis  and  has 
reached 5.13 global hectare/person in 2016, which 
is  close  to  the  EU  average.  Slovenia’s  target  is  to 
reduce  it  to  3.8  global  hectare/person  by  2030 
(IMAD,  2019 a).  The  conservation  status  of 
national  habitats  has  deteriorated  in  recent  years 
(EEA,  2019 a).  However,  the  ecological  deficit  is 
above  the  EU  average  and  amounts  to  twice  the 
bio-capacity of Slovenian nature (Global Footprint 
Network, 2017; IMAD, 2019 a). 

are  still  to  be  developed.  A  broad  societal 
consensus on climate change exists. According to a 
2019  Eurobarometer,  76%  of  the  respondents 
consider  climate  change  a  very  serious  problem 
(European  Commission,  2019 m).  Although  the 
government  is  committed  to  a  just  transition  to  a 
low-carbon 
policy 
documents  fail  to  explain  how  to  achieve  a  high 
quality of life for all, including  good employment 
and  educational  opportunities.  While  the  overall 
level  of  environmental  taxation  is  above  the  EU 
average, there may also be scope to improve its use 
to  better  support  the  policy  objectives  and  to 
ensure a just transition. 

economy, 

existing 

the 

road 

transport;  and 

Air  pollution  continues  to  raise  concerns.  The 
main  contributing  factors  to  air  pollution  are:  (i) 
increasing 
(ii)  energy 
production  as  well  as  heat  generation  from  solid 
(European  Commission,  2019 l).  The 
fuels 
exposure  of  the  urban  population  to  air  pollution 
by  particulate  matter  is  above  the  EU  average 
(Eurostat, 2017 a). The total (health and non-health 
related)  costs  of  air  pollution  by  road  traffic  in 
Slovenia  in  2016,  were  estimated  at  €354  million 
(CE  Delft,  2018).  In  addition,  it  is  estimated  that 
around  916  years  of 
lost  per  100,000 
inhabitants  in  2016  were  due  to  exposure  to  fine 
particulate matter (PM2.5), which is above the EU 
average of 800 years lost (EEA, 2019 b). 

life 

Slovenia’s  economy  is  more  carbon  intensive 
than  the  EU  average.  Carbon  intensity  remains 
above the EU average and the rate of reduction in 
carbon  intensity  since  1990  is  below  the  EU 
average  (EEA  (2019 c)  (Graph  3.5.1).  Regarding 
emission productivity (39), Slovenia belongs to the 
bottom quarter of EU countries. This raises climate 
concerns  and  means  that  the  country  might  fall 
behind  both  the  EU’s  decarbonisation  targets 
beyond  2020  and  its  own  2030  development 
strategy goals. 

Public  awareness  of  the  climate  challenges  is 
high but policy plans to ensure a just transition 

the 

resource 

(38)  This  is an indicator  of  environmental  development,  which 
compares 
individuals, 
governments, and businesses against what Earth can renew. 
It  is  measured  in  units  of  biologically  productive  area, 
which is the fertile area required to satisfy the needs of the 
population and to absorb and dispose waste generated. 
(39)  The ratio between GDP and greenhouse  gas emissions i.e. 

demand 

of 

inverse of emission intensity. 

Graph 3.5.1:  Greenhouse gas intensity of the economy, 

Slovenia and the EU 

Source: Eurostat 

Targets for 2020 and 2030 

is 

target 

increasing,  putting 

Slovenia  will  reach  the  2020  greenhouse  gas 
emission  target  but  the  achievement  of  the 
energy-efficiency 
still  uncertain. 
Slovenia  has  already  achieved  its  Europe  2020 
targets  for  energy  efficiency  and  greenhouse  gas 
emission.  However,  energy  consumption  is  above 
the  EU  average  and 
the 
achievement  of  the  EU  2020  energy  efficiency 
target at the deadline under pressure. According to 
2017  data,  Slovenia’s  final  energy  consumption 
has  been  almost  unchanged  since  2011.  This  is 
mainly  due  to  road  transport  (which  includes 
transit  transport),  followed  by  industry,  services 
and 
residential  sector  all  with  energy 
the  EU  average.  Further 
consumption  above 
energy  savings  in  the  residential  sector  will  be 
difficult,  as  energy  poverty  is  quite  widespread. 

the 

44 

8026356194364203030100200300400500600700800900SloveniaEUg CO2-eq. per EUR199020052018 
                                                           
   
3.5. Environmental Sustainability 

million of EU funds have been allocated to specific 
projects to ensure affordable and clean energy for 
all. 

Graph 3.5.2:  Renewable energy: share in gross final energy 

consumption 

Source: European Commission 

Transport 

The  transport  sector  is  a  large  contributor  of 
carbon  emissions  and  air  pollutants.  In  2017, 
transport  emissions  were  responsible  for  38%  of 
Slovenia’s total CO2 emissions. This is well above 
the  EU  average  of  26.5%  and  these  emissions 
continue  to  rise.  The  share  of  road  transport  CO2 
emissions in total transport emissions also remains 
high  (98%  in  2017)  compared  to  the  EU  average 
(81%  in  2017)  (EEA,  2019 d).  Road  transport  is 
also  a  large  emitter  of  particulate  matter  (PM10), 
contributing  to  exceedances  of  EU  limit  values. 
Slovenia  has  made  a  commitment  to  solve  this 
issue.  There  is  also  a  high  dependency  on  cars  in 
Slovenia (see Section 3.4.4). 

Slovenia  is  gradually  developing  measures  to 
reduce  the  energy  and  carbon  intensity  of 
transport.  With  2.74%  in  2017,  the  share  of 
renewables  in  transport  was  lagging  behind  the 
2020 target of 10% and was falling behind the EU 
average of 7.39% (Eurostat, 2017 b). The situation 
is  expected  to  improve  considerably  due  to  the 
measures adopted in June 2019 (amendment to the 
Energy Law). Slovenia largely depends on imports 
of biofuels. Public fuelling points for the supply of 
biofuels are  lacking, and there are  no measures in 
place to address the issue. The share of cars using 
alternative fuels is still very low. However, several 
tax  exemptions/benefits, 
measures 

(including 

Approximately 40% of the population spends more 
than  10%  of  their  income  on  energy.  This  limits 
their  scope  to  switch  to  equipment  that  is  more 
the 
energy 
achievement of SDG 7. 

efficient.  This 

impedes 

also 

Reaching the Europe 2020 target for renewable 
energy  presents  a  significant  challenge.  The 
share  of  renewable  energy  sources  in  gross  final 
energy consumption declined from 22.4% in 2013 
to  around  21.1%  in  2018,  against  the  target  of 
25%. The latest assessment of progress towards the 
2020  renewable  targets  showed  that  Slovenia  is 
falling  behind  the  planned  progress  for  2017-
2018 (40). The interruption of support to the use of 
renewables  between  2014  and  2016  has  slowed 
down  their  deployment.  Traditional  renewable 
energy  sources  such  as  wood  and  hydropower 
account  for  most  of  the  renewable  energy  supply. 
Slovenia  ranks  towards  the  bottom  of  the  EU  for 
the use of sources like wind, solar and geothermal 
energy  (IMAD,  2019 a).  The  renewable  energy 
policies  currently  being  implemented,  and  new 
initiatives  appear 
the 
required  volumes  by  2020  from  purely  domestic 
sources. 

insufficient 

trigger 

to 

Slovenia’s  planned  effort  to  increase  the  share 
of  renewables  energy  by  2030  is  limited.  Both 
the  Slovenian  development  strategy  for  2030  and 
the draft  national energy and  climate plan41 target 
an  increase  in  the  share  of  renewable  energy  by 
2030  that  is  only  by  2  pps  above  the  2020  target. 
This  is  10  pps  lower  than  the  share  of  37% 
resulting  from  the  application  of  the  formula 
presented  in  the  Governance  Regulation  (Graph 
3.5.2) (42).  In  2020,  the  Commission  will  assess, 
the  final  national  energy  and  climate  plans 
submitted  by  the  Member  States.  The  European 
Commission  assessment  of  the  draft  national 
energy  and  climate  plan  urges  Slovenia 
to 
the 
introduce  specific  measures 
mandated  share  of  renewables  across  all  the 
different  sectors  indicated  in  the  recast  of  the 
Renewable  Energy  Directive (43), 
especially 
transport,  and  heating  and  cooling.  Almost  €300 

to  achieve 

(40)  Eurostat, SHARES database.  
(41) The Commission will assess, in the course of 2020, the final 

National Energy and Climate Plan once submitted.  

(42)  Regulation  (EU)  2018/1999  on  the  Governance  of  the 

Energy Union and Climate Action. 

(43)  Directive  (EU)  2018/2001  on  the  promotion  of  the  use  of 

energy from renewable sources. 

45 

37.025.027.021.60510152025303540060810121416182022242628302020 baseline2030-based on formula2030-as from Member StatesRenewable share%                                                           
  
 
3.5. Environmental Sustainability 

values.  In  2017,  nuclear  energy  was  the  primary 
source  of  electricity  generation  (accounting  for 
39%),  followed  by coal  and  renewable  sources, 
(European 
mainly 
Commission, 2019 n). 

hydropower 

(29%). 

To  achieve  the  EU’s  decarbonisation  goals, 
increasing the use of national renewable energy 
sources,  especially  wind  is  key.  Research  shows 
that  there  is  enough  wind  in  the  country  to 
capitalise  on  wind  energy 
investments  and 
effectively  implement  wind  power  technology 
(GIZ  Vetrne  Energije,  2019).  Currently,  eight 
national  spatial  plans  are  under  preparation. 
Renewable  energy  resource  projects  are  also 
supported  by  the  Slovenian  Energy  Agency’s 
tariff  scheme.  Backing  such 
existing  feed-in 
initiatives  in  the  national  energy  and  climate  plan 
could  improve  the  feasibility  of  the  projects  and 
could incentivise further investments. 

Transition in the coal industry 

Coal plays a decisive role in the economy of one 
region of Slovenia. The Šoštanj coal power plant 
produces  35%  of  national  electricity  production. 
The Savinjska NUTS3 region, more specifically its 
sub-region of Savinjsko-šaleška, where the plant is 
located, heavily relies on coal as the main driver of 
its  economy  (see  Annex  D).  Current  plans  by  the 
Slovenian authorities assume a continuation of the 
coal-related  activities  until  the  late  2030s.  The 
plant  and  coalmine  employ  directly  around  1,600 
workers.  The  closure  of  plant  and  mine  could 
cause  up  to  29,000  job  losses  in  Slovenia.  The 
region’s  unemployment  rate  is  already  one  of  the 
highest in Slovenia. 

severe 

socioeconomic 

The  unfinished  transition  of  a  coalmine  in 
Zasavje  has 
and 
environmental  impacts  on  the  region.  After  the 
shutdown of the coalmine in the Zasavje region, a 
coal  power  plant  and  a  machine  factory  in  the 
region were also closed. In 2000, when the act on 
the  gradual  closure  was  adopted,  the  GDP  per 
capita  of  the  region  was  73.6%  of  the  Slovenian 
average.  Now,  it  amounts  only  to  53%  of  the 
average,  making  it  one  of  the  poorest  regions  of 
Slovenia (see Annex D). It is estimated that almost 
a  third  of  the  urban  area  in  Zasavje  is  degraded 
and, thus, in need of environmental rehabilitation. 

incentives and loans for alternative fuels vehicles) 
are in place or planned to help the country reach its 
targets for 2030 (Government of Slovenia, 2018 a). 
Furthermore,  there  are  plans  to  set  up  hydrogen-
accessible 
charging 
compressed 
points 
natural 
(Government of Slovenia, 2018 a). 

refuelling 

publicly 

points 

and 

gas 

Different measures for air quality improvement 
are  being  introduced.  Public  transport  will  be 
improved  and  outdated,  small  combustion  plants 
that  use  wood  for  heating  will  be  replaced.  The 
government  also  adopted  seven  regulations  to 
implement measures from the air quality plan and 
detailed  programmes  to  reduce  the  emission  of 
substances  into  the  atmosphere  from  small  and 
medium-sized combustion plants. 

Slovenia  is  nevertheless  lagging  behind  in  the 
transition to a zero-emission transport sector by 
2050.  The  share  of  transport  emissions  in  overall 
emissions  from  energy  consumption  continues  to 
rise,  and  the  share  of  road  transport  emissions 
remains high. For these reasons, the internalisation 
of  external  costs  (see  Section  3.4.4)  will  be 
important  for  the  decarbonisation  of  transport.  To 
ensure  a  comprehensive  approach  on  sustainable 
mobility,  including  the  improvement  of  energy 
efficiency and the reduction of emissions, Slovenia 
has started to implement a broad range of support 
measures.  These  measures,  proposed  in  the  draft 
national  energy  and  climate  plan  for  Slovenia 
(Government  of  Slovenia,  2018 a),  include  (i)  a 
more efficient organisation of the mobility system; 
(ii)  the  promotion  of  public  passenger  transport 
and  sustainable  freight  transport,  and  (iii)  grants 
for 
transport 
to 
infrastructure.  Further  efforts  are  needed 
promote  the  coordination  of  measures  targeted  at 
inter-city and urban public transport. 

sustainable  mobility  and 

rail 

Energy 

in 

the 

process 

Slovenia’s  current  energy  mix  represents  a 
challenge 
towards 
decarbonisation.  Out  of  gross  inland  energy 
consumption,  34%  was  accounted  for  by  oil  and 
petroleum  products,  22%  by  nuclear  energy, 
followed by solid fuels and renewables (14%) and 
natural  gas  (10%).  Domestic  sources  covered  half 
of  Slovene  energy  needs  in  2017.  For  the  other 
half,  Slovenia  depended  on  imports  of  petroleum 
products,  natural  gas  and  coal  of  high  calorific 

46 

3.5. Environmental Sustainability 

and  diversification  of 

the 

decarbonisation 
economy. 

Trade-offs 

Balancing  trade-offs  between  the  clean  energy 
transition  and  nature  conservation  in  Slovenia 
is  demanding.  Slovenia  has  a  lot  of  potential  to 
make  a  success  of  the  clean  energy  transition. 
However,  it  is  also  faced  with  environmental 
constraints.  Slovenia  has  an  extraordinarily  rich 
natural  heritage,  with  more  than  38%  of  its 
territory  protected  (e.g.  by  Natura  2000),  an 
important  element  of  SDG 15.  Particular  efforts 
will  be  needed 
the  rare  and 
endangered species and habitat types in these areas 
as  part  of  the  transition  to  clean  energy.  Projects 
and plans must be assessed on a case-by-case basis 
to  ensure  that  they  do  not  adversely  affect  the 
integrity of the site concerned. Sound planning and 
particularly 
environmental 
important  given  that  the  share  of  habitats  and 
species  with  unfavourable  conservation  status  has 
been  increasing  at  the  expense  of  habitats  and 
species  in  a  favourable  conservation  status  (EEA, 
2019 a). 

to  safeguard 

assessments 

are 

for 

like 

framework 

A  comprehensive  and  consistent  multi-sector 
sustainable 
strategic 
development  is  lacking.  While  some  relevant 
strategies  already  exist, 
the  Slovenian 
development  strategy  2030  or  the  sustainable 
urban  strategy,  there  is  currently  no  medium-  or 
long-term  strategy  for  climate  adaptation,  the 
green energy transition or the coal phase-out. Early 
work 
to  begin  drafting  such 
strategies. These strategies  would also be  relevant 
to  achieve  SDG 13  and  for  the  inhabitants,  as 
significant  share  of  the  population  lives  in  areas 
to  climate-change-induced  floods (44), 
exposed 
which have affected and caused economic damage 
in all regions since 2007 (Government of Slovenia, 
2018 b).

is  under  way 

(44)  The  population  affected  by  flooding  every  year  is  about 
70,000  and  the  yearly  average  affected  GDP  about 
€1 billion (World Bank, 2017). 

attainment 

The  coal  regions  are  characterised  by  several 
factors  unfavourable  for  economic  transition. 
High  unemployment  in  coal  regions  is  often 
accompanied  by  little  economic  diversification, 
lower  productivity,  and  ageing  populations. 
Educational 
adult 
participation  in  training  in  the  affected  regions  is 
far below the EU average. Partially because of the 
the  regions  are  not  attractive 
coal 
locations 
investments  and  new 
companies.  Therefore,  the  coal  workers  are  less 
likely  to  find  another  job  in  their  home  regions 
than  most  other  European  workers  in  their  home 
regions (Institute Jacques Delors, 2019). 

for  direct 

industry, 

levels 

and 

The  economic 
these  regions 
transition  of 
requires  a  comprehensive  set  of  measures.  An 
assessment  of  future  needs  on  the  ground  can  be 
helped  by  a  rethinking  of  social  assistance, 
training, labour market policies and social policies 
(see  Section  3.3),  involving  social  partners  and 
other  relevant  stakeholders.  Applying  the  relevant 
smart  specialisation  strategy  could  also  help.  The 
re-skilling  of  coal  workers  can  take  place  in  re-
education  activities  of  differing  intensity.  The 
wind  and  solar  photovoltaic  industries  have  been 
identified  as  particularly  suitable  for  reemploying 
coal  workers  that  have  retrained  but  they  require 
on  average  higher  qualified  employees  than  the 
coal industry (European Commission, 2018 d). 

The  transition  requires  significant  financial 
efforts in the area, which could be supported by 
EU 
funds.  The  European  Commission  has 
proposed  a  Just  Transition  Fund  to  support  the 
people  and  the  regions  most  affected  by  the 
transition away from the coal economy. Dedicated 
investment  guidance  for  the  Fund  is  provided  in 
Annex D. The Slovenian authorities intend to have 
a national transition strategy adopted by the end of 
2020.  The  strategy 
include 
is 
the 
anticipatory  and  mitigating  measures  for 
regions  where  coal-powered  energy  production  is 
to be phased out as well as mitigating measures for 
the  regions  where  the  transition  is  ongoing.  The 
lay  out  measures  for  the 
strategy  will  also 

intended 

to 

47 

                                                           
 
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment (45)  

2019 country-specific recommendations (CSRs)  

Slovenia  has  made  limited  progress  in  addressing 
CSR 1  

CSR  1:  Achieve 
the  medium-term  budgetary 
objective  in  2020.  Adopt  and  implement  reforms  in 
healthcare  and  long-term  care  that  ensure  quality, 
long-term  fiscal  sustainability. 
accessibility  and 
Ensure  the  long-term  sustainability  and  adequacy  of 
the  pension  system,  including  by  adjusting  the 
statutory  retirement  age  restricting  early  retirement 
and other forms of early exit from the labour market. 
Increase  the  employability  of  low-skilled  and  older 
workers  by  improving  labour  market  relevance  of 
education  and 
learning  and 
activation  measures,  including  through  better  digital 
literacy.  

training, 

lifelong 

Achieve  the  medium-term  budgetary  objective  in 
2020.  

The compliance assessment with the Stability and 
Growth Pact will be included in Spring when final 
data for 2019 will be available.  

Adopt and implement reforms in healthcare  

Limited  Progress  The  Member  State  has  not  yet 
presented the legislative act (Health Care and Health 
Insurance  Act)  in  the  governing  or  legislator  body. 
The  proposal  is  not  been  included  in  the  2019-2020 
National  Reform  Programme.  A  new  Health  Care 
and Health Insurance Act is in the Work Programme 
of  the  Ministry  of  Health  and  is  currently  being 
worked  on  by  the  services.  It  is  expected  to  be 
discussed  by  the  Government  of  the  Republic  of 

(45)  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.  

48 

 
                                                           
 
A. Overview table 

Slovenia  in  mid-2020  (its  adoption  by  the  National 
Assembly is expected in the autumn of 2020). Other 
measures  have  been  announced  but  these  only 
address  the  CSR  to  a  limited  extent.  The  European 
Commission  under  the  Structural  Reform  Support 
Programme  helps  Slovenia  to  implement  key  health 
sector  reforms 
the  areas  of  health  system 
governance,  hospital  financing,  quality  of  care,  and 
long-term care.  

in 

and  long-term  care  that  ensure  quality,  accessibility 
and long-term fiscal sustainability.  

No Progress The reform is not included in the 2019-
2020  National  Reform  Programme.  The  work 
programme  of  the  Ministry  of  Health  envisages  the 
proposal of the act of long-term care to be submitted 
for  public  discussion  in  January  2020  and  adoption 
potentially still in 2020.  

Ensure  the  long-term  sustainability  and  adequacy  of 
the  pension  system,  including  by  adjusting  the 
statutory  retirement  age  restricting  early  retirement 
and other forms of early exit from the labour market.  

Limited  Progress  The  pension  reform  adopted  in 
November  2019  improves  the  adequacy  of  pensions 
but puts a strain on the sustainability of the pension 
system in the long term. At the same time, measures 
taken  in  2012  to  limit  early  retirement  seem  to  be 
having some effect, but the early exit from the labour 
market remains a challenge. 

Increase  the  employability  of  low-skilled  and  older 
workers  by  improving  labour  market  relevance  of 
education  and 
learning  and 
activation  measures,  including  through  better  digital 
literacy.  

training, 

lifelong 

implemented  additional 

Some  Progress 
In  2019,  Slovenia  adopted 
amendments to labour market regulation act aimed at 
faster  activation  and  higher  social  security  of 
in  unemployment 
unemployed  people.  Changes 
benefits  will  also  likely  influence  unemployment 
levels  of  older  people  (prior  to  retirement).  The 
authorities  also 
labour 
market  measures  that  provide  life-long  learning  and 
training  measures  relevant  for  labour  market  needs. 
There  are  also  soft  measures  (through  competence 
centres for human resources development; Support to 
Enterprises  for  active  ageing  of  Labour  Force)  to 
improve  employment  of  older  people  and  long-term 
unemployed.  Finally,  ALMPs  also  appear  to  better 
target  older  people  (31%  until  August  2019)  and 
long-term unemployed (28%), though this still leaves 
room  for  improvement.  Concerning  the  aspect  of 
"better  digital  literacy",  Slovenia  has  made  only 
limited  progress:  Some  projects 
for  digital 
transformation  of  economy  have  been  put  in  place 
and  are  at  cruising  speed  through  the  Strategic 
Research and Innovation Partnerships. Further, there 
are  several  pilot  actions  in  schools  for  improving 
digital  literacy.  However,  no  changes  have  been 
made into school curricula to enhance the teaching of 
digital skills in schools. Finally, no review or up-date 
of digital programme in existing curricula  has  taken 

49 

A. Overview table 

place.  

CSR 2: Support the development of equity markets. 
Improve  the  business  environment  by  reducing 
regulatory  restrictions  and  administrative  burden. 
Improve 
and 
independent  oversight  in  public  procurement.  Carry 
out privatisations in line with the existing plans.  

professionalisation 

competition, 

Slovenia  has  made  some  progress  in  addressing 
CSR 2.  

Support the development of equity markets.  

Limited Progress Slovenia continued implementing 
support  measures  launched  earlier  on  in  order  to 
strengthen  its  equity  markets.  Major  new  initiatives 
were not launched in 2019.  

Improve  the  business  environment  by  reducing 
regulatory restrictions and administrative burden.  

Some Progress Slovenia continued to implement its 
burden  reduction  efforts,  such  as  under  the  Single 
Document, the SME test and e-government. Slovenia 
has  removed  certain  restrictions  in  the  access  to  the 
professions  of 
real  estate  agent. 
Nevertheless,  the  legal  professions  (lawyers  and 
notaries) remain highly regulated.  

lawyer  and 

Improve 
professionalisation 
independent oversight in public procurement.  

competition, 

and 

independent  oversight 

Some  Progress  Slovenia  adopted  an  important 
reform of the National Reform Commission, thereby 
in  public 
strengthening 
procurement.  Setting  up 
foreseen 
structures is still to be done. Slovenia also continued 
implementing 
increase 
its  Action  Plan 
professionalisation.  Competition  benefits  from  e-
procurement as well as from good efforts to facilitate 
SME participation in tenders, but remains a problem.  

the  newly 

to 

Carry  out  privatisations  in  line  with  the  existing 
plans.  

Some Progress  Another 10% of the shares of NLB, 
have  been  sold,  and  the  sale  of  Abanka  has  been 
finalised in 2019, in line with obligations under State 
aid rules; however, other privatisations have come to 
a halt. 

CSR  3:  Focus  investment-related  economic  policy 
on  research  and  innovation,  low  carbon  and  energy 
transition, sustainable transport, in particular rail, and 
environmental  infrastructure,  taking  into  account 
regional disparities.  

Slovenia  has  made  limited  progress  in  addressing 
CSR 3.  

investment-related  economic  policy  on 

Focus 
research and innovation,  

Some  Progress  Slovenia  has  not  fully  implemented 
its research and innovation strategy, and there is little 
harmonisation 
and 
strategies. 

different 

policies 

among 

low carbon and energy transition,  

Limited  Progress  Climate  change  adaptation 
received  about  €90  million  for  climate  change 
adaptation  from  the  cohesion  policy  for  2014-2020. 

50 

A. Overview table 

The  selection  and  implementation  of  projects  has 
improved.  However,  a  comprehensive  climate 
change  strategy  covering  all  sectors  has  not  been 
prepared yet.  A  more  specific regulatory  framework 
for the adaptation to climate change is planned to be 
provided  in  the  Environmental  Protection  Law, 
which  is  currently  being  adopted.  The  use  of  low 
carbon  energy  remains  limited  and  there  are  lags  in 
the  implementation  of  the  programme  the  fields  of 
transport and power generation. 

Some  Progress  Slovenia  published  an  investment 
plan for transport to increase the funding of railways 
and sustainable  mobility in the period 2020-2025. It 
also  adopted  an  ‘Action  plan  for  alternative  fuels  in 
transport’  setting  specific  objectives  and  measures 
for uptake of alternative fuels in transport. 

sustainable transport, in particular rail, and  

environmental  infrastructure,  taking  into  account 
regional disparities.  

accelerated 

Limited  Progress  Slovenia 
the 
implementation  of  the  EU  co-financed  wastewater 
projects but investment gap still prevail in this sector. 
In addition, the integration of environmental aspects, 
particularly, nature considerations, into planning and 
implementing  infrastructure  projects,  is  challenging. 
To  tackle  the  challenges  in  the  water  sector,  the 
Government proposed an amendment of the national 
water legislation in December 2019.  

Europe 2020 (national targets and progress)  

Employment rate target: 75 %.  

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

Target  achieved.  Employment  rate  stood  in  2018  at 
75.4%,  above  the  Europe  2020  target  and  the  EU 
average (73.2%). 

In 2018, R&D spending was 1.95% of GDP, slightly 
below  the  EU  average  of  2.11%.  Business  R&D 
spending  was  1.45%  of  GDP  (EU  average  1.41%) 
and public R&D spending was 0.5% of GDP.  

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

GHG  emissions in 2016  were lower than the annual 
target  by  9%.  Projections  indicate  that  the  Republic 
of  Slovenia  will  achieve  its  2020  targets  of  a 
maximum 4% increase in GHG emissions compared 
to 2005.  

2020 renewable energy target: 25%  

The  target  to  achieve  a  25%  share  of  renewable 
energy  resources  (RES)  in  the  final  total  energy 
consumption  by  2020  is  slowly  drifting  away  In 

51 

 
 
 
A. Overview table 

2018,  the  share  of  renewable  energy  in  final  total 
energy  consumption  was  21.1%,  significantly  below 
the 22.4% of 2013.  

Energy efficiency, 2020 energy consumption targets:  

Slovenia's 2020 energy efficiency target is 7.1 Mtoe 
expressed in primary energy consumption (5.1 Mtoe 
expressed in final energy consumption) 

For  2018,  Slovenia  remains  within  the  indicative 
target  for  2020  for  primary  energy  consumption.  In 
2018,  primary  energy  consumption  amounted  to  6.7 
Mtoe  and  decreased  by  0.8%  compared  to  the 
previous  year.  However,  compared  to  the  previous 
year the final energy consumption rose by 0.6% to 5 
Mtoe,  getting  close  to  the  level  of  5.1  Mtoe 
corresponding to the 2020 energy efficiency target.  

Early school/training leaving target: 5%.  

Target  achieved.  In  2018,  the  early-school-leaving 
rate in Slovenia was 4.2%, 0.8 pps under the national 
target 
in  2017. 
Early-school-leaving in Slovenia is among the lowest 
in the EU. 

and  0.1  pps  better 

than 

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

Target  achieved.  Tertiary  attainment  was  42.7%  in 
2018,  above  the  Europe  2020  target  and  the  EU 
average,  though  it  has  decreased  by  3.7  pps  in 
relation to 2017. 

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 2018, the number of people at risk of poverty and 
social  exclusion  fell  for  the  fourth  consecutive  year. 
However, 326,000 people were still at risk of poverty 
or  social  exclusion  (minus  34,000  compared  to  base 
year). 

52 

 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

53 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio70.466.763.159.556.554.252.550.649.147.947.146.746.7Changes in the ratio (-1+2+3)-3.7-3.8-3.6-3.6-3.0-2.3-1.7-1.9-1.6-1.2-0.7-0.40.0of which(1) Primary balance (1.1+1.2+1.3)2.82.12.02.01.50.90.40.20.0-0.2-0.6-0.9-1.2(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)1.30.70.60.70.70.50.40.20.0-0.2-0.6-0.9-1.2(1.1.1) Structural primary balance (bef. CoA)1.30.70.60.70.70.70.70.70.70.70.70.70.7(1.1.2) Cost of ageing0.00.20.30.50.70.91.31.61.9(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component1.51.51.51.30.80.40.00.00.00.00.00.00.0(1.3) One-off and other temporary measures-0.1-0.1-0.10.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-2.5-1.9-1.8-1.7-1.4-1.4-1.3-1.7-1.6-1.4-1.3-1.3-1.2(2.1) Interest expenditure2.01.61.51.41.21.11.00.90.80.70.70.70.6(2.2) Growth effect-2.9-1.7-1.7-1.6-1.4-1.3-1.3-1.5-1.4-1.2-1.1-1.1-0.9(2.3) Inflation effect-1.6-1.8-1.6-1.4-1.3-1.2-1.1-1.0-1.0-1.0-0.9-0.9-0.9(3) Stock-flow adjustments1.60.30.20.00.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. 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 after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five 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 and the DSM 2019.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. 3040506070809020172018201920202021202220232024202520262027202820292030Debt as % of GDP -SIBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario3040506070809020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -SIp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline3040506070809020172018201920202021202220232024202520262027202820292030Debt as % of GDP -SIBaselineHistorical SPB scenarioSGP scenario3040506070809020172018201920202021202220232024202520262027202820292030Debt as % of GDP -SIBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2030)46.753.049.248.946.8Debt peak year20192019201920192019Percentile rank45.0%59.0%Probability debt higher6.3%Dif. between percentiles22.2MEDIUMLong termMEDIUM(S2 = 5.4)S1S2Short termLOW(S0 = 0)DSALOWDebt sustainability analysis (detail)Medium termLOWLOW(S1 = -1) 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2019. 
(3) Quarterly values are annualised. 
(*) Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

54 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)115.8107.199.694.188.887.3Share of assets of the five largest banks (% of total assets)55.659.261.061.560.8-Foreign ownership of banking system (% of total assets)(2)33.634.046.145.846.050.1Financial soundness indicators:(2)              - non-performing loans (% of total loans)22.817.912.39.26.04.5              - capital adequacy ratio (%)17.918.619.118.117.918.1              - return on equity (%)(3)-2.53.57.89.110.712.3Bank loans to the private sector (year-on-year % change)(1)-9.1-4.22.85.93.75.4Lending for house purchase (year-on-year % change)(1)0.51.84.25.54.44.9Loan-to-deposit ratio(2)79.474.174.074.773.174.4Central bank liquidity as % of liabilities(1)3.32.82.33.53.32.8Private debt (% of GDP)97.987.481.176.372.8-Gross external debt (% of GDP)(2) - public62.464.657.451.046.145.4    - private40.637.135.433.632.931.2Long-term interest rate spread versus Bund (basis points) (*)210.7120.9105.964.353.454.6Credit default swap spreads for sovereign securities (5-year) (*)138.5107.895.072.559.970.8 
 
 
   
 
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) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019. 
(4) 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).   
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap. 
Source: Eurostat 

55 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)4.45.04.94.34.2:Gender employment gap (pps)8.08.66.67.27.37.4Income inequality, measured as quintile share ratio (S80/S20)3.73.63.63.43.4:At-risk-of-poverty or social exclusion rate(1) (AROPE)20.419.218.417.116.2:Young people neither in employment nor in education and training (% of population aged 15-24)9.49.58.06.56.6:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)67.769.170.173.475.476.5Unemployment rate(2) (15-74 years)9.79.08.06.65.14.3Long-term unemployment rate (as % of active population)5.34.74.33.12.22.0Gross disposable income of households in real terms per capita(3) (Index 2008=100) 92.995.099.7102.7106.1:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)147411495815049:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-0.510.501.17:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)42.242.342.844.643.2:Children aged less than 3 years in formal childcare37.437.439.644.846.3:Self-reported unmet need for medical care0.20.20.43.53.3: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) Long-term unemployed are people who have been unemployed for at least 12 months. 
(2) 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.    
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2015 refer to mathematics and those for 
2018 refer to reading. 
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted. 
Source: Eurostat, OECD 

56 

Labour market indicators201420152016201720182019(5)Activity rate (15-64)70.971.871.674.275.075.5Employment in current job by durationFrom 0 to 11 months8.812.410.913.411.3:From 12 to 23 months7.17.88.38.09.1:From 24 to 59 months14.213.714.213.814.3:60 months or over68.366.266.564.865.3:Employment growth(*)(% change from previous year)0.41.31.83.03.22.6Employment rate of women(% of female population aged 20-64)63.664.766.769.771.772.7Employment rate of men (% of male population aged 20-64)71.673.373.376.979.080.1Employment rate of older workers(*)(% of population aged 55-64)35.436.638.542.747.048.8Part-time employment(*)(% of total employment, aged 15-64)10.010.19.310.39.78.5Fixed-term employment(*)(% of employees with a fixed term contract, aged 15-64)16.517.816.917.615.713.3Transition rate from temporary to permanent employment(3-year average)41.041.242.438.440.7:Youth unemployment rate (% active population aged 15-24)20.216.315.211.28.88.0Gender gap in part-time employment6.96.67.27.78.37.7Gender pay gap(2) (in undadjusted form)7.08.17.88.0::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)12.111.911.612.011.4:Underachievement in education(3):16.1::16.4:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)41.043.444.246.442.7:Variation in performance explained by students' socio-economic status(4):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 

57 

201320142015201620172018Expenditure on social protection benefits(*) (% of GDP)Sickness/healthcare7.47.27.67.67.6:Disability1.51.41.31.21.1:Old age and survivors11.811.511.311.010.5:Family/children1.91.81.81.71.8:Unemployment0.80.70.60.60.5:Housing0.00.00.00.00.0:Social exclusion n.e.c.0.60.70.70.70.7:Total24.223.523.422.922.3:of which: means-tested benefits1.81.81.81.81.9:General government expenditure by function (% of GDP)Social protection18.617.817.316.816.2:Health6.86.56.76.76.6:Education6.56.05.55.55.4:Out-of-pocket expenditure on healthcare:13.012.512.012.3:Children at risk of poverty or social exclusion (% of people aged 0-17)*17.517.716.614.915.113.1At-risk-of-poverty  rate(1) (% of total population)14.514.514.313.913.313.3In-work at-risk-of-poverty rate (% of persons employed)7.16.46.76.16.66.0Severe material deprivation rate(2)  (% of total population)6.76.65.85.44.63.7Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan4.54.73.53.33.03.1Tenant, rent at market price18.918.818.912.215.016.2Proportion of people living in low work intensity households(4) (% of people aged 0-59)8.08.77.47.46.25.4Poverty thresholds, expressed in national currency at constant prices*601059256113615763606524Healthy life years at age 65Females7.68.67.68.27.2:Males7.27.88.28.47.2:Aggregate replacement ratio for pensions(5)0.50.50.50.50.50.5Connectivity dimension of the Digital Economy and Society Index (DESI)(6):47.151.855.057.6:GINI coefficient before taxes and transfers(*)47.247.046.746.145.7:GINI coefficient after taxes and transfers(*)24.424.924.524.323.7: 
 
 
  
 
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) Simple average of the indicators of regulation for lawyers, accountants, architects and engineers.  
(9) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR). 
(*) Please be aware that the indicator values from 2003 to 2013 are comparable, however the methodology has 
considerably changed in 2018 and therefore past vintages cannot be compared with the 2018 PMR indicators. 
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). 

58 

Performance indicators201320142015201620172018Labour productivity per person(1) growth (t/t-1) in %Labour productivity growth in industry1.553.670.092.114.48-0.63Labour productivity growth in construction-2.3811.02-3.77-2.585.911.43Labour productivity growth in market services0.852.851.431.140.961.24Unit Labour Cost (ULC) index(2) growth (t/t-1) in %ULC growth in industry0.44-0.492.020.86-1.094.35ULC growth in construction3.24-5.686.334.96-1.144.70ULC growth in market services-1.95-0.980.111.491.952.81Business environment201320142015201620172018Time needed to enforce contracts(3) (days)127012701160116011601160Time needed to start a business(3) (days)6.06.06.06.06.08.0Outcome of applications by SMEs for bank loans(4)0.381.080.410.670.610.56Research and innovation201320142015201620172018R&D intensity2.562.372.202.011.871.95General government expenditure on education as % of GDP6.506.005.505.505.40:Employed people with tertiary education and/or people employed in S&T as % of total employment434344444544Population having completed tertiary education(5)242527272929Young people with upper secondary education(6)929091919192Trade balance of high technology products as % of GDP-0.60-0.83-0.62-0.65-0.68-0.89Product and service markets and competition2003200820132018*OECD product market regulation (PMR)(7), overall:1.891.701.29OECD PMR(7), retail:0.900.631.15OECD PMR(7), professional services(8)::2.561.88OECD PMR(7), network industries(9)4.843.412.901.74 
  
 
 
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)  
     Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)  
     Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)  
     Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)  
     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 including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR).  
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR).  
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels.  
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger 
diversification and hence lower risk.  
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels. Smaller values indicate larger diversification.  
* European Commission and European Environment Agency - 2018 provisional data. 
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).  

59 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.190.180.170.170.170.16Carbon intensity kg / €0.520.460.450.460.43-Resource intensity (reciprocal of resource productivity)kg / €0.710.750.740.690.670.70Waste intensity kg / €-0.13-0.14--Energy balance of trade % GDP-5.5-4.1-3.1-2.1-2.6-2.9Weighting of energy in HICP%14.3814.7214.2312.9911.8811.76Difference between energy price change and inflation p.p.0.6-0.9-2.9-2.60.24.2Real unit of energy cost% of value added10.19.59.79.9--Ratio of environmental taxes to labour taxesratio0.130.120.120.120.12-Environmental taxes% GDP3.93.93.93.93.73.5Sectoral Industry energy intensity kgoe / € 0.130.130.130.120.120.12Real unit energy cost for manufacturing industry excl. refining% of value added13.212.112.212.3--Share of energy-intensive industries in the economy% GDP11.1911.3410.9211.1611.4011.14Electricity prices for medium-sized industrial users€ / kWh0.100.090.080.080.080.09Gas prices for medium-sized industrial users€ / kWh0.050.040.040.030.030.03Public R&D for energy % GDP0.010.010.010.010.020.02Public R&D for environmental protection% GDP0.010.010.030.020.020.03Municipal waste recycling rate%34.836.054.155.657.858.9Share of GHG emissions covered by ETS*%40.336.936.336.637.637.2Transport energy intensitykgoe / €1.101.040.960.950.920.88Transport carbon intensitykg / €0.460.420.390.370.370.36Security of energy supplyEnergy import dependency%47.845.549.749.350.4-Aggregated supplier concentration indexHHI35.928.36.11.90.9-Diversification of energy mixHHI23.725.023.424.023.623.6 
    
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR SLOVENIA 

Building  on  the  Commission  proposal,  this  Annex (46)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition  Fund  investments  in  Slovenia.  These  priority  investment  areas  are  derived  from  the  broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards a climate-neutral economy of the Union by 2050 in Slovenia, assessed in the report. This Annex 
provides the basis for a dialogue between Slovenia and the Commission services as well as the relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Slovenia (47). 

In  Slovenia,  the  Zasavska  region  is  enduring  a  transition  away  from  coal-related  activities  while  the 
Savinjska region, in particular Savinjsko-Šaleška, continues to suffer from significant challenges linked to 
the on-going extraction and processing of fossil fuels, mostly coal. 

Zasavska faces a significant challenge of unfinished transition. As a consequence of the almost finalised 
closure of the Zasavje coal mine and the closure of the region’s coal-fuelled power plant, Zasavska has 
been facing  social hardship (8.3% unemployment  vs 7.4% nationally). Since 2013 approximately 5,000 
jobs have been lost and GDP has been falling (53% of the Slovene average). Based on this preliminary 
assessment, it appears warranted that the Just Transition Fund concentrates its intervention on that region.  

The smart specialisation strategy (48) provides an important framework to set priorities for innovation in 
support  of  economic  transformation.  In  order  to  tackle  these  transition  challenges,  priority  investment 
needs  have  been  identified  for  diversifying  and  making  the  regional  economy  more  modern  and 
competitive,  as  well  as  alleviating  the  socio-economic  costs  of  transition.  Key  actions  of  the  Just 
Transition Fund could target in particular: 

• 

• 

• 

• 

• 

productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 
reconversion; 

investments  in  research  and  innovation  activities  and  fostering  the  transfer  of  advanced 
technologies in line with the Slovenian smart specialisation strategy; 

investments in the deployment of technology and infrastructures for affordable clean energy; 

investments in digitalisation; 

upskilling and reskilling of workers. 

Environmental  pollution  and  degradation  as  a  direct  result  of  mining  activities  are  visible  in  the  area. 
Almost a third of the urban area of Zasavje is degraded and thus in need of environmental rehabilitation. 
In  order  to  tackle  these  transition  challenges,  investment  needs  have  been  identified  for  achieving 
environmental sustainability and resource efficiency. Key actions of the Just Transition Fund could target 
in particular: 

(46)  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  Just  Transition  Fund  2021-2027  (COM(2020)  22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020) 23. 

(47) SWD(2019) 1023 final 
(48) As defined in Article 2(3) of Regulation EU 1303/2013 (CPR) 

60 

 
                                                           
D. Investment guidance on Just Transition Fund 2021-2027 for Slovenia 

• 

investments  in  regeneration  and  decontamination  of  sites,  land  restoration  and  repurposing 
projects; 

• 

investments in enhancing the circular economy. 

The  Savinjska region  has an  operational coal mine  and a coal power plant (Šoštanj) generating 35% of 
national  electricity  production.  Environmental  pollution  and  degradation  as  a  direct  result  of  mining 
activities  are  visible  in  the  area.  Due  to  the  caving-in  of  the  ground  in  Savinjsko-Šaleška,  three  lakes 
already  formed  on  the  territory  of  a  few  former  settlements.  The  ground  is  still  sinking,  which  puts 
additional  settlements  at  risk.  Based  on  this  preliminary  assessment,  it  appears  warranted  that  the  Just 
Transition Fund also intervenes in this region. 

In order to tackle these transition challenges, priority investment needs have been identified for achieving 
a  low  carbon  transition,  environmental  sustainability  and  resource  efficiency.  Key  actions  of  the  Just 
Transition Fund could target in particular: 

• 

• 

• 

• 

investments in the deployment of technology and infrastructures for affordable clean energy; 

investments  in  regeneration  and  decontamination  of  sites,  land  restoration  and  repurposing 
projects; 

investments in enhancing the circular economy; 

upskilling and reskilling of workers. 

Coal-related activities in the Savinjska region (the mine, the plant and the related companies, subsidiaries 
and services) provide direct employment  for around 2,200 people. Learning  from the experience of the 
Zasavje region, such closures could have significant negative effects on the entire economy of the region. 
In order to tackle these transition challenges, investment needs have been identified for diversifying and 
making  the  regional  economy  more  modern  and  competitive,  as  well  as  alleviating  the  socio-economic 
costs of transition. Key actions of the Just Transition Fund could target in particular: 

• 

• 

• 

• 

• 

productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 
reconversion; 

investments  in  research  and  innovation  activities  and  fostering  the  transfer  of  advanced 
technologies, in line with the Slovenian smart specialisation strategy; 

investments in digitalisation; 

upskilling and reskilling of workers; 

active inclusion of jobseekers. 

61 

ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGS) 

Assessment of Slovenia’s short-term progress towards the SDGs (49) 

Table E.1 shows the data for Slovenia and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for  monitoring progress towards the SDGs in an EU context (50). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the  SDI dedicated section of 
the Eurostat website. 

Table E.1: 

Indicators measuring Slovenia’s progress towards the SDGs 

(49)  Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(50)  The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

62 

 
 
                                                           
 
  
 
References 

Table (continued) 

(Continued on the next page) 

63 

 
 
 
 
  
 
References 

Table (continued) 

(Continued on the next page) 

64 

 
 
 
 
  
 
References 

Table (continued) 

(Continued on the next page) 

65 

 
 
 
 
  
 
References 

Table (continued) 

Source: Eurostat 

66 

 
 
 
  
 
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