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Slovenia Economic Snapshot

Going for Growth 2021 - Slovenia

Several long-standing vulnerabilities risk slowing down the recovery. Lowering labour taxes should be a priority. Currently, low-skilled workers have few incentives to enter employment or increase work efforts as high-income taxes erode income gains. Another concern is the relatively high share of state-owned enterprises, present across all sectors, which hinder competition and reallocation of resources to most productive firms during the recovery.

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2021 Structural Reform Priorities

  • Tax system: Adjust the tax-benefit system to strengthen work incentives for low and high income earners
  • Labour market: Reform the wage setting process and improve targeting of employment and training assistance
  • Competition and regulation: Eliminate barriers to entry and competition
  • Education and skills: Improve students' performance and employment prospects
  • Labour market and fiscal sustainability: Reform pension regime in light of rapid ageing

 

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Economic Forecast Summary

GDP is set to fall by 7.5% in 2020 and grow by 3.4% in 2021 as the effects of the pandemic will continue to disturb economic activity until at least mid-2021. From then until the end of the projection horizon in 2022, investment and exports will be the main engines of growth thanks to higher demand in trading partner countries, improvements in the epidemiological situation, increased household confidence due to the rolling out of an effective vaccine, and the effects of the EU stimulus plan.

Targeted sectoral support measures may need to be continued to tackle sporadic virus outbreaks, while immunisation has not been attained, and to avoid a negative long-lasting impact on the economy. Employment transitions would benefit from directing employment and training subsidies to job seekers with high assistance needs. Prolonged wage support is needed in the tourism and entertainment sectors.

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