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Slovenia Economic Snapshot

Economic Survey of Slovenia (July 2022)

Slovenia’s strong post-pandemic recovery has been hit by strong headwinds from the war in Ukraine, higher energy prices, and supply chain bottlenecks. At the same time, the strong labour market performance has led to historically high employment, low unemployment and widespread labour shortages. Thus, inflation will remain high as growth slows. Looking further out, population ageing will lead to a smaller and older workforce, while the number of pensioners increases. Financing the fiscal costs of population ageing requires containing ageing-related spending increases in the pension, health and long-term care systems.

Executive Summary

Presentation

Economic Forecast Summary (June 2022)

GDP growth is projected to moderate to 4.6% in 2022 and 2.5% in 2023, in part reflecting the negative impact from the war in Ukraine. Domestic demand will be the main growth driver. The labour market is expected to remain tight, with historically high employment and low unemployment rates continuing to put pressure on wages. Together with high and rising fuel and food prices, this will lead to higher headline inflation. A major risk is that stronger wage growth could further raise inflation expectations and lead to a wage-price spiral.

Reform Priorities (April 2021)

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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