Slovenia’s economy has made impressive progress over the past decade, with real GDP growing, unemployment falling, and a strong ranking of exports as part of national output. However, not all parts of the country have benefited equally. Economic activity, foreign direct investment and employment opportunities are increasingly concentrated in and around Ljubljana, while many of Slovenia’s 12 regions are experiencing lower rates of labour productivity and R&D. In addition, while quality of life in Slovenia is generally high, there are regional variations – particularly in some health, social and life satisfaction indicators – with implications for regional development. This report explores recent economic and social trends in Slovenia and considers what is driving regional inequalities, including competitiveness gaps, differences in regional attractiveness, and the uneven impacts of structural challenges, such as the transition to net zero. The report then considers Slovenia’s multi-level governance system and how it could be strengthened to better support regional development and the implementation of the forthcoming national regional development strategy. The report also offers a set of policy recommendations and a plan for implementing a short set of priority actions to build more competitive regions in Slovenia.
Building More Competitive Regions in Slovenia
Abstract
Executive summary
The Slovenian economy has grown steadily over the past decade, with real gross domestic product (GDP) growth outpacing the OECD (2.9% vs. 2.3% per annum on average), unemployment falling to historic lows (3.7% in 2024) and goods exports, as a share of GDP, consistently ranking among the highest in the European Union. However, the international competitiveness of the Slovenian economy is geographically uneven, and the recent economic success has not benefitted all regions equally. On most development indicators, the Osrednjeslovenska region, home to the capital city of Ljubljana, continues to outperform the others. For example, GDP per capita in Osrednjeslovenska (EUR 44.6 thousand) was nearly 50% higher than the national average (EUR 30.2 thousand) and 171% higher than Zasavska (EUR 16.5 thousand), with the gap between Osrednjeslovenska and other regions widening over the past decade.
The strong gravitational pull of Ljubljana, and the slower speed of economic development in other regions, are the driving force behind Slovenia’s forthcoming national regional development strategy. This strategy, if carefully formulated, can help guide and co-ordinate national and subnational government investment towards Slovenia’s most pressing regional development challenges. However, in addition to an improved strategic framework, changes to Slovenia’s multi-level governance system could be required to more effectively support regional development. The country currently has 212 municipalities, with population sizes that vary markedly, ranging from around 300 in the smallest municipalities to more than 300 000 inhabitants in Ljubljana.
Greater territorial consolidation at the municipal level could improve resource capacity to implement strategies and programmes and deliver public services, as well as helping all levels of government better achieve regional development objectives. In parallel, stronger mechanisms to support inter-ministerial and multi-level co-ordination, as well as more rigorous monitoring and evaluation of regional and local development initiatives, would help Slovenian policymakers deliver on their regional development ambitions.
The strong gravitational pull of Ljubljana contributes to the increased regional inequality seen in the last decade. Not only is GDP per capita in Osrednjeslovenska the highest in the country (EUR 44 567, compared to the national average of EUR 30 158), but Ljubljana and its surrounding suburbs receive the vast majority of foreign direct investment and research and development expenditure. In 2023, for example, Osrednjeslovenska received 58.9% of FDI and was responsible for 58.4% of R&D expenditure.
Quality of life is generally high in Slovenia, but social inequalities are undermining regions’ efforts to catch up economically. Overall, Slovenian residents rate their life satisfaction as 7.7 out of 10, above the EU average of 7.2. However, there are significant regional disparities across a range of social indicators such as life expectancy, educational attainment, poverty and housing conditions. These disparities have an immediate effect on labour productivity and workforce participation, and also undermine regional attractiveness. New workers are potentially less likely to relocate, and some investors may be deterred from establishing new operations in less attractive Slovenian regions, further hampering competitiveness and long-term economic development.
Slovenia faces several significant and long-term structural challenges which, without adequate preparation, may frustrate regional development. These include demographic change, which is anticipated to reduce Slovenia’s working-age population overall and increase the share of elderly residents to 30% by 2060, affecting rural and remote communities more significantly than others. Spatial-planning challenges, including the scarcity of suitable land for industrial activity and the time required to obtain construction permits, are further barriers to less developed regions aiming to attract investment and boost economic activity. Slovenia’s environmental challenges, including transition to net zero emissions, are also unevenly distributed.
Stronger vertical and horizontal co-ordination arrangements could play a decisive role in the implementation of Slovenia’s forthcoming national regional development strategy. Current mechanisms supporting co-ordination across and among levels of government are limited, fragmenting regional development efforts and weakening alignment between sectoral and territorial priorities. Slovenia lacks a body or actor with a clear mandate to co-ordinate regional development priorities across line ministries. Clarifying responsibility for the national-level co-ordination of regional development could strengthen cross-sector interventions supporting regional development and reinforce policy coherence. Moreover, existing vertical co-ordination mechanisms lack the participation of key stakeholders (e.g., relevant line ministries, RDAs) that will play a role in the national regional development strategy’s implementation. Expanding opportunities for multi-level dialogue would help ensure that a broader range of relevant national and subnational actors can align their regional development efforts.
Addressing the fragmentation of Slovenia’s municipal tier will depend on building territorial scale. Between 1994 and 2025, the number of Slovenian municipalities increased from 63 to 212, more than half of which have fewer than 5 000 inhabitants. This fragmentation was driven primarily by fiscal equalisation arrangements that led to the formation of smaller, less affluent new municipalities, as well as cultural and local identity factors. Slovenia’s fragmented municipal landscape risks constraining efficient service delivery, limiting local investment capacity, and hampering regional development. To encourage local authorities to pool resources and achieve scale, the government has offered incentives to promote inter-municipal co-operation and municipal mergers, including co-funding for joint municipal service delivery and additional funding for newly amalgamated municipalities. Further territorial consolidation could be encouraged by improving local-level data on the cost, quality and accessibility of municipal services, strengthening the case for these and other collaborative arrangements.
The forthcoming national regional development strategy’s implementation depends on sufficient financial and human resources being in place.
Subnational public investment in Slovenia – 37.3% of total public investment – is considerably lower than the OECD (55.1%) and EU (54.9%) averages, although higher than in Lithuania (26.9%), which has a comparable population size. Policymakers could expand subnational-level funding sources for regional development, currently heavily concentrated in EU Cohesion Policy funds, to better ensure financial support for places whose needs or capacities may not align with Cohesion Policy objectives or eligibility criteria. For example, the government could allocate additional resources through a national fund for territorial development, providing municipal governments with competitively allocated funds for project proposals demonstrating clear regional impact.
RDAs, and their staff, are key regional development actors in Slovenia, yet their dependence on EU project-based funding constrains their ability to engage in broader regional development tasks. Exploring practical options to bolster the financial sustainability of RDAs will be essential to strengthening regional development implementation capacity at the subnational level in Slovenia.
Slovenia’s ability to evaluate its achievement of regional development goals could be reinforced with a stronger performance measurement system. Monitoring, evaluation and reporting processes in the country remain uneven across and among levels of government. Challenges to systematic performance measurement are underpinned by persistent data gaps, barriers to accessing territorial statistics, and human resource capacity constraints. Strengthening data availability and accessibility and upskilling monitoring and evaluation practitioners will be essential to improving government accountability.
