Building More Competitive Regions in Slovenia

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.