Foundations for Growth and Competitiveness 2026

Slovenia

Economic convergence with the OECD’s most advanced economies has continued in recent years. However, growth has relied on employment gains, while weak productivity growth since the global financial crisis has maintained a sizeable productivity gap with the upper half of OECD countries. Gross fixed investment has improved, but mostly in housing. As the population ages and the working-age population shrinks, sustaining growth will require stronger productivity improvements and further increases in labour force participation.

Productivity and investment would benefit from structural reforms, such as deepening capital markets and streamlining permitting processes. Removing tax disincentives for second earners and single parents to work full-time is needed to boost labour supply. Growth-friendly tax reforms should reduce the labour tax burden, funded by higher consumption, environmental, and recurrent immovable property taxation.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Labour market: Reduce disincentives to work full-time

The labour tax burden is high, especially for lower earners, discouraging labour market participation. High effective marginal tax rates deter single parents and second earners, often women, from entering the labour market or working full-time. High social security contributions and reduced household-based tax credits and allowances increase work disincentives. Additionally, high childcare costs further deter second earners from entering or increasing participation in the labour market.

Recommendations

✓ Reduce marginal effective tax rates for low-income earners and second earners through a more gradual and targeted withdrawal of social benefits and transfers, while broadly reducing labour taxation for all earners.

✓ Make the tax system more growth-friendly by further reducing labour taxes and increasing consumption taxes and recurrent taxes on immovable property, where possible by broadening the tax base.

Financial markets: Deepen capital markets

Productivity growth is limited by low investment in both tangible and intangible capital and shallow capital markets. Few new Fintech providers exist, with limited venture capital and institutional investor involvement. The stock exchange suffers from low liquidity, limiting access to equity finance for innovative firms for which bank lending is less suitable. Unlike most OECD countries, the insurance sector is dominated by state-owned firms, which are less active as institutional investors compared to their privately-owned peers.

Recommendations

✓ Improve access of small and medium-sized firms to equity finance and increase the supply of financial products.

✓ Consider partial listings of state-owned enterprises to boost capital markets and continue privatisation efforts, particularly in inherently competitive sectors such as tourism.

✓ Promote digitalisation in the financial sector by evaluating the regulatory burden, and through closer alignment of FinTech regulations with other European countries.

Housing: Enhance supply and affordability

The housing market faces tensions as strong demand meets slow supply growth, hampering geographical labour mobility. Inefficient planning and lengthy permitting processes limit residential construction. Homeownership is high and the private rental sector is underdeveloped. Strict rental regulations are often bypassed. Underreporting and informality create tenant vulnerabilities and uncertainty for landlords. Additionally, the tax system favours short-term over long-term rentals, exacerbating housing affordability challenges.

Recommendations

✓ Establish a centralised one-stop shop for submitting and tracking building permit applications.

✓ Introduce standardised rental contracts. Specify mandatory clauses to ensure that contracts comply with national law and protect both landlords and tenants.

✓ Level the playing field between short-term and long-term rentals by harmonising the taxation of rental revenues. Apply higher property tax rates on secondary homes and short-term rentals than on primary residences.

Physical infrastructure: Improve public investment and streamline permitting

Spending efficiency in energy and transport infrastructure investment is hindered by the absence of a unified cost-benefit framework, limiting effective project selection. Inefficient spatial planning and slow permitting further constrain construction. Though the issuance of permits has accelerated recently, progress is too slow to meet growing demand for investment projects.

Recommendations

✓ Accelerate the implementation of regional spatial plans and incentivise inter-municipal cooperation in the design of local plans.

✓ Establish a centralised one-stop shop for submitting and tracking building permit applications.

✓ Introduce a unified cost-benefit framework to identify the most cost-efficient investments.

Governance: Move towards digital public services

Digitising administrative procedures can create greater efficiency, reduce compliance costs and ease firm entry. The government can promote digitalisation, but e-government use is low, especially among older people and people with lower education. Most digital services are opt-in, which limits incentives to adopt digital solutions and raises service provision costs. Switching from an opt-in to an opt-out system for e-government services would boost usage, supported by training for less digitally skilled individuals. Additional incentives, such as automatic tax form filling and extended submission deadlines, would further encourage use of e-government services.

Recommendations

✓ Move from opt-in (voluntary-based) to opt-out (compulsory-based) systems in e-government services to increase the use of digital public services among households.

✓ Ensure an inclusive transition to digital services by strengthening accessibility throughout the country.

✓ Use incentives for individuals, such as longer deadlines or prefilled forms, to adopt digital solutions for services.

Recent progress on structural reforms

Recent structural reforms include a public sector wage reform and a long-term care reform in 2025, increasing government spending on elderly care, financed through a 2% social security contribution rise. In 2025, the social partners agreed on pension reforms that include gradually raising the retirement age from 65 to 67 from 2028, extending the period for pension calculations from the most favourable 24 contribution years to 40 years minus the five best, and a greater weight of inflation in pension indexation rather than wage growth.