Jan Stráský
Federico Giovannelli
OECD Economic Surveys: Slovenia 2026
Abstract
Economic growth has been resilient amid elevated uncertainty and growing geopolitical risks. The labour market remains tight, with labour market shortages and the public sector wage reform supporting strong wage growth. Fiscal policy needs to restore fiscal buffers and continue addressing long-term challenges, such as permanently higher defence spending and costs related to population ageing and the green transition. The 2025 pension reform will reduce fiscal costs moderately, but further measures will be needed to put public finances on a sustainable path. The taxation of labour is high, and reducing it, while raising property and consumption taxation, would strengthen economic growth. Efforts to fight corruption need to continue to address remaining risks in public procurement and improve public spending efficiency.
Economic growth has slowed down from 1.7% in 2024 to 1.1% in 2025, increasingly constrained by high energy prices, trade uncertainty and growing geopolitical tensions. Economic growth is likely to moderate further in the first half of 2026, due to the ongoing conflict in the Middle East, amid volatile energy prices and continued services price inflation. In this challenging environment, the Slovenian economy proved resilient, achieving higher economic growth in the past years than the euro area and regional peers (Figure 1.1, panel A). However, the weakness in the export sector caused by elevated trade uncertainty as well as Slovenia’s strong exposure to structural problems in European industry continue to weigh on activity.
1.1.1. Domestic and external demand have weakened
Weak economic activity at the beginning of 2025 reflected heightened uncertainty in the export-oriented sectors of the economy (Figure 1.1, panel B). Uncertainty spilled over to weakening household confidence and consumption growth, despite still robust growth in real disposable income. After stagnating in the first half of the year, real GDP grew at 0.4% quarter-on-quarter in the fourth quarter of 2025, driven by strong private consumption and continuing implementation of public investment projects (Bank of Slovenia, 2026[1]). At the same time, export growth remained constrained by the persistent weakness of foreign demand. Real GDP growth accelerated in the first quarter of 2026 to 0.7% quarter-on-quarter, driven by strong gross fixed capital formation related to the implementation of post-flood reconstruction projects and resilient government consumption. However, more recent data suggest that the evolving Middle East conflict is gradually affecting the economy: consumer confidence fell strongly in April, despite resilient high-frequency data on industrial production and consumer demand.
Note: Panel A, CEE (Central and Eastern European) refers to the unweighted average of Czechia, Hungary, the Slovak Republic and Poland.
Source: Eurostat National Accounts database; and OECD calculations.
Trade flows between Slovenia and the United States are limited and the direct impact of tariffs remains contained. However, the indirect effects, which affect Slovenia via the main trading partners in the euro area, are more significant (Figure 1.2, panels A and B) and the conditions for exporters remain challenging. After growth in the second quarter driven by front-loading, net exports turned negative again in the second half of 2025. The decline in goods exports intensified, while services exports, which represent about 25% of total exports, grew marginally, due to increasing exports of transport services.
Source: Central Bank of Slovenia; Eurostat Balance of Payments database; Eurostat National Accounts database; Austria National Bank (OeNB); Deutsche Bundesbank; and OECD calculations.
The current account balance remained in surplus in 2025, reflecting further improvement in services trade compared to the previous year (Figure 1.2, panel C). However, amid weak foreign demand and challenging conditions for exporters, the goods trade balance recorded a deficit for the first time since the 2022 energy crisis (Bank of Slovenia, 2026[1]). Most of the merchandise trade decline came from weaker exports of machinery and equipment, especially road vehicles to France, and higher imports of food. In the first four months of 2026, services trade remained robust, driven by exports of tourism and insurance services, while merchandise trade further contracted. Going forward, the export sectors of the Slovenian economy may profit from the German fiscal package that will start positively affecting foreign demand in 2026 (Box 1.1).
To improve competitiveness and stimulate economic activity, the German government plans a substantial increase in fiscal spending, about 3% of GDP by 2028 according to the Bundesbank projections, primarily directed toward infrastructure investment and defence. Expansionary fiscal policy in Germany will affect the Slovenian economy both directly, through increased demand from Germany, and indirectly through spillover effects from other countries.
Using a multi-country Bayesian Global Vector Autoregression (BGVAR) model of individual EU countries, the U.S. and China, empirical estimates put the response of GDP to a 1 percent increase in the level of German government expenditure to about 0.3% of GDP in Germany in the initial period. This stimulus is gradually transmitted to Slovenia, where GDP increases by 0.2% after about four years. About one third of the response is attributable to direct effects of higher demand in Germany, while the remaining part reflects spillover effects from other countries included in the model. The large multiplier for Slovenia is consistent with much stronger indirect spillovers for small economies with proportionally greater export exposure to the shock-originating country than in large economies (Eller, Feldkircher and Huber, 2017[2]).
Source: Bank of Slovenia (2025[3]).
1.1.2. Investment is recovering
Public investment in 2025 was predominantly related to the implementation of the Recovery and Resilience Facility (RRF) projects and the post-flood reconstruction projects financed from the state budget. About 0.6% of GDP was spent on flood reconstruction projects in 2025, mainly on water, road and railway infrastructure. By September 2025, the Reconstruction Fund, a budgetary fund established to collect temporary fiscal revenues for post-flood reconstruction, collected EUR 903 million and disbursed EUR 150 million (0.2% of GDP). Post-flood reconstruction spending is projected to continue until at least 2028, when the temporary tax measures are set to expire.
Grants from the Recovery and Resilience Facility (RRF) financed spending of about 0.9% of GDP in 2025. By April 2026, Slovenia has received about 72% of funds, grants and loans allocated under the Recovery and Resilience Plan (RRP) and seems on track to complete the plan by the end of 2026, as required (European Commission, 2026[4]). The Commission has confirmed that 33 out of 36 reform measures in the RRP have been fully implemented. To ensure full delivery of the reforms under the RRF, an amendment to the current Cohesion Policy Programme, aimed at improving alignment with updated national and European priorities, would help lift low absorption rates and shorten implementation delays (Government of the Republic of Slovenia, 2025[5]).
Private investment was weak in 2025. Uncertain economic conditions as well as weak foreign and domestic demand were the main factors holding back investment activity (Bank of Slovenia, 2025[3]). The low investment activity of the private sector is the main driver of weak productivity growth as discussed in Chapter 4. Private investment may be boosted by higher defence spending, particularly from investment in dual-use projects which entail a smaller import component than purchases of military equipment. However, the empirical evidence suggests that the effect is likely to be limited (Box 1.2). The government plans to increase NATO defence spending from 2% of GDP in 2025 to 2.6% in 2026 and 3% in 2030, allocating at least 20% of the funds to fixed assets investments and 2% to research and development spending (Government of the Republic of Slovenia, 2025[5]).
The impact on economic activity of higher defence spending is likely to be limited, mostly due to the low level of domestic military production and limited production capacities. The net impact on GDP will largely depend on the import content of procurement and on the composition of expenditure between compensation of employees in the defence sector, intermediate consumption and investment.
Empirical studies generally find positive defence spending multipliers, but lower than for other categories of government expenditure, because military equipment is capital intensive and highly import dependent. The estimates range from 0.4 to 0.7, and could be considerably lower in small open economies, particularly when domestic supply is constrained (Hall, 2009[6]; Barro and Redlick, 2009[7]; Ilzetzki, Mendoza and Végh, 2013[8]). The effects are heterogeneous across individual expenditure components. Domestically oriented items, such as expenditure on employees in the armed forces and services provided by domestic suppliers, typically generate higher domestic multipliers, often in the range of 0.8 to 1.2. At the same time, procurement of military equipment, particularly when imported, yields almost zero or only mildly positive multipliers, between 0 and 0.2 (Sarasa-Flores, 2025[9]).
The phase of the business cycle and the mode of financing also play an important role. Multipliers are usually higher in periods of low capacity utilisation (Auerbach and Gorodnichenko, 2012[10]) and the impact on GDP is generally weaker when defence expenditure is financed through direct tax increases rather than borrowing.
The Resolution on the Long-Term Development and Equipping Programme of the Armed Forces up to 2040 adopted in June 2025 foresees a gradual increase in defence expenditure to 2% of GDP in 2026, followed by further increases towards 3% of GDP by 2030. At least 2% of annual defence expenditure should be allocated to research and 20% to expenditure on equipment. The estimated contribution to GDP growth amounts to 0.1 percentage points in 2025 and 0.2 percentage points in 2026-2028. Simulations using the Commission’s QUEST macroeconomic model for Slovenia similarly suggest that GDP in 2030 could be 0.3 percentage points higher than without the additional defence spending.
Source: OECD (2025[11]), IMAD (2025[12]) and Bank of Slovenia (2025[3]).
1.1.3. The labour market is strong, but structural challenges remain
The labour market performed well in recent years, but worker and skills shortages remain. The employment rate for those aged 20-64, at 78.3% in 2025, is above the EU average and the unemployment rate is close to a historical low, despite slight increases in recent months (Figure 1.3, panel A). The labour market is gradually easing, as growing numbers of unemployed, particularly among young people, point to a moderation in labour demand. Nevertheless, job vacancy rates in key sectors such as industry, construction and services remain high and firms continue to report labour shortages, which are only partly alleviated by increasing employment of foreign workers (Bank of Slovenia, 2026[13]). Labour shortages are high among ICT professionals, healthcare and social workers. There are also widespread shortages of teachers that contribute to deterioration of instruction (European Commission, 2025[14]). The labour market reforms adopted in 2025, facilitating and accelerating the entry of foreign healthcare professionals as well as improved protection of temporary workers through stricter oversight of temporary employment agencies, could help alleviate labour shortages in the healthcare sector and sustain the inflow of foreign workers.
Labour market developments in the private and public sector continue to differ. While employment in the private sector continues to decline alongside a deceleration in wage growth, the public sector enjoys strong employment and wage growth (Bank of Slovenia, 2025[3]). Private sector employment contracted by 0.7% year-on-year in February, with the contraction most pronounced in manufacturing. At the same time, the public sector recorded employment growth of 1.8% year-on-year, driven by health and social work. The number of foreigners in employment also increased, by 0.3% year-on-year in February, as firms continue to rely on foreign labour to alleviate domestic labour shortages (Bank of Slovenia, 2024[15]).
Source: Statistical Office of Slovenia; Eurostat Labour cost database; OECD National Accounts database; and OECD calculations.
Structural challenges in the labour market need to be addressed. Long-term unemployment remains a concern, accounting for 29% of unemployed people in 2025. In addition, participation of older workers, aged 55 to 64, in the labour market is low, alongside low participation of adults in learning and low levels of digital skills (European Commission, 2025[16]).
The semi-automatic indexations of the minimum wage have pushed up nominal wages considerably in recent years (Figure 1.3, panel B) and the statutory minimum wage relative to median wage, at 60.8% in 2024, is the second highest in the EU, after France (OECD, 2025[17]). According to the Minimum Wage Act, the minimum wage increases in January each year by at least the annual inflation rate, as happened in 2024 and 2025. In addition, from time to time, as in 2018 and 2023, the minimum wage is reset to the newly estimated minimum living costs increased by 20% to 40%. The average annual real minimum wage growth between 2009 and 2025, for a single person without children, was 3.0%. In response to the rising cost of living, the minimum wage has increased in January 2026 by 16%, to EUR 1.482. Mainly because of this increase, the overall year-on-year wage growth in January amounted to 6.7% (Bank of Slovenia, 2026[18]). While minimum wage indexation helps protect real incomes of low-earning workers, it also increases the labour costs to employers and reduces cost competitiveness. To balance predictably the trade-offs involved and minimise the short-term political pressures, many OECD countries rely on independent expert bodies or commissions, which advise governments on setting the minimum wage, based on clear criteria and usually once a year (OECD, 2023[19]). In Slovenia, the adjustment is decided annually by the Ministry of Labour, after consultation with the social partners. Furthermore, the minimum wage increases also push up wages in the neighbouring parts of the wage distribution. Using data on individual employees for the period 2009-2019, Perko and Rogan (2025[20]) find a statistically significant spillover effect for wages up to 20% above the new minimum wage level and show that about a third of the average real wage growth from 2009 to 2019 can be attributed to increases in the minimum wage. Public finances will also be impacted by the minimum wage increase, leading to at least a reprioritisation within existing budget envelopes, as discussed below, in the section on fiscal challenges.
At the same time, by compressing the wage distribution among firms, minimum wage increases may reduce net job-to-job mobility and make it difficult for more productive firms to attract workers (Hijzen, Lillehagen and Zwysen, 2025[21]; Forth et al., 2024[22]). While a rising minimum wage may also force the least productive firms to exit the markets – improving aggregate productivity and leaving overall employment unaffected if workers can relocate swiftly (Rao and Risch, 2024[23]; Dustmann et al., 2021[24]) – the descriptive evidence suggests that a stronger compression of wages is not associated with growth-enhancing reallocation (OECD, 2025[17]). Hence, it is important to complement wage-setting institutions that limit wage dispersion with policies that enhance job mobility and foster innovation in low-productivity firms, such as comprehensive activation policies and career guidance services. In addition, pay transparency measures might incentivise worker-driven job mobility by making the benefits of potential transitions more salient (OECD, 2025[17]).
The so-called winter holiday allowance, a mandatory allowance of EUR 639 for workers in both the public and private sectors introduced in November 2025, will further add to the public sector wage bill and labour costs of employers and should not be continued. Companies with insufficient liquidity have the option of delaying payment until end-March in the following year, and in 2025, exceptionally, the option of paying a reduced amount of EUR 160, provided they do not pay dividends and management bonuses (IMF, 2025[25]). However, this flexibility is not sufficient and payment of the winter allowance should remain voluntary. The introduction of mandatory winter holiday allowance for all employees together with the winter bonus for pensioners could increase the general government’s budget deficit by 0.3% of GDP per year (Fiscal Council, 2025[26]).
1.1.4. Inflation has increased
Inflation rose sharply amid the energy crisis, but eased significantly during 2024, falling to 1.9% in December. Lower inflation, compared with the 2022-2023 inflation levels, together with strong wage growth have protected the purchasing power of households (Figure 1.4). Despite the slowdown, mainly driven by non-energy industrial goods prices, growth in service prices remained elevated in 2024, at 2.7% in December, and accounted for nearly half of headline inflation. The HICP inflation differential between Slovenia and the euro area has been primarily driven by differences in government price-mitigating measures; by mid-2024 both headline and core inflation in Slovenia fell below the levels in the euro area (Figure 1.5, panel A). In 2025, subdued economic growth was accompanied by an increase in inflation, which has accelerated since May and stood at 2.6% in December 2025 and 3.4% in April 2026. The increase was driven by strong food price growth and faster growth in labour costs (Figure 1.5, panel B). Higher food and services price inflation more than offset the negative contribution from energy prices (Figure 1.5, panel C and D) driven by falling global oil prices and the euro exchange rate appreciation. Moreover, the contribution of energy prices to inflation turned positive in the fourth quarter of 2025, reflecting the resumption in July of payments by households of the environmental contribution to electricity prices, which were stopped during the energy crisis, as well as higher prices of motor fuels and heat energy (Bank of Slovenia, 2025[3]). The positive contribution of energy prices to inflation happened despite the dampening effect of reintroducing a 50% exemption from the environmental contribution to electricity prices between November 2025 and February 2026. The base effect related to the original introduction of these measures in February 2025 also partly explains the increase in HICP inflation to 2.8% in February (Bank of Slovenia, 2026[1]). Annual energy inflation decelerated to 1.1% in March 2026 despite the evolving Middle East conflict, mainly due to changes in electricity prices and government measures to lower the prices of oil products. Although higher wholesale energy prices had so far only a limited impact on inflation, inflationary pressures could strengthen in the coming months, as higher input costs pass through to final goods and services prices (Bank of Slovenia, 2026[18]).
Source: Eurostat; OECD Household Indicators Dashboard database; Statistical Office of Slovenia; OECD calculations.
The energy price support measures for households and companies were effectively phased out by December 2024, although the regulation of electricity prices for households remained in effect until February 2025 and the full and partial exemptions from the environmental contributions until June 2025 and February 2026, respectively (see above). Environmentally harmful fossil fuel subsidies without a planned phase-out before 2030 accounted for 0.18% of GDP in 2023, below the EU average of 0.49%, and with tax measures and income and price support each representing about a half of the total (European Commission, 2025[14]). While electricity prices for households are lower than the EU average, final prices for firms match the EU average. To alleviate this situation, the Parliament adopted in February 2026 the Act on promoting the competitiveness and decarbonisation of energy-intensive companies (ZSKREP) providing temporary state aid to companies exposed to volatile electricity prices. The law is based on the Clean Industrial Deal state aid framework and will provide support from 2026 to 2028, financed from the profits of state-owned companies with electricity generation capacities. The subsidy will cover up to 50% of annual electricity consumption, at the estimated annual cost of EUR 30 million (0.5% of GDP), while half of the aid must be allocated to industrial decarbonisation measures, such as renewable energy generation facilities and waste heat recovery systems. This complex measure will require ongoing monitoring until 2037, and its costs and benefits should be carefully assessed. There is also the risk that the programme will slow down the relocation of energy-intensive industry to another EU location where such production is more competitive, as discussed in the 2025 Economic Survey of the EU and euro area (OECD, 2025[27]). In addition, the government has limited the pass-through of wholesale energy prices to petroleum product prices for consumers by reducing excise duties on liquid fuels in March 2026. Ensuring that support measures are temporary and improving targeting to most vulnerable consumers and firms would help limit the fiscal cost.
Source: OECD Price Statistics database; and Eurostat.
Core inflation picked up to 2.3% in March 2026, driven mainly by prices in services such as insurance of motor vehicles, package holidays and accommodation (Bank of Slovenia, 2024[15]). Services inflation is elevated and sticky and domestic price pressures remain strong, with firms increasingly expecting further price increases. Wage dynamics in the public sector will play an important role, as more pronounced wage pressures could arise from spillovers of public sector wage increases to the private sector (Bank of Slovenia, 2025[3]).
1.1.5. Growth is projected to strengthen, driven by domestic demand
GDP growth is projected to pick up to 1.9% in 2026 and 2.2% in 2027, driven by domestic demand and a gradual rebound in trade (Table 1.2). Private consumption will rise, as robust wage growth sustained by tight labour market conditions will continue to support household incomes. Stronger external demand will support a gradual recovery in the export-oriented sectors, including investments in expanding production capacity. Gross fixed capital formation will benefit from favourable financing conditions, ongoing post-flood reconstruction and, in 2026, the inflow of EU funds from the Recovery and Resilience Facility (RRF). Headline inflation is projected to increase following the energy price shock from the ongoing conflict in the Middle East, from 2.5% in 2025 to 2.9% in 2026. The inflationary shock is projected to dissipate rapidly, with headline inflation moderating to 2.4% in 2027, reflecting strong wage dynamics and ongoing labour shortages in certain sectors. Core inflation will also decline only gradually, mainly driven by decreases in services inflation.
1. OECD estimates.
2. Contribution to changes in real GDP.
3. Index of consumer prices excluding food, energy, alcohol and tobacco.
Source: OECD Economic Outlook: Statistics and Projections database.
The uncertainty surrounding the outlook remains elevated and the risks are tilted to the downside (Table 1.3). A key downside risk is the potential fallout from the ongoing conflict in the Middle East, including possible shortages and rationing of oil and gas. An additional downside risk is weaker demand from European trading partners, particularly Germany and France, while other risks facing the export sector include further U.S. protectionist measures and a redirection of Chinese exports from the U.S. to the European market. In addition, a more pronounced appreciation of the euro against the U.S. dollar and a broader basket of currencies could continue to weigh on trade. Moreover, stronger-than-expected wage growth and persistent services and food price inflation could lead to higher inflation. On the upside, higher participation of older workers in the labour market and ongoing recruitment of foreign labour could help ease labour shortages and wage pressures, leading to improvements in competitiveness. In addition, a boost to foreign demand from the recently concluded Mercosur trade agreement may help lift exports.
The banking system remains resilient on average, but the growing credit risk needs to be monitored as lending to households, both for housing and other purposes, continues to grow (Bank of Slovenia, 2025[28]). The ECB implemented its latest policy rate cut in June 2025, and monetary policy easing has gradually translated to decreasing interest rates on deposits and loans in Slovenia. Interest rates on loans to non-financial corporations declined moderately in 2025, while the demand for loans strengthened. Amid falling interest rates on deposits, savers continue to keep more than 80% of total deposits of the non-banking sector as sight deposits (Bank of Slovenia, 2025[29]). The level of systemic risk in the banking sector has not changed in the first half of 2025, despite elevated uncertainty, but macro-financial risks have increased due to the evolving conflict in the Middle East. While the credit rate risk in the banking system has been concentrated in specific businesses, mainly in the manufacturing sector, the situation could deteriorate over the medium term, for example due to renewed risks in the energy sector.
Banks are well capitalised and enjoy high profitability, outperforming their peers in the European Union and euro area. Post-tax return on equity in 2024 was 14.9%, above the euro area at 12.5% and the EU average of 13.1% (Figure 1.6). Over the last decade, return on equity in Slovenia averaged 10.3%, almost double of the euro area and EU averages of 5.3% and 5.4%, respectively. The low interest expenses generated by the relative importance of deposits, particularly sight deposits, on the funding side of banks’ balance sheets are the main factor driving high net interest income and overall profitability. Banks in Slovenia offer savers relatively uncompetitive conditions in the form of below-average interest rates on both sight deposits and long-term savings products compared with banks across the EU and euro area (Bank of Slovenia, 2025[28]). This is partly due to the moderately concentrated banking sector, as measured by the Herfindahl index of about 0.2. The sector is dominated by two banks with the market share of 30%, the Nova Ljubljanska Banka where the state holds a stable 25% blocking minority stake and the Hungarian-owned OTP Banka, followed by two smaller Italian banks, each with the market share close to 7%, Intesa Sanpaolo and Unicredit Banka Slovenija. The concentration in the banking sector may negatively affect the overall efficiency and the level of competition, resulting for example in high mortgage lending margins, as discussed in the last Economic Survey. Conversely, strong profits may allow banks to put aside part of their earnings to further strengthen regulatory capital.
Bank solvency is high, although growth in credit exposure in the first half of 2025, particularly to mortgages secured by residential real estate and to consumer loans, was the main factor in the increase of the risk-weighted exposure of the banking sector. Going forward, the risks to future solvency include a decline in net income, higher growth in net impairments and provisions, increasing operating costs and the banks’ poor access to the capital market. Despite the sound capital adequacy ratios, banks should continue to diligently manage their regulatory capital, suitable to the existing risk exposure.
The ratio of non-performing loans to total loans remained broadly stable in 2025 (Figure 1.6). The ratio of non-performing exposures in the total loan portfolio increased marginally, from 1% in January to 1.6% in December, mainly driven by the loans to non-financial corporations (Bank of Slovenia, 2026[30]). The increase of non-performing exposures in loans to non-financial companies was driven by several firms in manufacturing and construction sectors and does not seem to entail a broader deterioration in loan quality. Furthermore, the portfolio of loans to firms in services sector has recorded a decrease in non-performing exposures.
Note: 2025Q4 data for the EU average is calculated on the basis of latest available quarter for the 27 member countries, ranging from 2025Q1 to 2025Q4.
Source: IMF Financial Soundness Indicators database.
The financial position of households is good. Household indebtedness, measured as households’ financial liabilities to GDP, stood at 28% in the first quarter of 2025, about half of the euro area level of 58.5% (Figure 1.7). The demand for housing loans is increasing, driven by low interest rates, but the ratio of housing loans to GDP remains well below the euro area average. At the same time, the ratio of consumer loans to GDP has increased over the last three years, surpassing the euro area average in 2024. The ratio of households’ financial assets to GDP, at about 130%, remains well below the euro area level of more than 200%. The main increase in the first half of 2025 was in bond holdings, following the issuance of government bonds targeted at retail investors, but almost half of households’ financial assets continue to be held in currency and deposits.
The financial position of non-financial corporations is similarly stable (Figure 1.7), and firms assess their access to finance as improving. Despite the benign indebtedness indicators, the number of bankruptcies is rising, amid the elevated uncertainty in the external environment, but the overall number remains small. Bankruptcies increased in the first half of 2025, notably in manufacturing, construction as well as accommodation and food service activities, but the numbers stabilised towards the end of the year.
The financial stability risks from the real estate market are moderate. Residential real estate prices growth moderated further in the first half of 2025, amid increased sales, with prices remaining stable in both real terms and relative to income (Figure 1.8). New housing loans increased strongly, reflecting the fall in interest rates and strong demand for residential real estate. As new construction remains hindered by longer-term issues, such as high construction costs, labour shortages and the lack of land available for residential construction, demand for housing continues to outstrip the limited supply.
Housing costs, such as loans, rents and communal expenses, have a significant impact on the financial position of households. Households in rented accommodation usually assess their financial position as worse than owner-occupiers. Moreover, low-income households face a considerably heavier burden from housing costs than higher-income households. Despite some improvement, the housing cost overburden rate, that is a ratio of households spending more than 40% of disposable income on housing, remains high, at about 15% of households in the lowest income quintile.
Private sector debt, securities other than shares and loans, as % of GDP, 2025
Note: CEE (Central and Eastern European) refers to the unweighted average of Czechia, Hungary, the Slovak Republic and Poland.
Source: OECD Financial Accounts database.
Note: CEE (Central and Eastern European) refers to the unweighted average of Czechia, Hungary, the Slovak Republic and Poland.
Source: OECD Prices Statistics database.
The macroprudential policy stance is appropriate. Since January 2025, the Bank of Slovenia requires banks to hold the countercyclical capital buffer (CCyB) at 1% of risk-weighted assets, rather than 0.5% previously. At the same time, in view of receding real estate risks, the Bank of Slovenia reduced the sectoral capital buffer for retail real estate loans from 1% to 0.5%. At the European level, the new Capital Requirements Regulation III introduced stricter conditions for the risk weighting of exposures secured by residential real estate. Moreover, letting the temporary bank asset tax introduced for post-flood reconstruction expire at the end of 2028, as planned, will help preserve capital buffers against future adverse shocks (IMF, 2025[25]). Borrower-based measures on lending to households, have not been tightened, despite an increase in the average debt service to income (DSTI) ratio, particularly for consumer loans, in 2024 and the first half of 2025. While the calibration of the macroprudential instruments seems to support sound lending standards, considering that the average DSTI ratio remains at sustainable levels and that 95% of consumer loans and housing loans have a fixed interest rate (Bank of Slovenia, 2023[31]), continued monitoring of asset quality and other risks, especially for exposed banks and sectors, such as export-oriented manufacturers, is warranted. If the existing macroprudential instruments and capital requirements need to be tightened further, consideration could be given to balancing resilience gains with potential procyclical effects.
1.3.1. The fiscal stance is set to become more expansionary
The general government budget deficit decreased from 2.6% of GDP in 2023 to 0.9% in 2024, alongside a gradually tightening fiscal policy stance (Figure 1.9, panel A). Similarly, public debt continued to decrease, from 68.3% of GDP at the end of 2023 to 65.7% at the end of 2025, but it remains above the 60% threshold and higher than in some regional peers (Figure 1.9, panel B). After a considerable fiscal consolidation effort, in 2023 and particularly in 2024, which may have added to the deceleration in growth, the budget deficit increased to 2.5% in 2025. The relaxation of the fiscal stance reflected the implementation of the public sector wage reform, a high level of public investment and further moderation of economic growth. Social security contributions have been the main source of revenue growth, but direct taxes have remained broadly unchanged, affected by slower growth of both corporate and personal income tax revenue. The 2026 annual progress report projects a headline deficit under a no-policy change scenario this year at 3.4% of GDP, just above the 3% Maastricht threshold. The moderately expansionary stance planned for 2026 will support growth, given the moderation of GDP growth and the still negative output gap. However, a more neutral fiscal stance would have been adequate, considering the need to preserve fiscal space for defence and other medium-term spending pressures. Moreover, the package of measures voted by the Parliament in May includes temporary VAT rate reductions for energy and staple foods, alongside rental income tax rate reductions as well as lowering of pension insurance contributions and long-term care contributions for some contributors. Continuation of expansionary fiscal policy in 2027 would further worsen the fiscal position. However, the package is facing political and legal challenges and its fiscal impact on the 2026 budget remains uncertain.
Note: CEE (Central and Eastern European) refers to the unweighted average of Czechia, Hungary, the Slovak Republic and Poland.
Shaded area refers to projections.
Source: OECD Economic Outlook: Statistics and Projections database.
The targets set under the new EU fiscal framework are at risk of not being met. The medium-term fiscal structural plan (MTFSP) approved in January 2025 set the average annual growth of net expenditure to 4.5%, and in July 2025 the EU Council approved the activation of the national escape clause to allow for a temporary boost to defence spending. The government plans to gradually increase defence spending to 3% of GDP by 2030 (from 1.4% of GDP in 2024). However, net expenditures grew at 4.2% in 2024 and the government estimates even stronger net expenditure growth for 2025 and 2026 well above the MTFSP average, at 7.7% and 5.5%, respectively (Government of the Republic of Slovenia, 2025[5]). As a result, the Fiscal Council projects that the commitments to maximum net expenditure growth in the national fiscal plan will not be met, even when allowing for increased defence spending. The Council projects the net expenditure will be higher than planned in both 2026 and 2027 by about 0.8 percentage point of GDP on average, which cumulatively represents a deviation of net expenditure growth from the fiscal plan between 2024 and 2027 of about 1.4 percentage points of GDP (Fiscal Council, 2025[26]). Such deviation would be beyond the flexibility allowed by the control account, either 0.3 percentage points of GDP annually or 0.6 percentage points of GDP cumulatively. The European Commission using the Autumn Forecast 2025 assesses the 2026 Draft Budgetary Plan of Slovenia as at risk of non-compliance with the maximum growth of net expenditure allowed by the fiscal plan but notes that after using the flexibility provided by the national escape clause, the projected cumulative deviation in 2026 is 0.2% of GDP, which is within the control account threshold (European Commission, 2025[32]). However, the budget deficit is also set to increase due to the winter bonus approved after the submission of the Draft Budgetary Plan, and the public sector wage reform, which is included in the Commission’s opinion.
The public sector wage reform, which started to be implemented in 2025, is estimated to increase the public wage bill by 2028 by 1.5 percentage points compared to 2024 (this excludes the mandatory Christmas bonus introduced last November). Taking account of increased related tax revenue and contributions, the measure will add 0.7% of GDP to the annual fiscal deficit (Fiscal Council, 2025[26]). The key objective of the public sector pay reform was to increase the lowest monthly wages in the public sector to the level of the minimum wage, thus obliterating the need for additional payments (Box 1.3). Since some public sector employees still earn at or just above the minimum wage levels, the lowest brackets of the public sector wage system are likely to fall under the new 2026 minimum wage level, necessitating further upward adjustment. Increases in public wages close to the minimum wage level will also offset the wider pay gap introduced by the reform, likely limiting the overall decompressing of the wage structure. Regular reviews of the public sector compensation system, followed by appropriate adjustments, will be key to maintain its effectiveness and sustainability (IMF, 2025[25]).
After almost two years of negotiations, the social partners in the public sector reached an agreement on a new salary system, which has been adopted by the Parliament in October 2024 and came into force on 1 January 2025. The reform aims at addressing wage disparities and labour shortages in public services such as healthcare and education. It affected about 190 000 employees in the public sector, leading to an average salary increase of 19%, phased in over six instalments from January 2025 to January 2028. As a result, compensation of employees as a percentage of GDP in 2028 is estimated to be around 1.5 percentage points higher than in 2024. Due to the positive direct effect of higher social contributions and personal income tax revenues, as well as indirect effects stemming from higher VAT and other tax revenues, the overall impact on the general government balance is approximately half this amount (Fiscal Council, 2025[26]).
The key improvement is the increase of the lowest monthly base pay to the level of the statutory minimum wage, which obliterated the need for additional payments for about 27 000 public sector workers who used to earn salaries below the minimum wage. While increasing the income of low earners, by setting the base salary to the minimum wage, the reform also made public sector employment more attractive by decompressing the wage structure, widening the pay gap between the highest and lowest wage from the previous ratio of 1:4.8 to 1:7 (EPSU, 2024[33]). Another notable change is the mandatory annual partial adjustment of wages for inflation. So far, wage adjustments largely depended on agreements between the government and individual trade unions, leading to only sporadic adjustment. The infrequent adjustments were the main reason for the lowest salaries falling below the inflation-adjusted minimum wage.
Career progression has also been made easier, particularly for young employees and those from the private sector. The system of public sector wages was divided into 67 base pay brackets and in the first ten years of service, employees are to be promoted by one bracket every two years, over the next ten years by one bracket every three years, and later by one every four years (Eurofound, 2025[34]). Those achieving above-average results can proceed faster. However, some public sector employees, such as uniformed police and army professionals voiced concerns about the new system and doctors have refused to negotiate as part of the group of health and social care professionals. Furthermore, salary increases of some public office holders, such as ministers, were delayed until the constitution of the next National Assembly, which took place on 10 April 2026.
Source: EPSU (2024[33]); Eurofound (2025[34]); and Fiscal Council (2025[26]).
The stylised debt scenarios show that the fiscal trajectory for 2026-2027 needs to be followed by continuing consolidation to restore fiscal buffers and ensure medium-term fiscal sustainability. Without any measures to offset defence and ageing-related costs as set out in the 2024 Ageing Report, public debt would rise to about 170% of GDP by 2050 (Figure 1.10, current policies prior to the 2025 pension reform scenario). The pension reform adopted in 2025 will reduce fiscal pressures considerably until 2040 and result in a debt-to-GDP ratio of 145% in 2050 (Figure 1.10, current policies including the 2025 pension reform scenario) under otherwise unchanged policies. Consolidation to reach the targets outlined in the medium-term fiscal plan, for example via the measures identified in Table 1.5 would stabilise debt around 80% of GDP in 2050 (Figure 1.10, fiscal consolidation scenario). Furthermore, accounting for the potential growth and revenue effects of the structural reforms listed in Table 1.6 would bring debt on a downward trajectory (Figure 1.10, fiscal rules and structural reforms scenario).
General government debt, as % of GDP
Note: 1. The "No policy change scenario without the 2025 pension reform" scenario is based on the OECD Economic Outlook 119 database until 2027 and the OECD Long-Term Economic Model thereafter. Increases in ageing related costs are not offset and based on the EU Ageing Report 2024. In addition, defence spending is assumed to increase gradually from 2% of GDP in 2025 to 3% of GDP in 2030 and 3.5% of GDP in 2035.
1. The “No policy change scenario with the 2025 pension reform” scenario includes the effects of the 2025 pension reform by replacing the pension-related ageing costs from the EU Ageing Report 2024 with the projected pension costs under the new system, based on microsimulations of the Dypensi model.
2. The “Fiscal rules scenario” assumes that a structural primary budget deficit of 0.4% is reached in 2028 and maintained thereafter corresponding broadly to the fiscal package outlined in Table 1.5.
3. The “Fiscal rules and structural reforms scenario” assumes in addition higher real GDP growth of about 0.3 p.p. on average until 2040 compared to the baseline scenario as well as an improvement in the primary balance thanks to positive employment effects of the reforms outlined in Table 1.6.
Source: OECD Long-term Economic Model; EU Ageing Report 2024; Ministry of Finance of Slovenia; and OECD calculations.
Table 1.5 brings together illustrative estimates of direct fiscal impacts of selected tax and spending recommendations. They are static estimates, which do not allow for behavioural responses such as higher economic activity when reducing income tax rates, but include revenue gains from the recommended fiscal reform package via higher employment of older workers. Table 1.6 provides illustrative estimates of the effects of selected recommendations in this Survey on GDP per capita using the OECD long-term modelling framework (Guillemette and Château, 2023[35]). The estimated quantitative effects of various structural reforms on GDP per capita are taken from Égert and Gal (2017[36]).
Medium-term fiscal planning should include regular spending reviews. Under the new EU economic governance framework, the Slovenian Fiscal Council is tasked with regularly assessing the compliance, integrity and effectiveness of the national budgetary framework. The role of the Fiscal Council could also include an evaluation of the implementation of expenditure reviews. Slovenia lags behind most EU countries in implementing expenditure reviews as they are not carried out regularly, the process is often not transparent and the findings have rarely been applied in practice. To ensure efficient use of public funds and create additional fiscal space, the government should conduct expenditure reviews regularly, integrate them into the budgetary process and use their results to channel funds to areas with most economic potential (Tryggvadottir, 2022[37]; IMF, 2025[38]). The Public Finance Internal Control Service which was established within the Ministry of Finance in 2025 to evaluate the expediency of public expenditure, including expenditure reviews, is a step in the right direction. To ensure that expenditure reviews become a regular part of the budgetary process, they could be enshrined in legislation, for example by amending the Public Finance Act (Delakorda, 2025[39]).
Fiscal saving (+) and costs (-) after ten years
Note: Estimated effects of changes in labour taxes, property taxation, and the employment rates assume a move toward the OECD average. Broadening the personal income tax (PIT) base assumes removing the exemption of home-work travel expenses, meal allowance, as well as the performance and annual bonuses, which are currently exempt from taxable personal income up to the level of average wage. Estimated effect of the PIT broadening assumes reducing allowances by 25%. Reducing VAT exemptions assumes removing 50% of reduced VAT rates, including on food, non-alcoholic beverages, medicines, hotel accommodation and restaurants. The estimated effect of further pension reforms assume that indexing fully on inflation would bring about one half of the savings associated with the already legislated move from indexing 40% on inflation to 80% on inflation. The estimated effect of basing pensions on average lifetime earnings assumes savings at about 50% of those associated with the already legislated move from the best 24 years to the best 35 years. The estimated effect of linking the minimum retirement age to life expectancy assumes that after 40 years of such policy the pension spending would be reduced by about 13%, as estimated for Finland, that about 10% of GDP is spent on pensions and the effect is linear, so that one fourth materialises after 10 years. The estimated effect of removing the minimum retirement age reduction for mothers is based on a similar quantification for the Slovak Republic. Fiscal effects of higher employment are modelled as a 10-percentage point increase in the employment rate of workers aged 55-74, closing about half of the gap to the OECD average, and come from the OECD long-term modelling framework (Guillemette and Chateau, 2023[40]).
Source: OECD (2018[41]); OECD (2024[42]); IMF (2025[25]) and OECD calculations.
Relative to baseline
Note: The effect of employer’s matching contributions in occupational pension schemes is quantified based on a literature survey.
Source: Long-run scenarios using OECD Long-Term Model and OECD calculations.
1.3.2. Accelerating the energy transition and adaptation to climate risks
Reaching the target of a 36% reduction in GHG emissions by 2030 (relative to 1990) would require a significant acceleration of effort (OECD, 2024[42]) (Figure 1.11). At the same time, slow progress in the reduction of green-house gas (GHG) emissions and reliance on fossil fuels pose challenges to energy affordability and competitiveness. Coal and natural gas continue to account for almost a quarter of Slovenia’s electricity mix, making wholesale electricity prices sensitive to volatile fossil fuel prices. The deployment of renewables has slowed down in solar photovoltaics, while no new wind capacity has been added in more than a decade. Despite recent reforms on permitting, the installation of new renewable capacity is delayed by complex and lengthy permitting procedures at municipal level. Furthermore, insufficient grid capacity is an increasing obstacle for the integration of new sources of renewable energy. Further investment into the upgrade of the medium- and low-voltage grids is needed to improve the connectivity of new small-scale renewable energy installations (European Commission, 2025[14]).
Greenhouse gases emissions, tonnes of CO₂ equivalent per capita
Note: Greenhouse gas (GHG) emissions include those from the land use/land use change and forestry sector (LULUCF).
Source: Eurostat; European Environment Agency; OECD Environment database; OECD Population database; and OECD calculations.
Energy (power and heat generation, including in industry and buildings), transport and agriculture account for 90% of total GHG emissions. Further progress in electrification is needed for to decarbonise the economy, but the emission reduction across sectors has been uneven. Energy efficiency renovation of buildings has been supported by grants and loans financed by both national and EU funds, but the target to reduce the energy consumption of buildings by 17% by 2030 (compared to 2020) will require additional effort (European Commission, 2025[14]). For example, phasing out reduced tax rates for heating gas could make electricity-based heating more attractive and support existing regulatory policies in further reducing emissions in the building sector. Similarly, the uptake of sustainable transport is lagging, due to high dependence on private cars, which is reinforced by reduced tax rates on diesel and to a lesser extent gasoline (OECD, 2024[42]).
Slovenia is highly vulnerable to climate risks, particularly river flooding, that inflict considerable damage on the economy (Figure 1.12, panel A). The devastating floods in August 2023 have exposed major shortcomings in flood preparedness, such as underinvestment in the maintenance of water infrastructure, which is under the responsibility of municipalities. Despite efforts to strengthen climate adaptation, challenges remain in the implementation of flood protection measures, which are continuously delayed, as well as in environmental governance and coordination among all levels of government and administration (European Commission, 2025[14]). Higher involvement of municipalities in adaptive planning and new sources of financing will be needed to meet substantial investment needs that remain in wastewater collection and treatment, in addition to ongoing projects financed by the RRF and cohesion policy funds.
The floods in 2023 also exposed a considerable insurance gap, as the government had to step in and pay households for flood damages (Figure 1.12, panel B). However, government compensation reduces private incentives to buy flood insurance and increases risks for the budget. To increase the uptake of flood insurance, the government could make it mandatory for all properties irrespective of the location, as in France, or for properties in flood areas, as done in Belgium and Denmark. Developing new insurance schemes could help lower risks for the budget while aligning incentives for adaptation but the approach will have to be complemented by prohibition of new construction in high-risk flood areas (OECD, 2024[42]).
Source: OECD River flooding exposure database; and European Environment Agency (EEA).
1.3.3. Managing pension, health and long-term care spending
The public sector is facing increasing spending pressures driven by demographic and climate change, as well as additional defence requirements. The total cost of ageing is projected to rise by 5 percentage points of GDP between 2026 and 2060 (Figure 1.13), well above the EU average of 1.2 percentage points of GDP for the same period (European Commission, 2024[43]), mainly driven by an increasing ratio of people aged 65 or above to people aged 20-64. However, this projection does not include the pension reform agreed in September 2025. Population ageing together with the planned increase in defence spending will likely necessitate further reforms, beyond those adopted in 2025, to reduce the fiscal deficit and preserve medium-term fiscal sustainability (Fiscal Council, 2025[26]).
Projected changes in public social spending, change between 2026 and 2060, percentage points of GDP
Note: The “Total before the 2025 pension reform” excludes the effects of the pension reform legislated in 2025.
Source: European Commission Ageing Report 2024; Ministry of Finance of Slovenia; and OECD calculations.
The pension reform legislated in September 2025 is an important step in the right direction, which will improve both the financial sustainability and the equity of the system. Between 2028 and 2035, the statutory retirement age will gradually increase from 65 to 67 conditional on 15 years of contributions and retirement without penalty will be possible with 40 years of contributions from age 62 instead of 60 previously (except for early starters, see below). The normal retirement age of 62 will remain under the OECD average of 64.7 year for men and 63.9 for women (OECD, 2025[44]). In addition, the retirement age for the early starters with 40 years of contributions, whose employment began before age 20, will increase from 58 to 60. The reform eliminates early retirement without 40 years of contributions, which is welcome, but keeps the option to retire early based on having had a child. While there are valid reasons to grant pension entitlements, such as credits of pension bonuses, for periods of childcare, having a child should not result in lowering the minimum retirement age (OECD, 2022[45]; OECD, 2024[42]). In addition to Slovenia, the only OECD countries relaxing pension eligibility conditions based on having children are Czechia, France, Italy and Slovakia. While this is usually motivated as a measure to encourage fertility, the empirical evidence on its effectiveness is weak.
The reform has modified how the pension is calculated and adjusted the indexation of pensions in payment. Both changes will help reduce pension expenditures. The reference wage period for calculation has been extended from the best consecutive 24 to the best non-consecutive 35 years, strengthening the link between contributions and benefits, and improving equity. At the same time, people with low earnings are protected by the floor in the calculation of pensionable earnings, set at 76.5% of the average wage. Pensions in payment are currently adjusted to 60% of wage growth and 40% of inflation, but starting in 2026 these percentages will be gradually adjusted until pensions are indexed to 20% of wage growth and 80% of inflation in 2045 (OECD, 2025[44]). This is welcome, as moving towards price indexation can generate savings while preserving the purchasing power of pensions. However, the shift is incomplete and gradual, spanning 20 years rather than 1 to 4 years during similar reforms in Hungary and Slovakia.
These measures lowering pension costs are partially offset by the increase in the accrual rate, which is considerably greater than in the original reform proposal of April 2025 and will lead to higher pension entitlements. Before the reform, the accrual rates implied the total accrual after a 40-years career amounting to 63.5% of the reference wage. From 2028 to 2035, total accruals over a 40-year career will increase to 70% of the reference wage and the future net replacement rates will increase, reaching 71% of average wage for average earners and 100% of average wage for low earners. Moreover, survivor pensions benefits will increase from 70% of the deceased spouse’s pension in 2025 to 80% in 2027, while the eligibility age will increase by two years, from 58 to 60 years. It is difficult to justify the changes to survivor pensions, as the current rate was already quite generous compared to other OECD countries (OECD, 2018[46]) and a survivor pension rate of 70% appears sufficient to maintain the standard of living of a survivor. Furthermore, some measures, such as the winter allowance for pensioners, could have been means tested. Hence, the overall reduction in pension expenditure associated with the 2025 pension reform will be moderate, amounting to about 1 percentage point of GDP in 2070, according to government projections, stabilising the long-term pension costs at around 12.5% of GDP (OECD, 2025[44]; IMF, 2025[25]).
Further pension reform may be needed, should the prospects of the pension system deteriorate, beyond the flexibility already included in the system, for example due to a faster increase in the dependency ratio or lower labour force participation. Currently, in case of worsening fiscal sustainability, government may ask social partners to consider further changes, for example on the way pensions are adjusted to wages and inflation. Additional, more automatic adjustments, such as linking the retirement age to life expectancy, could help limit the fiscal costs, reducing the social costs from changing the rules abruptly when fiscal pressure becomes too strong and improve intergenerational equity (OECD, 2022[45]; OECD, 2024[42]). About two-thirds of OECD countries have at least one automatic adjustment mechanism in place (OECD, 2023[47]). Retirement ages are linked to life expectancy in one quarter of OECD countries, including Denmark, Italy, Slovakia and the Netherlands (OECD, 2023[47]). Slovenia should consider such a measure to further strengthen the pension system’s sustainability. In addition, strengthening the second pension pillar, for example by automatically enrolling employees into occupational pension schemes as discussed in Chapter 4, could help expand the pool of domestic capital.
Health expenditure, at 9.9% of GDP in 2024, as well as spending on prevention, at 3.3% of current health expenditure, are similar to the OECD averages of 9.3% and 3.4%, respectively (OECD, 2025[48]). However, labour shortages among the health workforce, particularly primary care physicians, outpatient specialists and hospital nurses, continue to weigh on the availability of health services (OECD and European Observatory on Health Systems and Policies, 2025[49]). Moreover, the number of long-term care workers per 100 people aged 65 years and over is 1.8, well below the OECD average of five.
To strengthen the public healthcare system and address labour shortages, the amendments to the Health Care Act adopted in 2025 set clearer rules for health care professionals, limiting the circumstances under which public employees can also work for private health providers. However, the Medical Chamber of Slovenia is concerned that the additional limitations may have the unwanted effect of reducing the number of professionals in the public system. In addition, another legislation adopted in June 2025 facilitated the employment of foreign health care workers, both from the EU and non-EU countries, which is welcome. In addition, the national strategy for the management and development of healthcare workers was adopted in March 2026 and other policy measures, such as upgrading of the centralised digital waiting lists platform, are being prepared to enhance data accuracy, skills and responsibilities expansion, as well as qualification recognition (OECD and European Observatory on Health Systems and Policies, 2025[49]).
Further reforms may be needed to control health care costs, particularly considering better coordination and cooperation among health care providers and refining the payment system for specialised hospital-delivered care. For example, the authorities may consider establishing an independent organisation to conduct cost studies and estimating the diagnosis related groups (DGR) cost weights regularly, possibly every three years, rather than five years as stipulated by the Health Insurance Act. In addition, a hybrid model of financing and volume-price caps could improve hospital planning, facilitate the concentration of highly specialised care at tertiary hospitals and mitigate the risk of spending overruns (Lorenzoni, 2026[50]).
A long-term care reform was adopted after many years of deliberations in 2023, expanding the number of caregivers and closing the gap in the relative number of long-term care workers. The eligibility to become a carer is not restricted to relatives or co-residents, and the carers are entitled to 120% of the minimum wage as well as a respite of 21 days per year (OECD, 2022[51]). Since July 2025, the new system is financed by a mandatory long-term care insurance with contributions of 1% of the gross wage from both employees and employers, as well as 1% of the net pension from pensioners, and a transfer of up to EUR 190 million for the next two years from the state budget (Government of the Republic of Slovenia, 2025[5]). Furthermore, from 2028 onwards, users may be asked for co-payment for certain long-term care services. While the reform can help to reduce the labour shortage in long-term care, it also increases the already high level of labour taxation.
1.3.4. Increasing spending on active labour market policies could lift employment
Spending on active labour market policies (ALMPs) is low, limiting the support for jobseekers. In 2023, Slovenia spent 0.12% of GDP on ALMPs, less than half of the OECD average of 0.42% and among the lowest in the OECD per unemployed person. Moreover, the mix of ALMPs is disproportionately directed towards direct job creation programmes, which are costly, compared to other types of interventions, such as training. The emphasis should be reconsidered given recent empirical evidence on training and employment incentives programmes and more stable financing provided for other ALMPs than direct job creation programmes. Using data from administrative registers and a methodology that compares programme participants with similar non-participants to track labour market outcomes up to four years after participants’ entry into the programmes, the results show that participation leads to durable, persistent improvements in both employment and earnings relative to non-participants. Moreover, the effects vary across specific groups, with more pronounced positive effects on younger and more educated participants (OECD/European Commission, 2025[52]).
The system of ALMPs has demonstrated adaptability in the past and works well in practice, but it could be further improved. Spending on ALMPs could be increased and channelled away from direct job creation programmes, which in the past showed limited success in improving participants’ employment prospects, towards training programmes and employment incentives (wage subsidy). More comprehensive upskilling programmes for less educated jobseekers could be developed. Since participation in training programmes is often low among the groups of jobseekers more distant from the labour market, such as older jobseekers, the long-term unemployed, and low-educated jobseekers, designing training programmes to reach these groups is essential (Figure 1.14). One way is to increase the use of micro-credentials, which are more targeted, smaller in scope and more flexible than traditional training programmes and can quickly equip jobseekers with the skills needed in the dynamic labour market.
Share of adults who participated in formal or non-formal job-related training over the previous 12 months, %
Note: The unfiled markers represent the unweighted average of the 28 countries shown. Data refer to 2012 for most countries, and to 2015 for Chile, Greece, Israel, Lithuania, New Zealand, Slovenia and Türkiye. Data for Belgium refer to Flanders only.
Source: Survey of Adult Skills, PIAAC, https://www.oecd.org/skills/piaac/.
The employment incentives (wage subsidy) programmes are effective but could be better targeted. For example, the subsidy parameters could be refined to make it more attractive for employers to hire less-educated jobseekers. In addition, the private sector wage subsidy programme could be combined with external professional in-work support for individuals with multiple employment barriers. Such support could provide help with onboarding and mentoring, as well as serving as a mediator between workers and employers. Additional measures, such as increasing the counselling frequency for jobseekers requiring intensive support and using statistical profiling to tailor services more efficiently may also help make the programmes more effective. Finally, the authorities should invest more into linking the available administrative databases and harness these resources in regular impact evaluations of ALMPs (OECD/European Commission, 2025[52]).
1.3.5. Broadening the tax base and lowering the taxation of labour could help lift economic growth
Taxation levels are even higher than in European OECD countries and tax revenue relies disproportionately on labour taxes (Figure 1.15). The tax burden on labour is high across all wage levels, but particularly for lower earners. Employee and employer social security contributions are high, and some features of the personal income tax system discourage second earners from fully participating in the labour market. In 2024, second earners entering the labour market at 67% of average wage would lose more than 50% of earnings due to taxes and withdrawn benefits (European Commission, 2025[53]). The tax burden on labour should be reduced and the revenues replaced by more growth-friendly consumption and property taxation, as discussed in the 2024 OECD Economic Survey.
Another concern is that the personal income tax is relatively narrow because of exemptions and special tax provisions, such as the exemption of commuting expenses, performance and annual bonuses, as well as the meal allowance (OECD, 2024[42]). Reducing personal income tax exemptions could raise revenues by 0.5% of GDP, even leaving the rate of personal income tax unchanged (IMF, 2025[25]). Similarly, the coverage of the value added tax (VAT) could be increased, bringing in more revenue. The VAT system has a standard rate of 22% but applies reduced rates of 5% and 9.5% on a variety of goods. Narrowing the scope of reduced rates on essential commodities, socially beneficial services, and educational and cultural materials could yield an additional 1% of GDP (IMF, 2025[25]) and phasing them out altogether an additional 1.7% of GDP in revenues (OECD, 2018[41]).
Source: OECD Global Revenue Statistics database.
Recurrent taxes on immovable property should increase and play a more significant role in the tax mix. At the current level of 0.6% of GDP in 2023, taxes on property are less than a third of the EU aggregate of 1.9% of GDP and well below the OECD average of 1.7%. An increase in less distortive recurrent taxes on immovable property owned by households, albeit conditional on regular updating of property values, together with lower distortive taxes on labour could be considered in a revenue-neutral reform package, while adjusting intergovernmental fiscal relations, as needed. Alternatively, with more stringent parametrisation of the reform package, the resulting fiscal space could be used to help to address the ageing-related fiscal pressures. In central and eastern European countries, increasing recurrent property taxes often runs into the difficulty that many homeowners have low income. However, with modern, digitised tax administrations, this obstacle can be overcome by offering the option to pay in instalments or defer payments until the property is sold or transmitted to heirs, as done in Denmark and Ireland (De Pace, 2024[54]).
Slovenia has continued to make notable progress over the past two years in strengthening its anti-corruption framework. Key developments include the adoption of a new anti-corruption strategy in March 2025, the enhancement of technical and operational capacities within the Commission for the Prevention of Corruption (CPC), and the promotion of measures to improve transparency and integrity. In addition, further measures have been implemented to reinforce transparency and competition in public procurement processes (European Commission, 2025[55]). Despite this progress, some challenges remain, particularly regarding the operational capacity of the Commission for the Prevention of Corruption (CPC), lobbying oversight especially at the local level, whistleblower protection, the investigation and prosecution of complex economic and financial crimes, and corruption risks in certain areas of public procurement. Furthermore, perception of corruption remains relatively high (Figure 1.16).
Following the conclusion of the 2017-2019 anti-corruption strategy, the implementation and adoption of the new strategy constitute a significant achievement, as it had been identified as an urgent priority in the last Survey (OECD, 2024[56]). The 2025 Resolution on the Prevention of Corruption, establishes the foundational objectives of the anti-corruption strategy, which aims to (i) permanently eliminate conditions causing corruption, (ii) prevent it, (iii) promote transparency and public integrity by fostering awareness and a zero-tolerance culture through education and training, and (iv) effectively apply anti-corruption international standards (CPC, 2025[57]). More specifically, the Resolution focuses on rules enforcement in critical areas, such as conflict of interest and lobbying, political party financing and public spending, public procurement and whistleblower protection. Its implementation is supported by the corresponding Action Plan, adopted by the CPC in June 2025 for the period 2025-2030 (CPC, 2025[58]).
The Commission has a prominent role in the application of the Action Plan, being responsible for the activities related to several measures included in the plan. The CPC’s resources were increased in 2025 in order to improve its technical and operational capacities, through the enhancement of a public web portal disseminating data on the use of public funds, as well as the improvement of the database for monitoring and reporting obligations of public officials in relation to the Integrity and Prevention of Corruption Act, in the field of assets declaration, lobbying contacts, conflict of interest and gift registration (Official Gazette of the Republic of Slovenia, 2010[59]). The CPC has also the authority to oversee compliance with the Integrity and Prevention of Corruption Act as a whole as well as to issue recommendations in case of infringement. Following an Administrative Court judgement of 2024, identifying irregularities in the appointment procedure of the Police Director-General, the CPC in 2025 advised authorities to improve procedures for the appointment of senior officials, advocating for greater transparency through more detailed and well-justified decisions. These aspects have been integrated into the objectives of the 2025 Resolution on the Prevention of Corruption discussed above. Although the CPC had sufficient financial resources to sustain its operations in 2025, it operated at only half of its staffing capacity due to difficulties in replacing temporarily absent personnel (European Commission, 2025[55]).
The Commission for the Prevention of Corruption (CPC) is also responsible for supervising compliance with lobbying rules, which are set in the Integrity and Prevention of Corruption Act, with sanctioning powers. The CPC maintains a publicly available register of contacts with lobbyists (CPC, 2025[60]). As part of its work, the CPC has observed that, while lobbying reporting works well for high level officials - such as ministries and parliamentarians - this is not the case at the local level. A recent study indicates that lobbying interactions at the local level are often poorly perceived or not even recognised by the actors involved (Sumah, Sesko and Kokal Golcer, 2024[61]). More efforts should be made to raise awareness of lobbying mechanisms at the local level, for example though education and training programmes. Furthermore, in 2025, the CPC, in collaboration with stakeholders, recommended to align reporting deadlines - currently annual for lobbyists and within eight days of contact for lobbied officials - to enhance transparency and improve the overall functioning of the system (European Commission, 2025[55]).
The Commission for the Prevention of Corruption (CPC) also monitors the number of whistleblowers’ reports. The CPC records revealed that corruption crime reporting has remained very limited since the Protection of Whistleblowers Act entered into force in 2023, while the provision has primarily been used in situations involving law violation occurring in the workplace (European Commission, 2025[55]). Moreover, in the context of the 2023 assessment of the OECD Working Group on Bribery, Slovenian authorities explained that the Protection of Whistleblowers Act also allowed for reporting of foreign bribery offences (OECD, 2023[62]). However, no cases of foreign bribery have been reported or investigated so far. The whistleblowers act is relatively new, and it is still premature to draw conclusions on its effectiveness. At the same time, the OECD Working Group on Bribery expressed concerns in 2025 about the lack of adequate safeguards to protect investigators and prosecutors from political influence, which could also inhibit the reporting through the whistleblower channel (OECD, 2025[63]). On the one hand, the CPC should continue its efforts initiated in 2024 to promote the use and the importance of whistleblowers reporting as a key tool in preventing and combating corruption, while further raising awareness and a culture of integrity. On the other hand, the amendments to the Criminal Code and other legal provisions - announced by the Slovenian authorities to address the remarks received by the OECD Working Group on Bribery - could represent another opportunity to strengthen the independence of investigators and prosecutors when handling foreign bribery cases. Moreover, projects as the EU Technical Support Instrument (TSI) could further support this process. The TSI is a two-year programme designed to support Slovenia in strengthening the capacity of the State Prosecutor Offices (SPO) to handle complex economic and financial crimes - such as money laundering and bribery, where the length of trials remain among the highest in the EU on average between 2021 and 2023 - through a review of the current legal framework, the provision of recommendations for legislative amendments, and the exchange of best practices at the EU level (Council of Europe, 2025[64]; European Commission, 2025[65]).
Note: Panel B shows the point estimate and the margin of error. Panel E shows ratings from the FATF peer reviews of each member to assess levels of implementation of the FATF Recommendations. The ratings reflect the extent to which a country's measures are effective against 11 immediate outcomes. "Investigation and prosecution¹" refers to money laundering. "Investigation and prosecution²" refers to terrorist financing.
Source: Transparency International; World Bank, Worldwide Governance Indicators; OECD Public Integrity Indicators database, accessed on 20 November 2025; OECD, Financial Action Task Force (FATF); and OECD calculations.
Some challenges remain in public procurement, despite measures to strengthen transparency and competition that have been adopted. Currently, there are several integrated electronic systems that ensure openness and traceability at every stage of public procurement in Slovenia, allowing for a more transparent and accountable system (OECD, 2025[66]). Furthermore, amendments to the e-procurement system are underway to allow public actors to publish information on contracts below the national thresholds in real-time, thus further enhancing transparency. However, the country has the fourth-highest share of single-bidder procedures in the EU, reaching 44% in 2023. Although the use of negotiated procedures without prior publication (direct awards) has declined over time - from 26% in 2020 to 10% in 2023 - it is still high (European Commission, 2025[67]). A recent EU survey indicates that 28% of companies believe that corrupt practices have prevented them from winning a public tender or procurement contract, compared to the 25% EU average (European Commission, 2025[68]). According to reports from authorities and stakeholders, corruption risks in public procurement remain high in sectors such as health, IT equipment and infrastructure. This was further confirmed by a 2024 investigation by the Commission for the Prevention of Corruption (CPC), which also recommended strengthening oversight of state-owned enterprises (SOEs), as interactions between public and private interests can create fertile ground for misconduct in public procurement. In that regard, the Parliament is also conducting an inquiry into the alleged misuse of public funds by SOEs, linked to potential illegal party financing (European Commission, 2025[55]). Addressing corruption risks in public procurement is one of the key objectives of the 2025 Resolution on the Prevention of Corruption. The accompanying Action Plan already includes measures to address issues in this area, such as improving training on public procurement with a focus on the proper application of internal controls and auditing to enhance bidder competitiveness, as well as on raising awareness on the provisions of the Prevention of Corruption Act and the Whistleblower Protection Act. It also includes measures to establish a system for better supervision over the preparation and implementation of public procurement, and to organise inter-departmental consultations to identify practical challenges in applying procurement rules (CPC, 2025[58]).
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