Development Report


Development Report

Development report 2019

Since 2016 Slovenia has again been narrowing its development gap with the EU average, social inclusion of the population remains relatively high, while the efficiency of energy and resource consumption has improved somewhat. These are the key findings of this year’s Development Report of the Institute of Macroeconomic Analysis and Development. In certain areas, developments deviate from the principles of sustainable development and pose a risk to the achievement of the primary objective of the Slovenian Development Strategy 2030. For effective dealing with key development challenges, the report pays special attention to recommendations for development policies. In our view, these should be focused on acceleration of productivity growth, adjustment to demographic change and strengthening the development role of the government and its institutions, while striving to reduce the environmental burden.

Recommendations for development policies:

- Acceleration of productivity growth for economic progress and higher living standards of the population;
- Adjustment to demographic change to ensure a decent life for all;
- Transition to a low-carbon circular economy to reduce the environmental burden and increase the competitiveness of the economy;
- Strengthening the development role of the government and its institutions.

Slovenia's development - Indicators:

1. Gross domestic product per capita in purchasing power standards

In 2016 Slovenia again started to approach the EU average in terms of economic development as measured by gross domestic product per capita in purchasing power standards (PPS). In 2017, with 85% of the EU average, it reached the level of relative economic development from 2009, lagging only 5 pps behind the pre-crisis peak from 2008. More precisely, in 2008 Slovenia’s GDP per capita in PPS was 10% lower than the EU average, but during the economic crisis the gap widened to 18%. A breakdown of per capita GDP into productivity and employment rate shows that in 2016 and 2017 the development gap narrowed due to a relatively faster increase in the employment rate than in the EU, in 2017 also due to higher productivity growth. Productivity otherwise remains relatively low (82% of the EU average in 2017), the lag in this area fully explaining the relatively low level of Slovenia’s economic development, measured by per capita GDP, given that the employment rate has been above the EU average throughout the period (in 2017 it exceeded it by 4%).

In 2017 eight Member States lagged more behind their pre-crisis peaks than Slovenia. Gross domestic product per capita expressed in relation to the EU average was lower than before the crisis in 13 Member States. In Slovenia it lagged 5 pps behind the highest pre-crisis level in comparison with the EU average, in Greece and Cyprus more than 20 pps, and in the Netherlands, Finland and Italy more than 10 pps. In 2008 the countries closest to Slovenia in terms of GDP per capita in PPS were Greece (93%) and the Czech Republic (84%); in 2017 they were Cyprus (85%) and the Czech Republic (89%). The gap in GDP per capita in PPS in EU Member States has been declining over the years. From the beginning of the previous decade to 2017, the ratio between the most and the least developed Member States dropped from 1:9.3 (Romania/Luxembourg) to 1:5.1 (Bulgaria/Luxembourg).

Figure: GDP per capita and its components

2. Real GDP growth

After four years of higher and higher growth, GDP exceeded its pre-crisis level in 2017; in 2018 its growth started to slow. Following the double-dip recession, real GDP has been rising in Slovenia since 2014. Having strengthened in 2014–2017, economic growth started to ease in 2018, primarily as a consequence of more moderate export growth due to the slowing of economic growth in trading partners and the wearing off of the effect of one-off domestic factors. In 2018 exports remained a significant factor of growth, but growth has been increasingly driven by domestic consumption: (i) in 2013–2016 particularly household consumption, whose moderate growth was still boosted by favourable labour market conditions, and (ii) since 2017 particularly investment in gross fixed capital formation, which had dropped notably in 2009–2012. Investment has been rising in all main segments; last year construction investment increased the most, particularly investment in civil-engineering works, which had rebounded in 2017. The continuation of several-year growth of investment in machinery and equipment was boosted by high capacity utilisation, good business performance and lower corporate indebtedness. With the further relaxation of austerity measures and employment growth in the general government sector, government consumption also rose for the fourth consecutive year.

After a relatively deeper decline during the crisis, in 2018 economic growth in Slovenia (4.5%) was significantly higher than in the EU as a whole (1.9%) for the third year in a row. This was attributable primarily to the still relatively strong growth of Slovenian exports, but also, in the last two years, to stronger growth in investment than in the EU overall, following a more pronounced decline during the crisis. Growth was also again higher, on average, than in other new Member States, behind which Slovenia still lagged in terms of the cumulative growth since 2005.

Figure: GDP

3. General government debt

The improvement of the general government balance in circumstances of high economic growth has been reflected in a rapid decline in the general government debt as a share of GDP in recent years. The increase in Slovenia’s indebtedness since 2008, one of the largest in the EU, amid double-dip recession and many years of persistently high general government deficits and owing to one-off factors, came to a halt in 2015. Since then the debt-to-GDP ratio has been rapidly falling (also on an international scale), the pace of reduction being even faster than required by the Stability and Growth Pact for the transition period (2016–2018) following the abrogation of the excessive deficit procedure. The debt-to-GDP ratio has declined under the influence of the improvement in the primary balance (in surplus); the contribution of economic growth – which exceeded the counter-effect of interest expenditure in the last three years – has also been favourable. In nominal terms, debt has remained unchanged for several years, partly on account of the strengthening of liquidity reserves for the pre-financing of liabilities in favourable international financial market conditions. In such circumstances and due to active debt management, which continued to involve buy-backs of dollar-denominated bonds with high interest rates issued during the crisis, the implicit interest rate dropped to 2.9% in 2018 (2008: 5.7%).

Figure: Change in the general government debt in 2008–2015 (left) and 2015–2018 (right)

4. General government balance

In 2018 the general government budget was in surplus. Slovenia, which was one of the EU countries that took measures for mitigating the growth of general government deficit during the crisis and for its gradual reduction with a delay of several years, significantly improved its fiscal position in the five years to 2018. The steady improvement in Slovenia’s balance after 2013, the year when the general government deficit was at its highest due to the economic crisis, can be attributed to stabilisation measures, improved economic conditions and measures for increasing revenue and containing expenditure. The majority of the increased revenue after 2013 arises from higher revenues from taxes (particularly value added tax, personal income tax and corporate income tax) and somewhat less from social contributions. General government revenue from property income also doubled. On the expenditure side, amid more favourable economic conditions, temporary austerity measures began to be relaxed gradually in recent years, particularly in the areas of social benefits and transfers and compensation of employees. This was reflected in stronger growth in primary expenditure in 2017 and 2018, when investment activity also started to rebound. Meanwhile, interest expenditure dropped notably, this as a result of low interest rates and active debt management. The structural deficit, having totalled around 4.2% of GDP in 2008–2011, the most since 2000, was close to the balanced position in 2018.

Figure: General government balance, 2018

5. Current account of the balance of payments and net international investment position

The surplus of the current account of the balance of payments in 2018 was the highest to date. It totalled EUR 3.2 billion (7.0% of GDP). The current account surplus recorded in Slovenia since 2011 reflects private sector deleveraging (especially during the crisis) and increased saving (particularly in the last few years) amid a still relatively low level of domestic investment. The growth of the surplus can be attributed to favourable conditions internationally and to the improved competitive position of Slovenian exporters, amid modest growth in domestic spending. The surplus also reflects the lower deficit in current transactions of the government sector, which is mainly related to fiscal consolidation. Among the current account sub-balances, the surplus in trade in services is widening further, while the surplus in trade in goods started to decline in 2018 following several years of growth due to faster growth in imports than exports, this related to a deterioration in the terms of trade. The deficit in primary income is narrowing gradually as a result of lower debt-servicing costs, while the deficit in secondary income is relatively stable.

The excess of aggregate savings over investment is reflected in both an increase in external assets and a decline in external liabilities; Slovenia’s international net investment position has therefore been improving gradually since 2013. The improvement has been attributable primarily to the net outflow of financial assets in the form of portfolio investment. Commercial banks and mutual and pension funds are stepping up financial investment in foreign debt securities on international financial markets. The Bank of Slovenia has been  buying securities based on its investment decisions and in the framework of non-standard monetary policy measures (under the Asset Purchase Programme) coordinated at the level of the Eurosystem and financed through money issuance. Government liabilities to foreign portfolio investors are also declining. Inward FDI flows have been rising in the last few years, partly on account of privatisation, and exceed those of outward FDI flows. Net external liabilities are also higher in the segment of other investment, this as a consequence of the withdrawal of BoS deposits from accounts abroad and higher liabilities within the Eurosystem. The analysis of changes in Slovenia’s international investment position shows that the improvement in the net financial position is mainly the result of current account surpluses and the related net capital outflows.

In 2018 Slovenia recorded a negative net financial position in the amount of 26.7% of GDP, which is already considerably below the indicative threshold of external imbalances (35% of GDP). The threshold continues to be exceeded most markedly by the euro area countries that experienced the severest sovereign debt crises (Spain, Portugal, Cyprus, Greece and Ireland).

6. Financial system development

Slovenia has a wide gap with the EU average in financial system development; since the onset of the crisis, it has widened particularly in the areas of the capital market and banking system. Growth in financial sector development has not followed economic growth in recent years, meaning that the values of financial system development indicators dropped further. The decline in the banking system’s total assets has come to a halt. The volume of corporate loans is still falling at a moderate pace, but this decline has slowed following the intense corporate deleveraging between 2011 and 2016. New lending strengthened somewhat at the end of 2018 but remains low. On the asset side, growth in the banking system’s total assets mainly stems from lending to households; on the liability side, non-banking sector deposits are on the rise, particularly overnight deposits, which we consider to be a consequence of the low level of deposit interest rates. The development gap regarding the capital market is even wider. After the onset of the financial crisis, Slovenia’s capital market shrank considerably and plays no significant role in financing the economy. Market capitalisation increased by approximately one-fifth in 2018, but only as a consequence of a one-off event, without which market capitalisation would have been 3.1% lower.

Slovenia has the smallest development gap in the insurance sector. During the crisis, the value of this indicator improved somewhat, which is related to the structure of insurance premiums, where non-life insurance premiums, which are less sensitive to cyclical movements, dominate. In the period of economic growth, the indicator value dropped slightly again and remains just above 5%. In the structure of insurance premiums, Slovenia has the widest gap with the EU average in the share of life-insurance premiums, which, at 15% of GDP, is less than one-third of the EU average.

Figure: Banks’ total assets as a % of GDP, 2018

7. Regional variation in GDP per capita

GDP per capita is the highest in Osrednjeslovenska, the region that exceeds the Slovenian average by more than 40%. Osrednjeslovenska is the region with the most jobs (more than one-third of all in Slovenia) and, consequently, high daily commuter flows, which raises its GDP per capita. The Slovenian average is also exceeded in Obalno-kraška, which is one of the regions that were most affected during the crisis but also the one that has improved its position the most since 2014. Jugovzhodna Slovenija is also moving closer and closer to the average – it had the highest nominal GDP growth of all regions in 2017. Zasavska, at the tail end of regions for a number of years, exceeded the Slovenian average only slightly in 2017 despite its above-average GDP growth.

In 2017 the western cohesion region exceeded the EU average in terms of GDP per capita for the first time since 2011. The regions that widened their gaps with the EU average in GDP per capita the most during the crisis are Osrednjeslovenska, Obalno-kraška and Zasavska. In the last two years under review, GDP was again rising across all regions, the fastest in the regions of Zahodna Slovenija, which had experienced a relatively greater decline in economic activity in the first years of the crisis. The gaps with the EU average are therefore narrowing. In 2017 Zahodna Slovenija exceeded the EU average again, while Vzhodna Slovenija (at 70%) remained among the less developed EU regions. Among the statistical regions, only Osrednjeslovenska exceeds the EU average, but it is still at the level from 2011.

Since 2015 regional disparities have again been widening slightly. The relative dispersion of GDP per capita had been the highest in 2010, then decreased until 2015 before rising slightly in the last two years. It is still lower than in the pre-crisis period yet higher than its 2000 low (19.6%). The ratio between the regions with the highest and lowest GDP per capita is 2.6:1 and this is slowly yet persistently rising. It was smallest in 2000, at 2:1.

8. The development risk index

The risk to development as measured by the development risk index (DRI) is higher in the regions of Vzhodna Slovenija. It is the highest in the Pomurska region, where it exceeds the Slovenian average almost by 56%. In the Osrednjeslovenska region, it is almost four times smaller, at 40% of the Slovenian average. Osrednjeslovenska has the highest (or almost the highest) values on most indicators, except for investments in fixed assets as a share of GDP and the proportion of protected areas, where its values are somewhat lower, yet still above average. Among the regions of Vzhodna Slovenija, the risk to development is the lowest in Jugovzhodna Slovenija, at just over 80% of the Slovenian average. Closest to the average index is Goriška, although an overview of individual indicators shows somewhat greater deviations from the Slovenian average. This region stands out in a negative way particularly in the areas of population ageing and population density.

Interregional disparities rose somewhat relative to 2014. The DRI values in the Gorenjska and Primorsko-notranjska regions dropped by more than 10 pps. Both regions made progress particularly in the areas of employment, productivity and unemployment. The damage caused by natural disasters was also smaller, particularly in Primorsko-notranjska. The largest increase in the DRI value (by more than 12 pps) was recorded in Jugovzhodna Slovenija, primarily owing to lower investments in fixed assets as a share of GDP, a higher share of protected areas and a lower share of treated wastewaters. The changes in the DRI index values had no significant impact on the regions’ rankings or interregional disparities (the coefficient of variation rose from 27% to 27.8% and the ratio between the two extreme regions from 1:3.3 to 1:3.8 (Pečar, 2018)).

Map: Development risk index, 2018

9. Productivity

Slovenia’s productivity gap with the EU average remains wider than before the onset of the crisis; the pace of renewed convergence seen in the last years has slowed considerably. The decline in trend productivity growth is largely related to the absence of capital deepening. In 2000–2008 capital deepening explained half of productivity growth in Slovenia (significantly more than in the EU overall) and was recorded in almost all sectors. In the absence of this factor in the post-crisis period, trend productivity growth has been solely the result of the contribution of total factor productivity, i.e. more efficient utilisation of capital and labour. In the last years, particularly in 2016 and 2017, total productivity growth was again also supported by cyclical factors. Before the crisis, the structural shift of employment towards sectors with higher (or more rapidly rising) productivity was still relatively strong in Slovenia, while in the last years, total growth has been based on within-sector productivity growth, i.e. productivity growth in individual sectors (see Section 1.2).

In the business sector, the movement of productivity was largely comparable with the EU average and the level higher than before the crisis; a significant lag is still recorded in construction and ICT activities. Manufacturing, the part of the business sector that is the most exposed to foreign competition, has relatively rapidly offset productivity losses incurred during the crisis, and since 2013 its productivity has mostly been rising faster than in the EU as a whole. More favourable productivity movements than in the EU and in other sectors of the economy were also recorded in transportation (H) and administrative and support service activities (N), particularly in the segment of employment agencies. A significant gap is still evident in construction (which was particularly strongly affected during the crisis), even though. value added per employee rose markedly in 2017 and 2018. Another sector standing out in a negative way in international comparisons is ICT activities, more precisely telecommunications. Total productivity is also being impeded by the non-business part of the economy, which could be due to lower competition. Productivity in these activities is more difficult to measure, however, owing to statistical problems in measuring.

Figure: Productivity level in the total economy (left) and real productivity growth by sector (right)

10. Export market share

The export market share of Slovenian goods on the world market has returned to its pre-crisis peak level. While in 2007 Slovenia met approximately 0.2% of global import demand for goods, in 2008–2012 it was one of the EU countries with the largest market share declines. More than half of the market share decline in that period can be explained by the unfavourable (geographical in particular) orientation of Slovenian exports, although it was also due to the strong deterioration in (cost) competitiveness at the beginning of the crisis. With the rebalancing of price and cost factors and stronger import demand of main trading partners, Slovenian market share has again been rising since 2013, especially since 2016. According to preliminary data, in 2018 the average annual market share growth on the world market was still relatively high (3.7%), although negative in the second half of the year, this to a great extent due to the expected year-on-year easing of the otherwise high growth rates in exports to France. Among main trading partners, strong market share growth was recorded in Italy and Switzerland and in Germany, Slovenia’s most important market. On the other hand, market share declined in most countries of the former Yugoslavia (for the second consecutive year) and Russia (for the third consecutive year).

In the absence of the contribution of favourable product specialisation, in 2018 the growth of Slovenia’s market share in the EU was based on improved efficiency, but this was declining gradually during the year in most products. In the last 15 years, Slovenia’s product specialisation has mostly been unfavourable from the aspect of the composition of global import demand (in the post-crisis years this structural effect was positive in 2014–2016). Data on market share growth in the EU, where Slovenia exports more than 75% of its goods, also show the absence of a favourable impact of product composition in 2018, the 4.1% growth on the EU market being thus based on an increase in efficiency, i.e. an increase in market share of individual products. The quarterly dynamics show that in most major product groups growth rates dropped sharply over the course of the year. This is partly a consequence of the slowdown in the European car industry in mid-2018, which is linked to several other industries and a relatively high share of Slovenian exports. The wearing off of the effect of the introduction of a new production line in the manufacture of vehicles in 2017 had an even greater impact on the dynamics. In 2018 growth rates remained high in machinery specialised for particular industries, scientific and control instruments, and metal waste.

Figure: Countries’ world merchandise market shares (left) and decomposition of growth in Slovenia’s world merchandise market share (right)

 

11. Unit labour costs

At the level of the economy, there has been no major misalignment between wage growth and productivity growth in recent years. Under the impact of strong wage growth (in 2008 and 2010) and a decline in productivity (2009), Slovenia’s cost competitiveness position relative to EU countries deteriorated significantly during the crisis. After the readjustment in 2011–2015, unit labour costs remained more-or-less unchanged in the following three years, at around 2% above the pre-crisis level.

In the more export-oriented part of the business sector, in 2018 cost pressures started to increase gradually. The readjustment of unit labour costs at the beginning of the post-crisis period arose particularly from those parts of the economy that are the most exposed to international competition and foreign demand. By 2014 manufacturing activities had thus already offset the competitiveness losses incurred during the crisis. Signs of a gradual build-up in cost pressures (higher wage growth and stagnant productivity) did start to show last year, but as the movements did not deviate significantly from those in main trading partners, it can be expected that the competitive position of the majority of Slovenian exporters did not deteriorate (notably) in 2018. After a decline in the preceding year, most of the remaining industries and traditional market services recorded moderate growth in unit labour costs in 2018; stronger growth was also seen in ICT activities (all of these being part of the tradable sector of the economy). Unit labour costs in the non-tradable sector, on the other hand, fell last year under the impact of accelerated activity in construction and financial services, thereby reducing the otherwise still wide gap relative to the pre-crisis period and the EU average.

Figure: Unit labour costs, entire economy (left) and manufacturing (right)

12. Exports of high-technology goods and knowledge-intensive services

After rising before and during the crisis, the share of high-technology products has been fairly stable in the last five years and somewhat higher than the EU average. The previous decade and the period of the crisis were marked by the restructuring of goods exports towards a higher share of high-technology products amid a concurrent sharp decline in low-technology products. In the years of the economic upturn following the crisis, the shares of both product groups remained close to the levels achieved, which, with regard to the differences in 2000, no longer deviate significantly from the EU average. The share of medium-technology products, which make up the bulk of goods exports, has not changed significantly over the longer term. It dipped during the crisis before strengthening again after 2013, this being the group of products that is highly integrated into global value chains and thus the most vulnerable to fluctuations in foreign demand.

Despite their greater export orientation, the share of knowledge-intensive non-financial market services  in total exports of services remains among the lowest in the EU. In 2010 knowledge-intensive services contributed 20.9% to total exports of services, in 2017 4.3 pps more. This increase, however, did not suffice to reduce the wide gap with the EU average, which persisted above 12 pps throughout the period. Most sectors of knowledge-intensive services lagged behind the EU average, particularly computer services (by around 7 pps). A higher share than in the EU was achieved by telecommunication services in particular, but in the last two years their share in total exports of services declined. In 2010–2017 exports of technical, trade-related services increased the most in Slovenia, by 12.3% per year on average. In the EU, meanwhile, exports of information services rose the most during this period, by 15.5% per year. Significantly stronger export growth was recorded particularly in Eastern European Member States (around 20% per year).

Figure: Share of knowledge-intensive non-financial market services* in total exports of services, 2017

13. Foreign direct investment

Since 2014 inward FDI has been rising faster, though still more slowly than in most new EU Member States, while outward FDI has remained modest. The increase in inward FDI is mainly due to accelerated privatisation and the generally higher sales of equity stakes in Slovenian companies. There have also been more expansions of existing foreign-owned companies and new greenfield investments. The results of the 2014–2017 SPIRIT surveys show that in each of the four years more than 35% of the surveyed companies with foreign equity were planning to expand in Slovenia; in 2018 the respective share was 38.2%. Outward FDI, on the other hand, has been rising only modestly since 2014, following a decline in 2010–2013. In 2018 its stock was still significantly lower than its 2009 peak (EUR 6,143 million). The inflows and outflows of equity both rose notably in 2018 relative to 2017 (by 25.5% and 25.8% respectively).

Slovenia remains among the EU countries with the lowest stock of inward FDI as a share of GDP. By 2018 the stock of inward FDI as a percentage of GDP otherwise rose to 31.7% of GDP (which is around 9 pps higher than at the beginning of the crisis), but as only two of the new Member States (Slovakia and Bulgaria) recorded a smaller increase, Slovenia remained one of the EU countries with the smallest FDI stock as a share of GDP. A smaller share than in Slovenia is recorded by Greece, Italy and Germany. Slovenia’s outward FDI as a share of GDP dropped from the record 17.0% in 2009 to 12.9% in 2018. Among new EU Member States, Slovenia thus lags only behind Hungary and Estonia in this regard, but both these countries have significantly higher shares.

Figure: Stocks of inward and outward FDI, as a % of GDP

14. Corporate environmental responsibility

The prevalence of environmental certificates, by which organisations demonstrate that the negative environmental impacts of their business activities are the lowest possible, is roughly on par with the EU average. The number of the otherwise most widely used environmental certificates, ISO 14001, per million inhabitants in Slovenia is similar to the EU average, while the prevalence of Ecolabel (EU Flower) licences is greater and participation in EMAS lower than in the EU as a whole. The number of ISO 14001 certificates has been very close to the EU average for many years. After rising rapidly up to 2006, it mostly hovered around the achieved level in the subsequent ten years. The total number of other environmental certificates (EMAS and EU Ecolabel) has been rising gradually throughout the period. Some EU countries, particularly Germany, Italy, Spain in Austria, where EMAS is the most widespread, are encouraging organisations to participate in EMAS by various incentives. Slovenia is planning to stimulate EMAS uptake through the European LIFE B.R.A.V.E.R. project and include some regulatory relief measures into the existing legislation. The EU Ecolabel (EU Flower) remains more widespread in Slovenia than EMAS. Besides in manufacturing, it is widely used in tourist accommodation. The number of EU Flower licence-holders in this sector is also high in some other Member States, for example France, Italy and Spain.

Figure: Environmental certificates ISO 14001

15. European Innovation Index

Slovenia ranks among strong innovators according to the European Innovation Index (EII), but it widened its gap with the EU average in the 2010–2017 period. The EII is a composite indicator measuring performance of national innovation systems in EU countries in four areas: (1) framework conditions for innovation activity external to the enterprise, (2) public and private investment in innovation activities, (3) enterprises’ innovation activities, and (4) the impacts of all these innovation activities on employment and sales. On the basis of 27 indicators, countries are classified into four innovation performance groups, from the most to the least innovative. Slovenia is the only Central European country to be ranked in the group of strong innovators, i.e. countries with innovation performance between 90% and 120% of the EU average from 2010. With an EII value rising more slowly in Slovenia than the EU average, Slovenia widened its gap with the best performing countries during this period.

In comparison with the EU average, Slovenia’s innovation system is strongest in human resources and business investment in R&D, while it is relatively weakest in public investment in R&D and the impacts of innovation activities. Looking at individual indicators, in 2017 Slovenia exceeded the EU average particularly in international scientific co-publications, the number of new doctors of science, the percentage of the population aged 25–34 with tertiary education, and the share of business sector expenditure in R&D expenditure. Its greatest weaknesses relative to the EU are the low values of the following indicators: R&D expenditure in the public sector, venture capital investments (which are important particularly for high-growth high-technology enterprises) and knowledge-intensive services exports (see Indicator 1.14).

Figure: European Innovation Index

16. R&D expenditure and number of researchers

After a long period of growth, R&D expenditure has been shrinking since 2014 and was below the EU average in the last two years. The EU average is significantly exceeded in Jugovzhodna Slovenija and the Osrednjeslovenska region; in the former as a consequence of intense R&D investment of the pharmaceutical industry, in the latter also due to the high concentration of research institutions. In 2017 the decline in R&D investment of the public sector came to a halt. Its volume rose by 12.3%, thus compensating for around one-quarter of the decline in 2012–2016. The business sector, the main driver of growth up to 2015, has since reduced investment by 17.1%. The decline in business investment on R&D is a consequence of several factors, such as, in 2013 and 2014, the termination of the financing of R&D in excellence, competence and development centres, which were co-financed by EU funds. After 2015, the amount of R&D tax relief claims also started to decline. Despite the fall in business expenditure on R&D, its share in total R&D expenditure (2017: 63.0%) remains high in comparison with the EU average (2016: 56.6%). Since 2013, R&D expenditure per capita has also been falling in Slovenia, unlike in the EU. In 2017 it totalled around 70% of the EU average in the business and only 46% of the EU average in the public sector.

In 2008–2016 the number of researchers rose considerably as a result of growth in the business sector (by 46.8%), where the majority of researchers are employed. Overall, 61.8% of all researchers worked in the business sector in 2016, which is significantly more than on average in the EU average (51.1%) and in some more innovation-active EU Member States (Sweden, the Netherlands and Austria). Owing to methodological changes, the business sector recorded an exceptionally large increase in the number of researchers in 2017. With public sector expenditure on R&D being reduced up to 2016, the trend of decline in the public sector has not yet come to a halt – in 2016 the number of public sector researchers was around 330 lower than in 2008. With a continuing outflow of highly qualified staff and only slow replacement of the retiring older generations of researchers, the problem of insufficient number of public sector researchers may worsen in the future.

Figure: R&D expenditure by source of funds, Slovenia

17. Innovation activity of enterprises

The share of innovation-active enterprises was falling in 2010–2016, so Slovenia’s gap with the EU average widened. In 2014–2016 there were 39.8% of innovation-active enterprises (IAEs) in Slovenia, which was a significant regression with regard to the previous three-year period (2012–2014) and the worst result since comparable data have been available. The EU also made very little progress regarding innovation activity, but the most innovation-active Member States increased their lead. Slovenia recorded a decline in the share of IAEs across all enterprise sizes. Among large enterprises, the share of IAEs significantly exceeded the EU average in all periods analysed. The share of innovation-active medium-sized enterprises dropped considerably in the last three-year period, which represents a notable difference from previous periods, when it had exceeded the EU average. The problem remains the low innovation activity of small enterprises and the increasingly wide gap with the EU average. Sales revenues attributable to the introduction of technological innovations tend to be higher in the case of innovations new to the enterprise than those new to the market. In Slovenian IAEs, the share of the former accounted for 10.7% and the share of the latter for 8.2% of total revenues in 2016 (they were around 2 pps higher in manufacturing but much lower in services). Enterprises in manufacturing are traditionally more innovation-active than those in the service sector, but in both the gap with the best performing countries widened over 2010–2016, hovering between 10 and 30 pps, which is reducing their competitiveness. Among service activities, the share of innovation-active enterprises is the largest in computer services (63.2%), but it declined and is significantly lower (by around 10–20 pps) than in leading Member States. The share of IAEs in knowledge-intensive services totalled 53.7% in Slovenia. It was the highest in Portugal (around 20 pps higher). Strengthening innovation activity in these service activities (e.g. ICT services or consultancy services) is also important because of their potential positive impact on innovation capacity in other sectors and thus the competitiveness of the entire economy.

Figure: Innovation-active enterprises in manufacturing and services, 2014–2016, as a % of all enterprises

18. Intellectual property

Since the beginning of the crisis, Slovenia has made great progress in terms of EU trademarks, but its gap with the EU average with regard to patents has widened. With regard to the level of patenting activity, as measured by the number of first patent applications per million inhabitants, Slovenia ranked around 13th place among EU countries throughout the 2008–2017 period. According to provisional data, Slovenian applicants filed 48 patent applications in 2018, the least since 2003. The intensity of filing patent application is also a reflection of the structure of the economy and technologies used in individual sectors. According to the international WIPO methodology, the most patentable technological fields are medical technology, digital communications, computer technology, and technologies related to electrical energy, machinery and apparatus. More than half of the patent applications filed with the European Patent Office (EPO) in 2010–2018 were from these technological fields and most of them were filed by large enterprises (EPO Annual Report 2018, 2019). In 2008–2013 the most first patent applications by Slovenian applicants were filed in the field of technologies for human necessities, this being related to the pharmaceutical industry. In EU trademark and service mark protection, Slovenia increased the number of applications per million inhabitants in 2008–2018 and thus considerably reduced its gap with the EU average. The gap in the number of Community designs  per million inhabitants remains wide, indicating insufficient exploitation of the potential of creative industries for enhancing competitiveness. Applicants can obtain EU trademark or Community design protection that is valid throughout the EU by a single application with the EU Intellectual Property Office (EUIPO). As these types of legal protection also involve lower costs and a shorter registration procedure than patent protection, they are increasingly interesting for enterprises in all sectors, particularly those in service activities and for small and micro enterprises.

Figure: Number of EU trademark applications and registered Community designs with the EUIPO, per million inhabitants

19. The Digital Economy and Society Index

Slovenia belongs to the medium-performing group of EU countries according to the Digital Economy and Society Index; in the last two years its ranking has been gradually improving. The index monitors digital competitiveness of countries in the areas of connectivity, human capital, use of internet services, integration of digital technology and digital public services. In recent years Slovenia has progressed particularly in the integration of digital technology and digital public services, where it ranks above or close to the EU average. The faster integration of digital technology since 2015 has been mainly due to the introduction of mandatory e-invoicing for suppliers to budgetary users; e-commerce is also increasing gradually. In digital public services, since 2016 Slovenia has made progress regarding open data. In 2018, there has also been a shift in e-government services. Positive changes have also been observed in connectivity and the use of internet services, yet insufficient for Slovenia to improve its ranking and reduce the lag behind the EU average. Broadband coverage (including fast broadband) is high and its take-up rising, but the relatively high prices of broadband connections remain a problem. In the use of internet services, Slovenia scores relatively low, but the use of internet communication, e-commerce and e-banking – where the gaps with the EU are among the widest – has increased slightly. Regarding human capital, Slovenia is close to the EU average, although it slipped in 2018 due to the shrinking share of ICT specialists in the workforce and of science, technology and informatics graduates, which may indicate problems in the supply of labour with advanced digital skills.

Figure: Digital Economy and Society Index (DESI) and its components, 2018

1. Share of the population with tertiary education

The share of adults (25–64 years) with tertiary education is rising; because of the relatively high share of tertiary-educated women, it is higher than in the EU as a whole. These trends, related to the long-term high participation of young people in tertiary education, are favourable from the aspect of an increase in human capital as a factor of competitiveness and with regard to greater demand for tertiary-educated workforce. The share of tertiary-educated people is higher than the EU average in all age groups except the oldest (55–64 years). The gap is widest in the youngest group (25–34 years), within which the share of young people aged 30–34 has been higher than the Europe 2020 Strategy target for several years. However, given the ageing of the population and mismatches on the labour market, ensuring a sufficient supply of young people with appropriate skills for dealing with development challenges remains a problem despite the favourable trends in tertiary education. Among tertiary-educated people, the share of women exceeds the share of men, the gender gap (in favour of women) being wider than in the EU as a whole. The share of adults (25–64 years) with tertiary education in the cohesion region Zahodna Slovenija (37.5%) is higher than in the cohesion region Vzhodna Slovenija (28.2%). In all years under review, this share has been highest in Osrednjeslovenska, the economically most developed region and the one with Slovenia’s largest university centre.

Figure: Share of the population aged 30–34 with tertiary education, 2017

2. Enrolment in upper secondary and tertiary education

The number of young people enrolled in upper secondary education is falling for demographic reasons. In 2007/2008–2017/2018 it dropped by approximately one-fifth. Such developments, which are set to continue in the coming years according to demographic projections, will be reflected in a lower supply of workforce in the future. Although the share of young people enrolled in vocational programmes increased in 2007/2008–2017/2018 and is above the EU average, employers have already been having difficulty finding appropriately skilled workers for many years, in our view not only because these occupations are less attractive for young people, but also as educational programmes are being too slowly adjusted to labour market needs. Apprenticeship, the type of training programme that could make the education system more responsive to employers’ needs, has been in place for the second school year only and the number of pupils enrolled is low, unlike in some other EU countries which have a long tradition in this area.

The number of students enrolled in tertiary education has also been falling for demographic reasons for several years. In the 2007/2008–2017/2018 period, enrolment in tertiary education dropped by almost a third, the most in social sciences. It was up only in health and welfare courses, where the share of enrolled students also increased the most (but was nevertheless below the EU average in 2016). The share of students enrolled in science and technology programmes also rose, but their number is nonetheless still falling. Despite these changes in structure, enrolment in tertiary education is responding to the needs of the society and the economy too slowly. The low enrolment in health and welfare courses is problematic in particular, given the demographic trends. It is also lower than the EU average. In the coming years, a greater responsiveness of the tertiary education system could be achieved by establishing a system for monitoring the employability of graduates and helping students gain practical experience and skills at companies.

Figure: Students enrolled in tertiary education, structure by field of education, in %

3. Graduates from tertiary education

Since 2013 the number of tertiary-level graduates has been falling for demographic reasons, which is reducing their availability on the labour market. Given the decline in the number of enrolled students, these trends will continue in the coming years. The number of graduates increased sharply only in 2016, this being the last year for completing studies under the pre-Bologna study programmes. In the structure of graduates, the share of social science graduates dropped the most in 2012–2017; given the falling enrolment rates, such trends are expected to continue in the future. With increased enrolment in science and technology fields, the share of science and technology graduates rose but was nevertheless below the EU average in 2016. Owing to a decline in their number, the needs of the economy for such persons are no longer being met. Given the needs of a long-lived society, the number of health and welfare graduates increased too modestly. They account for a much smaller share of total graduates than in the EU on average. The possibilities for ensuring an adequate supply of tertiary-educated graduates are being diminished not only by the insufficient responsiveness of the tertiary education system to the needs of society and the economy, but also by the low rate of transition into the second year of study and the relatively high average graduation age. The supply of graduates is also declining due to emigration, given the significant demand for certain educational profiles abroad.  The supply of tertiary-level graduates can also benefit from international student mobility, but the share of foreign students in Slovenia is low. The percentage of students studying abroad (which enables them to acquire knowledge and skills that cannot be obtained at home) is roughly the same as in the EU-22. Graduates from short-cycle tertiary education programmes – which in Slovenia include post-secondary vocational education and are meant to strengthen the links between education and the economy – account for a lower share of tertiary-level graduates than in the EU as a whole.

Figure: Structure of graduates from tertiary education, by field of education

4. Performance in reading, mathematics and science (PISA)

The performance of Slovenian 15-year-olds in mathematics, science and reading literacy is good. According to PISA 2015, they scored higher than the EU average in all three literacy types and rank in the upper quarter of EU Member States. One of the 2020 benchmarks for the average performance in the EU set in the Strategic Framework for European Cooperation in Education and Training (Education and Training/ET 2020) is that the share of 15-year-old pupils with low achievement (below proficiency level 2) in reading, mathematics and science should be less than 15% on the respective literacy scale. Slovenia has reached this goal in reading and science but is still below target in mathematics. While overall girls achieve better results in reading and science, boys score higher in mathematics. Between 2012 and 2015, Slovenian 15-year-olds improved their scores in mathematics and, in particular, reading, while their performance in science remained approximately the same.

The good results are related to educational (material and human) resources, an area where Slovenia has a favourable position on most indicators. Material resources include textbooks, library materials and laboratory equipment. As regards human resources, there is no shortage of teachers in Slovenia, Slovenia’s favourable position in this area being related to the number of certified teachers (i.e. teachers who have obtained a licence or passed a professional examination) and the pupil/teacher ratio. There is, however, still room for improvement in some indicators, such as class size, teachers’ help with homework, equipment of schools with computers and participation of teachers in professional development programmes.

15-year-olds from lower socio-economic backgrounds and those from immigrant backgrounds achieve worse results in mathematics, science and reading. Pupils from the highest socio-economic backgrounds perform the best and those from the lowest perform the worst, but between 2012 and 2015 the gap between the two groups narrowed and was smaller than the EU average for all three literacy types. Immigrant pupils achieve worse results in science literacy than their non-immigrant peers, the difference between them being greater than on average in the EU.

Figure: Average performance in mathematics, science and reading of 15-year-olds (PISA), Slovenia and the EU*, 2012 and 2015, in points

5. Education expenditure

Public expenditure on education (as a % of GDP) is declining and is lower than the EU average; private expenditure is comparable. In 2017 public expenditure amounted to 4.49% of GDP and was the lowest in ten years. The decline in public expenditure on education since 2012 (in relative terms) has been a consequence of the containment of its growth due to government fiscal consolidation measures and some other measures for more rational use of this expenditure and, in recent years, of its lower growth than that of GDP. In the last years analysed, public expenditure dropped for all levels of education, but for primary education particularly. In 2017 the decline in the share of public expenditure in GDP eased notably owing to its significant nominal increase as a consequence of a higher number of employed persons in education, wage rises, increased enrolment in kindergartens and elementary schools (and related investments), and changes in the areas of transfers to households/students. In 2015 (the latest international data), public expenditure on education was below the EU average at all levels of education except pre-primary. The gap was the widest at the tertiary level, despite the higher participation of young people in tertiary education than in the EU as a whole. Private expenditure on education is diminishing. In 2017 it totalled 0.59% of GDP; according to data for 2015, it was comparable with the average for those EU Member States that are also OECD members (i.e. the EU-22).

Expenditure (both public and private) per participant in education dropped in 2017 and is low by international comparison. It declined at all levels, but the most for tertiary education, and was the lowest in the last few years. In 2015 (the latest international data), it was below the EU-22 average at all levels of education. The gap was widest in upper secondary and tertiary education, owing to the high participation of young people and, at the tertiary level, also as, unlike in several other EU countries, full-time students enrolled in 1st and 2nd study levels pay no tuition fees. The low expenditure is reducing the possibilities for improving the quality of education. The analysis of the efficiency of education expenditure carried out for Slovenia in comparison with other countries highlighted the possibilities for improving the efficiency of this expenditure, particularly at the primary level of education.

Figure: Expenditure (public and private) on educational institutions per participant, 2015

6. Participation in lifelong learning

Following the decline in 2012 and 2013, the participation of adults (aged 25–64) in lifelong learning has stabilised and remains higher than the EU average. In 2017 it stood at 12.0% (EU: 10.9%), lower than at the onset of the crisis and far from both the objective of the Strategic Framework for European Cooperation in Education and Training (Education and Training 2020/ET 2020), which is 15%, and the SDS 2030 target, which is 19%. Particularly problematic is the low participation of low-skilled persons, older people and men and, consequently, their diminished possibilities for successful inclusion in society. Among the cohesion regions, the participation rate is higher in Zahodna Slovenija, which consists of economically stronger regions with a greater and more diverse supply of educational programmes. Among all regions, the economically most developed region, Osrednjeslovenska, had the highest participation rate in all years under review, at 15.1%, and has already exceeded the ET 2020 target. The lowest participation rate is in Pomurska (below 5%), this being one of the economically weakest regions and one with significantly fewer adult education providers.

Broken down by activity status, in 2017 participation in lifelong learning was highest among employed people, although it dropped the most in this group in the 2008–2017 period. The low participation rate of inactive people stands out in particular, this being the only rate that is also lower than the EU average. Differences also exist within the employed, low participation in lifelong learning being recorded particularly in those activities and occupational groups that employ larger shares of people with low education. Among all activity statuses, participation in lifelong learning among the employed dropped the most in 2008–2017, across all occupational groups and in most activities, which is however unfavourable from the perspective of employee adaptability to technological change and improvement in business sector competitiveness.

Figure: Participation of employed persons aged 25–64 in lifelong learning, 2017

7. Attending cultural events

While increasing steadily over the long term, the average attendance at cultural events per inhabitant remained roughly unchanged in the last three years analysed. It was highest in 2012, owing to the many performances hosted by Maribor, the European Capital of Culture that year, while amounting to around 5–6 visits per inhabitant in the remaining years, which is still far below the SDS 2030 target. In 2008–2017, amid a significant increase in the number of cultural performances, attendance in houses of culture and cultural centres increased the most. In 2017 they recorded the highest number of visits of all cultural institutions. Higher attendance was also recorded at events performed by cultural associations, this being related to a higher number of cultural associations and a greater supply of performances. Amid a higher supply of theatrical performances, theatre and opera attendance also went up in the period under review. Only cinema attendance declined, in our estimation partly due to the diversification of the ways films are watched and a shift away from physical cinemas with an increase in broadband internet connections. Attendance at screenings of Slovenian long feature films otherwise increased in 2008–2017.

Figure: Attendance at cultural events, Slovenia, 2017

8. Share of cultural performances held abroad

The share of cultural performances held abroad has been rising in recent years. Touring is an indirect indicator of the quality of cultural production, as invitations to perform abroad generally signify recognition of good work. Developments in this area are difficult to assess because of the short data series, as data are available only for 2015–2017 and the figure for 2015 is SURS's estimate (see note under the table). In 2017 the share of cultural performances held abroad totalled 3.9%. It rose in comparison with the preceding year and was higher than the SDS target for 2030. The share of theatre and opera performances increased the most. Although the share of performances by musical institutions declined significantly, it was still the largest among all cultural institutions, which we assess is related to the nature of their activity and to systematic promotion of international cooperation. Among performances held abroad, those in the EU accounted for the largest share (around 80%), which reflects the geographical attachment of Slovenian culture to this area.

Figure: Share of cultural performances on tours abroad, Slovenia, 2017

1. Income inequality

In 2017 Slovenia, together with the Czech Republic, recorded the lowest income inequality in the EU. The top 20% of households received 3.4 times as much income as the bottom 20%, while the EU average was 5.1. A further breakdown of income distribution shows that in Slovenia, the gap between the fifth quintile and the third quintile, which includes the median (1.79 in 2017), is somewhat smaller but comparable to the gap between the median and the first quintile (1.91 in 2017). The small changes in income inequality in the last decade were the result of comparable movements at both ends of the income distribution. In the period of 2010 to 2012 the ratio of the fifth to the third quintile otherwise declined, while the ratio of the third to the fifth quintile was increasing throughout the 2009–2014 period, which is a reflection of the poorer households having been much more affected by the crisis and austerity measures. The decline in inequality after 2014 was mostly driven by these households, as their growing incomes pulled closer to the median. Income is furthermore evenly distributed across generations, which indicates that pensions play a strong role in stabilising pensioners’ income.

After a slight increase in the years following the crisis, income inequality returned to the pre-crisis level in the last few years. In the period of 2005 to 2012 income distribution changed only marginally. Somewhat bigger movements were seen after 2012, with the adoption of austerity measures, changes in social policy and the increased tax burden on the highest wages. After 2014 income inequality started to decline again, due to rapid economic growth and the phasing out of austerity measures. These two factors had the strongest effect on the level of equivalised disposable income of the households in the lowest quintile, where employment increased the most and the relaxation of austerity measures had the biggest effect. Households from the highest quintile, on the other hand, are highly taxed. The relatively even distribution of household disposable income is due mainly to the progressivity of the tax system (personal income taxes) and, to some extent, to social transfers. The system of income redistribution through taxes and transfers is significantly reducing the dispersion of market income (earnings), from a Gini coefficient of 0.425 to 0.244 in 2016, which is more than in most OECD countries.

Figure: Equivalised disposable income distribution, quintile share ratio 80/20

2. Median equivalised disposable income

After its rapid growth had been interrupted by the crisis, median equivalised disposable income started increasing again in the last four years analysed. The period of strong and even growth (2005–2009) was followed by a period of negative or low growth rates (2010–2013) as a consequence of the crisis and austerity measures (ZUJF). Since 2014, median equivalised disposable income (expressed in euros) has again been growing, which indicates improvement in the living standard of the population. Despite the period of negative growth rates, the cumulative growth totalled 15.4% over the entire period under review (2005–2017), indicating a positive long-term trend. The developments in the median equivalised disposable income in the EU as a whole are comparable to those in Slovenia, except that incomes in the EU started recovering one year earlier. In the EU, the cumulative real growth over the last four years was somewhat higher than in Slovenia (SI: 6.1%, EU: 6.6%), while year-on-year real growth in 2017 was slightly lower (SI: 1.5%; EU: 0.6%).

In Slovenia, the lower levels of median equivalised disposable income of people over 65 years of age and a lower premium on higher education stand out in comparison with the EU average. Broken down by age, the highest median income (expressed in euros) is recorded for employed people aged 18 to 64 (13,098 in 2017). It is also similarly high for children aged 18 and under (12,667 in 2017), while it is relatively lower in the group of people over 65 years of age (11,379 in 2017) and even lower for those older than 75. In the EU average, the median equivalised disposable income of those over 65 years of age is 10% lower than that of employed people (13% lower in Slovenia). The gap in the median equivalised disposable income for the age group of 18 and under and the active population in the EU as a whole is 10%, while in Slovenia it is only 3.3%, which is a result of strong policies for protecting the material well-being of children and young people. The median equivalised disposable income of the population with tertiary education in Slovenia has been falling with regard to the total median eqivalised disposable income over the whole period since 2005. In 2005 it was 21.4% higher for this population group, compared with only 7.5% in 2017. Since the pick-up in growth of the total median equivalised disposable income in 2014, the median for people with higher education has been rising at a much slower pace in nominal terms (3.2%) than the medians for those with upper secondary (7.4%) and secondary and low education (8.8%), which indicates a faster improvement in the living standards of lower-skilled persons. In the EU average, the median equivalised disposable income of people with higher education was also falling relative to the total median equivalised disposable income in the 2008–2017 period, but from a higher level and more slowly than in Slovenia (from 46.7% of the total median income in 2008 to 35.0% in 2017).

Figure: Median equivalised disposable income, 2008 and 2017

3. At-risk-of social-exclusion rate

Slovenia has performed better than the EU average in terms of the risk of social exclusion ever since measurements began; in 2017 it was again at its pre-crisis level. In 2017 the rate of the risk of social exclusion totalled 17.1%, meaning that 345,000 persons were at risk of social exclusion that year, which is 26,000 fewer than in 2016 and in line with the Europe 2020 target. The values of all components of this composite index improved relative to the preceding year in 2017.

Of the three index components, only the at-risk-of-poverty rate is still higher than before the crisis. At 13.3% in 2017, it is still 1 percentage point higher than in 2008. A total of 268,000 persons lived below the poverty threshold in 2017, more than before the crisis. With regard to the preceding year, in 2017 the at-risk-of-poverty rate increased for some of the already very vulnerable groups, i.e. single-parent households (from 25.2% to 30%), self-employed persons (from 23% to 26.8%) and single-person households (from 35.8% to 37.1%).

Since 2014 the rate of the risk of social exclusion has been falling across all regions due to the improvement of labour market conditions. The declining of unemployment in 2014–2017 was reflected in a falling of the material deprivation rate and the very low work intensity rate in all regions. The at-risk-of-social-exclusion rate is otherwise still above the Slovenian average in the cohesion region Vzhodna Slovenija (19.3%), but even there it is not higher than the EU average. It does not even exceed the EU average in the statistical regions with the highest rates (Podravska and Posavska, both at 21.1%). It is lowest (half the rate) in the Primorsko-notranjska region, which has a relatively high employment rate.

Figure: The at-risk-of social exclusion rate, by component, Slovenia

4. Social protection expenditure

Given the ageing of its population, Slovenia allocated more funds for social protection in 2016 than in 2008, yet still less than the EU average. Social protection expenditure as a share of GDP totalled 23.3% in 2016, up 2.3 pps on 2008, when it had been the lowest since 2000. In 2009–2012, expenditure growth was mainly reflected the rising number of unemployed persons due to the economic crisis. The decline in expenditure since 2012 has been due to austerity measures adopted in the middle of 2012 (ZUJF) and the implementation of new social legislation, which redefined the eligibility criteria for social benefits and family compensation in order to improve their targeting. Particularly expenditure on sickness and healthcare has been rising rapidly in recent years, largely as a consequence of higher expenditure on sickness benefits. In 2008–2016 strong growth was also recorded for expenditure on old age, which is a consequence of the rising number of pensioners. Besides expenditure on old age, that on healthcare (sickness benefits) is also significantly higher than in 2008. Expenditure on unemployment benefits and social exclusion is also somewhat higher.

Slovenia lags behind the EU average in terms of social protection expenditure as a share of GDP, most notably in the categories of housing and unemployment, but allocates more funds than the EU average for social exclusion benefits not elsewhere classified. Its social protection system nevertheless ensures relatively good access to health services and reduces the poverty risk. Slovenia has the widest gap with the EU average in its expenditure on unemployment, mainly owing to the small share of unemployment benefit beneficiaries among the unemployed (22.2% in 2016) compared with other EU Member States. The relatively low expenditure on housing is to a great extent attributable to the relatively poorly developed rental housing market and the small share of non-profit housing in Slovenia.

Figure: Social protection expenditure in PPS per capita, 2016

5. Material and income deprivation

The material deprivation rate in Slovenia has been rapidly falling since 2014; in 2017 it was the lowest thus far. With 12.1% of materially deprived people, Slovenia was below the EU average in 2017, as in all previous years. The decline in the material deprivation rate since 2014 can be attributed mainly to the rising purchasing power of households. Among the new EU Member States, only the Czech Republic performed better than Slovenia throughout the period analysed. In 2014 Slovenia was outperformed by Estonia and in 2016 by Malta.

Risk of material deprivation in Slovenia rises with age, as do the differences in material deprivation by gender. The material deprivation rate is 12.7% for women and 11.5% for men, the gender gap being slightly wider than on average in the EU. Children were the least materially deprived group in all years under review. The material deprivation rate was highest among people over 65 years of age, except in 2012, when the 18–64 age group recorded a higher rate, and in 2016, when the two groups were equal in this regard. Of all socio-economic groups, women over 65 years of age with incomes below the poverty threshold were the most materially deprived group throughout the period analysed (45.3% in 2017), followed by men of the same age living below the poverty threshold (40.3%). In 2017 the material deprivation rate of people below the poverty line (at 34.7%) was otherwise the lowest and the share of households (59%) able to handle unexpected expenses in the amount of EUR 600 the highest since measurements began. Meanwhile, the share of households (8%) making ends meet only with great difficulty is still higher than before the crisis.

The material deprivation rate is the highest in the economically weakest regions with high unemployment rates. The share of materially deprived people is thus the lowest in Goriška (7.4%) and the highest in Pomurska (19.6%) and Zasavska (19%). The last also has the lowest share of households able to cover unexpected expenses, this lower than in 2008. At the same time, as many as 10% of households in this region were receiving material and/or financial assistance from charities in 2017, which was the most to date. In regions with the lowest unemployment rates (Goriška, Primorsko-notranjska and Osrednjeslovenska), this share is five times lower.

Figure: Material deprivation rate

6. Housing deprivation rate

Slovenia is among the EU countries with the highest housing deprivation rates. More than one-fifth of its population lived in poor housing conditions in 2017. In 2011–2017 the rate declined both in Slovenia and for the EU as a whole. In Slovenia, it varies significantly between regions, and the gaps are widening. More than one-third of people live in poor housing conditions in Zasavska and the least, yet still more than the EU average, in Koroška (14%). One of the reasons for the still high housing deprivation rate is the relatively old and poorly maintained housing stock, given that as many as 83% of flats were built before 1990. Since then, the construction of new flats has been modest, particularly the construction of public rental flats. Meanwhile, the housing cost overburden rate remained one of the lowest in the EU in 2017, amid growth in disposable income and a high share of owner-occupied flats (SI: 5.2%; EU: 10.2%).

In Slovenia, 4.4% of the population faced severe housing deprivation in 2017. Declining since 2011, the rate of severe housing deprivation has been below the EU average in the last few years. The housing stock has remained almost unchanged, but its quality is improving, with old and unusable flats being eliminated from the housing stock and owing to loans and non-repayable subsidies for environmental investments offered by the Eco Fund. The overcrowding rate  is also relatively low. After falling since 2011, it in fact rose by 0.2 pps in 2017 but nevertheless remained lower than the EU average.

Figure: Housing deprivation rate and severe housing deprivations rate, 2017

7. Experience of discrimination

The share of people who have experienced discrimination or harassment is gradually falling in Slovenia. Overall, 10% of respondents experienced discrimination in 2017, which is significantly less than the EU average (16%). Their number was highest in Jugovzhodna Slovenia and also higher than the Slovenian average in the Obalno-kraška, Savinjska and Pomurska regions. The most frequently mentioned reason for discrimination was gender (2%). Discrimination as a result of age (for being over 55 or under 30 years old), religion or beliefs, disability, ethnic origin, sexual orientation, social class, political opinions, or place of residence was experienced by around 1% of respondents, while 4% of respondents were discriminated against for other reasons. All shares were lower than the EU average, except the shares of those feeling discriminated against for being younger than 30 years or because of their sexual orientation or place of residence, which were equal to the EU average.

The share of people who felt harassed or discriminated against in Slovenia is among the lowest in the EU. The share of those who have experienced discrimination has in fact fallen in most EU countries, but in 2017 only Portugal (at 8%) had a lower share than Slovenia. In the EU as a whole, the share dropped for all types of discrimination in comparison with 2015, the most for being older than 55 years. Similar holds true for Slovenia, with the exception of discrimination on the grounds of ethnic origin or sexual orientation, where the shares remained unchanged. In fighting discrimination, it is important to inform people of their rights in the event thereof. In Slovenia two-thirds of respondents think that they would know their rights should they fall victim to discrimination or harassment, and more than half of respondents say that diversity is sufficiently reflected in the media, although the perceived diversity varies depending on the group in question.

Figure: Experience of discrimination, 2017

8. Life satisfaction

In 2018 life satisfaction, as measured by Eurobarometer, was higher than before the crisis; it has been above the EU average in Slovenia since measurements began. In 2018 it nevertheless declined slightly. The positive assessments of personal financial and employment situation, otherwise by far the highest in all years, declined slightly; expectations for the next year regarding these two areas declined even more. Optimism also dropped at the country level. After several years of more-or-less steady growth following the crisis, all of the above-mentioned measures of satisfaction or optimism indicate a lowering since spring 2018. At the country level, satisfaction with the economic and employment situations nevertheless increased further in 2018. When asked to identify two main issues at the EU level, in autumn 2018 (the most recent data) Slovenian respondents for the first time pointed to immigration (58%) and terrorism (20%) as the two most important problems (and this by far), while the economic situation – whose importance had been falling rapidly in the three years to 2018 – was only the third most frequently mentioned concern (13%). At the country level, social and health security was most frequently cited as the main issue (31%), followed by immigration (24%) then unemployment, the economic situation and pensions. These issues were also perceived as the main concerns at the personal level, with the exception of immigration, which was mentioned by 3% of respondents only.

In 2017 Slovenia recorded the highest level of life satisfaction thus far, and this for both genders alike, in contrast to previous years, when life satisfaction had been somewhat lower for men. People with higher education are, on average, more satisfied with life. Regardless of the level of education, people in the cohesion region Vzhodna Slovenia are, in general, less satisfied with life than those in the cohesion region Zahodna Slovenia, the gap being widest among those with lower education. The regions standing out from the Slovenian average (7.2) in all years are Koroška, Posavska, Jugovzhodna Slovenija and Osrednjeslovenska – the first two negatively (6.8 both) and the last two positively (7.4 both).

Figure: Assessment of the situation and optimism for the next 12 months, by four life satisfaction indicators, Slovenia

9. Life expectancy

Life expectancy at birth is rising in Slovenia; it has been above the EU average since 2014. Life expectancy in Slovenia increased by three months per year in the ten years to 2016 (in the EU by two). The improvement in longevity can be attributed to various factors, such as better socio-economic conditions, higher education, healthier lifestyles and advances in medicine. In many EU countries, including Slovenia, life expectancy gains have slowed since 2011, which can be attributed to a slower decline in mortality rates for circulatory diseases, which had been the main reason for life expectancy gains in previous years, and an occasionally higher number of deaths among older people (partly as a result of outbreaks of flu).

Life expectancy at the age of 65 is highest for women and people with tertiary education. In Slovenia women at age 65 can expect to live for a further 21.8 years on average, compared with 17.9 years for men. Life expectancy at age 65 is increasing and has reached the EU average. Broken down by educational attainment, remaining life expectancy among women with low education is 21.4 years and among those with tertiary education 22.3 years. For men, the educational differences are somewhat more pronounced (men with tertiary education can expect to live 2.1 years longer than those with low education (16.9 years)). The gender gap is widest for people with low education, where women can expect to live 4.5 years longer than men.

Regional disparities in life expectancy declined in 2011–2017, for woman somewhat more than for men. They reflect regional characteristics, which are linked to the previously mentioned socio-economic factors and the region’s position (for example the healthier Mediterranean diet and lifestyle). Women in the Obalno-kraška region thus had the highest life expectancy at birth in 2017, at almost 85 years, which is more than two years longer than women in north-eastern Slovenian regions (for example, 82.3 years in Podravska). Life expectancy for men was the highest in the Primorsko-notranjska region (almost 80 years) and the lowest in Jugovzhodna Slovenija, Savinjska and Pomurska (all 76.7 years).

Figure: Life expectancy at age 65, 2016

10. Healthy life years

In 2015 and 2016 Slovenia’s gap with the EU as regards healthy life expectancy at birth and at the age of 65 widened further. The indicator shows that a person born in Slovenia can, on average, expect slightly more than 58 years of healthy life (in the EU the figure is already slightly more than 64 years). Healthy life expectancy at the age of 65 is 8.3 years in Slovenia on average, compared with 10 years in the EU. The gap for women increased significantly in the last two years, while the gap for men declined slightly. Since 2015 the number of healthy life years in Slovenia has thus been higher for men. Increasing the number of healthy life years in the future – which involves higher investment in preventive care – would significantly contribute not only to the extension of individuals’ activity, but also to slower growth in health and long-term care expenditure. Inequalities in terms of healthy life years between people with higher and those with lower education narrowed in 2005–2014 and were roughly on a par with the EU average.

The lag behind the EU in the ratio between healthy life years and life expectancy has also widened further in the last few years. A worse ratio means higher pressure on social protection systems as a result of early retirement and higher demand for health and long-term care services. In 2014–2016, the ratio deteriorated somewhat in Slovenia, following several years of improvement; in the EU it improved markedly. Slovenia’s lag behind the EU average is mainly due to the very low number of healthy life years. In all EU countries the ratio is higher for men, though largely on account of their lower life expectancy.

Figure: Proportion of years lived in good health, 2016

11. Amenable mortality

Amenable mortality was similar to the EU average in 2015. In Slovenia in 2015, 128 deaths per 100,000 inhabitants could have been avoided (in the EU, 127). In 2011–2015 the number of amenable deaths in Slovenia declined by 7%, meaning that in 2015, 7% more deaths were avoided through effective healthcare than in 2011. Almost half of amenable deaths were caused by cardiovascular diseases, but there was also a large share of deaths from colon cancer and breast cancer, i.e. deaths that could be effectively prevented through early detection and timely treatment. In all countries, the indicator is significantly higher (i.e. worse) for men; in Slovenia, the lag behind the EU is smaller for women than for men.

With relatively lower investment in healthcare, Slovenia has reached the average level of amenable mortality primarily on account of its good healthcare at primary level. Total health expenditure per capita in Slovenia is close to 75% of the EU average, while the number of amenable deaths is similar. This can be to a great extent attributed to good healthcare provision at the primary level, but the problem remains long waiting times at the secondary level and a lack of coordination and integration across levels and sectors. The lowest amenable mortality rates are recorded in France, Spain and the Netherlands, primarily owing to the very low mortality from cardiovascular diseases, but these countries’ investments in health are on average almost 20% higher than the EU average and 45% higher than in Slovenia.

Slovenia has made the most progress in the detection and treatment of breast cancer but could do more to improve cervical cancer treatment and reduce stroke-related mortality. In acute care, Slovenia has reached very good results particularly in terms of 30-day mortality in patients admitted to hospital for acute myocardial infarction, but has very high 30-day mortality for strokes – in 2015 it was almost three times higher than in Denmark and twice as high as in Finland, Sweden and Germany, despite an improvement in recent years. The effectiveness of cancer prevention and treatment improved in Slovenia in 2010–2014, the most for breast cancer, where the 5-year survival rate exceeds the EU average. Slovenia has also made great progress in colon and rectal cancer survival rates, which are also higher than the EU average.

Figure: Amenable mortality and health expenditure per capita, Slovenia and EU countries, 2015

12. Overweight and obesity

The share of obese adults in Slovenia significantly exceeds the EU average. Overweight and obesity, usually a consequence of excessive food intake and insufficient physical activity, are important risk factors for the development of chronic health conditions and premature mortality. The burden of non-communicable chronic diseases such as hypertension, diabetes and cardiovascular diseases is rapidly rising. Cardiovascular diseases are the main cause of mortality in Slovenia and indeed most developed countries. Obesity can moreover have not only medical but also socioeconomic consequences (social exclusion, lower income, higher unemployment and more working days lost). Although a large share of the population is physically active in Slovenia, both the share of obese and the share of overweight persons (overweight and obese together) significantly exceeded the EU average in 2014. The large share of overweight and obese adults in Slovenia can be attributed to bad dietary habits. Slovenia diverges from the EU average particularly in the high prevalence of obesity in men of all levels of education and women with low education. Unlike men, women with higher education tend to be well aware of the importance of a healthy diet, the share of obese women in this group being significantly lower than in the EU as a whole.

The obesity rate among children declined significantly in Slovenia. Data on the decrease in obesity among children (7–8 years) are more encouraging than the data for adults. The share of obese children dropped from 13% in 2007 to 9% in 2016, thus by more than on average in the 23 countries for which data are available (13% in 2007 and 12% in 2016). All these countries have higher obesity rates for boys than girls (in 2016, SI: boys 10.5% and girls 8.4%; EU-23: boys 13.4% and girls 9.9%). Obesity among children is a significant risk factor for obesity in adulthood. Moreover, it can also lead to poor self-esteem, underachievement at school, depression, eating disorders, and health and economic problems in adulthood.   

Figure: Share of obese people aged 15 and over by educational attainment, 2014

13. Gender Equality Index

According to various indicators that measure gender equality/inequality, Slovenia has been among the best performing EU countries for a long time. In terms of the Gender Equality Index (GEI), it was above the EU average in 2015 (the latest data), exceeding it in all index dimensions except for knowledge. Slovenia scores lowest in the knowledge dimension due to its significant gender differences in enrolment in educational programmes. In terms of gender equality, Slovenia ranks highest in the health and money dimensions. In the last ten years Slovenia, like many other countries, made the most headway regarding the participation of women in political decision-making, which is a consequence of changes to election laws (the introduction of gender quotas on candidate lists). Meanwhile, according to the Global Gender Gap Index, for which more recent data are available, Slovenia slipped by four places, to 11th in the EU, mainly due to a decline in the number of women members of parliament following the elections in 2018, but also, in the economic cooperation and opportunities dimension, due to the increased wage gap between women and men. It remains, however, among the best-performing countries according to this index in the educational attainment and health dimensions.

In 2018 Slovenia also remained at the top of the EU according to the three UNDP indices of gender (in)equality. According to the Gender Inequality Index (GII) and the Gender Development Index (GDI), it is ranked 5th in the EU. Along with the Baltic countries and Poland, Slovenia is in the group of countries where society is now losing more potential in the male than in the female part of the population. The only country that equally exploits the potential of women and men is Finland. According to the human development index for women (HDIw), Slovenia is in 9th place in the EU, according to the index for men (HDIm) in 13th.

Figure: Gender Equality Index (GEI)

14. Unpaid voluntary work

The proportion of people who carry out unpaid voluntary work on a regular basis is slightly above the EU average. The proportion of volunteers engaged in unpaid voluntary work occasionally and the proportion of those doing it regularly or at least once a month increased in 2016 relative to 2012. In Slovenia, 34% of respondents carry out some type of unpaid voluntary work, of which 12% on a regular basis. The most volunteers were involved in regular unpaid voluntary work through educational, cultural, sports or professional associations (11.3%) and other voluntary organisations (5.6%), more than in 2012 and more than on average in the EU. The proportion of volunteers is the highest among young people (18–24 years) and more voluntary work is carried out by men. The proportions of respondents doing voluntary work at least once a month in community and social services (3.9%), social movements (2.4%), and political parties and trade unions (1.1%) are lower (and also lower than the EU average). The proportion of respondents doing voluntary work in community and social services and political parties and trade unions is the highest in the 25–34 age; it is slightly higher for men. Women perform more voluntary work through social movements, the proportion of those involved in regular voluntary activity being the highest in the 65+ age group.

Figure: Proportion of people doing unpaid voluntary work through educational, cultural, sports or professional associations, 2016

15. Health expenditure

Public health expenditure in Slovenia has been rising more slowly than the EU average in the last few years, which is also reflected in a greater lag in per capita expenditure behind the EU average. In 2013 per capita expenditure in PPS amounted to 83% and in 2017 to 80% of the EU average. In 2009–2013 public health expenditure per capita in Slovenia fell more than in the EU as a whole and since 2013 has increased less. Since 2014 public health expenditure in Slovenia has otherwise increased every year in real terms, in line with stronger growth in employment and wages and hence higher inflows into the health fund. The stronger revenue growth in recent years has allowed for the expansion and more effective evaluation of certain priority programmes (such as model practices, oncology and biological medicines), the reduction of waiting times, and the coverage of the increasing expenditure on sickness benefits. In 2017 and 2018 the additional HIIS revenue was also due to the fact that part of the salaries for trainee physicians and physicians in specialisation training was again paid from the state budget.

Total health expenditure as a share of GDP is similar to the EU average. With stronger GDP growth in recent years, the ratio between total and public health expenditure relative to GDP dropped somewhat both in Slovenia and in the EU as a whole. In 2018 current health expenditure in Slovenia accounted for 8.0% of GDP, according to the preliminary estimate (in the EU in 2017: 8.3%). Public expenditure in 2018 totalled 5.8% of GDP (in the EU in 2017: 6.0%).

Figure: Average annual real growth in public health expenditure per capita, 2009–2017

16. Expenditure on long-term care

Slovenia is widening its gap with the EU average in terms of expenditure on long-term care (LTC). In 2016 (the latest internationally comparable data), LTC expenditure in Slovenia amounted to 1.24% of GDP. International comparison shows that in the 13 EU countries for which data are available, public expenditure averaged 1.5% of GDP, in contrast to only 0.9% in Slovenia. Broken down by source of funding, the share of public expenditure dropped significantly in the ten-year period between 2006 and 2016 (by 2.8 pps); broken down by function, the share of expenditure on the health component of LTC (which is mostly financed by public funds) was falling during this period. In 2016 public expenditure on the social component of LTC rose substantially more than in previous years.

The share of LTC expenditure in total health expenditure is still significantly below the OECD average in Slovenia. After rising rapidly up to 2014, it has been dropping again in the subsequent years (2016: 9.6%; 2014: 10.3%) and is still significantly lower than the OECD average (15%). In some Scandinavian countries LTC expenditure (health component) already accounts for more than 25% of total health expenditure. While more advanced OECD countries are primarily increasing public funding for long-term care at home, in Slovenia the ratio between institutional care and care at home is deteriorating from year to year. In 2016 almost 78.8% of expenditure was allocated for long-term care in institutions (60% for retirement homes, 15% for special social welfare institutions and 4.3% for hospitals) and only 21% for long-term care at home. In OECD countries overall, the ratio between institutional care and care at home is 65:35.

Figure: Public expenditure on long-term (health and social) care, 2016

17. Employment rate

The employment rate (20–64 years), which has been rising since 2014, exceeded the pre-crisis level in 2018. In the second quarter of 2018 it totalled 75.5% (EU average: 73.4%). The rapid increase was significantly influenced by demographic trends, in addition to favourable economic conditions, increased inclusion of inactive population in the labour market and stronger hiring. The employment rate has been rising particularly fast among young (20–29 years) and older people (55–64), who belong to more vulnerable groups on the labour market and whose employment rates are significantly below the overall rate. Young people were strongly hit by the crisis owing to their high exposure to temporary employment forms and a decline in the volume of student work. The improvement in their labour market situation reflects both the increased hiring in recent years and also demographic trends. Meanwhile, the employment rate of older people in fact rose further during the crisis, partly as a result of the pension reform and demographic effects. Despite this increase, however, it remained among the lowest in the EU.

The employment rate has been rising in all education groups in recent years, the most among low-skilled people and those with secondary and upper secondary education. It was people with low, secondary or upper secondary education who were affected the most during the crisis (also in comparison with the EU average), owing to a significant decline in activity in construction and manufacturing. The improvement in their labour market situation in the last few years is, in addition to long-term changes in the demographic and educational structure, a consequence of the structure of the recovery of economic activity and hiring in sectors where such workforce predominates. The employment rate for those with higher education fell the least during the crisis, mainly due to a smaller contraction of activity in sectors that employ better educated workforce (for example in public service activities).

Since 2014 the employment rate has been rising the fastest in the cohesion region of Vzhodna Slovenija, where it is already higher than before the crisis. After deteriorating faster than in the cohesion region Zahodna Slovenija in most years of the crisis, it has also been rising more rapidly since 2014. Vzhodna Slovenija has thus narrowed slightly its gap with Zahodna Slovenija and the Slovenian average, although it still lags significantly behind both. The highest rates are recorded in the statistical regions Posavska and Koroška, where they have already exceeded 75%.

Figure: Employment rate, in %

18. Unemployment and long-term unemployment rates

After rising sharply during the crisis, the unemployment rate has been rapidly falling since 2014 and is significantly lower than the EU average. It had dropped to 5.2% by the second quarter of 2018, which is related to vigorous economic growth and hence stronger employment. In the crisis years the unemployment rate rose more for men (and indeed exceeded the rate for women), but since 2012 it has again been lower for men. Unemployment declined the most among people with low, secondary and upper secondary education, consistent with the structure of the recovery of employment, which was at first the most intense in manufacturing. The crisis was especially hard on young people (15–24 years) – by 2013 their unemployment rate had risen to 24.1%. Since then it has been rapidly falling. In the second quarter of 2018 it totalled 8.1%, which is considerably less than the EU average (15.0%). The decline was attributable to the increased volume of student work and active employment policy programmes targeted at young people (such as the Youth Guarantee Scheme). It was, however, also due to demographic factors, the number of young people already falling for quite a long period of time.

The long-term unemployment rate, dropping for the fourth year in a row, has been below the EU average since 2015. In 2009–2014 it rose sharply as a result of weak labour demand. After the crisis it started to decline amid greater employment opportunities and owing to active employment policy measures – the fall being particularly pronounced in the last two years. The long-term unemployment rate of young people rose the most during the crisis, but it has then also fallen the most in subsequent years. The share of the long-term unemployed in all unemployed also decreased sharply last year and was similar to the EU average in the second quarter of 2018.

Figure: Unemployment rate, annual average

19. Precarious and temporary employment

The share of precarious employment, one of the indicators of the quality of employment, rose slightly in 2008–2017 and was significantly above the EU average. In 2017 the share of precarious jobs among women aged 20–64 totalled 4.7% (EU: 2.1%). Among men, it was somewhat lower, at 4.4% (EU: 2.2%). As in other countries, precarious jobs are most prevalent in agriculture and fishing (i.e. seasonal work). According to the analysis by the European Commission, young people, women and low-skilled workers are most likely to work in precarious jobs. The European Commission also finds that in Slovenia older workers in atypical employment are at much higher risk of labour market precariousness than younger people (25–39 years), which might be attributed to the better educational structure of younger age groups and poorer opportunities of older people for transition into employment.

In 2017 the share of temporary jobs was higher than at the onset of the crises; it was above the EU average throughout the period analysed. In the 20–64 age group, it was 18% among women (EU: 13.4%) and 15.7% among men (EU: 12.8%). Temporary jobs are most prevalent among young people, in Slovenia also on account of student work, which is not known in this form elsewhere in the EU. In the last two years analysed (2016 and 2017), the share of temporary jobs declined among young people (15–24 years) in particular, while it remained basically unchanged in other age groups. With several years of stable economic growth, the share of new permanent contracts increased in the last years analysed, but the share of fixed-term contracts remained high.

Figure: Share of youth temporary employment in total youth employment (15–24 years), 2017

20. At-risk-of-poverty rate of employed persons

In Slovenia, the at-risk-of-poverty-rates of employed persons have been above the EU average since measurements began, despite significant fluctuations. Following three years of decline, the at-risk-of-poverty rates of employed persons rose again in Slovenia in 2017 and were higher than before the crisis. The at-risk-of-poverty rate of those aged 18 years or more is 5.2% for women and 7.7% for men.

Among employed persons, in 2017 the at-risk-of-poverty rate rose the most for the self-employed; it was also somewhat higher among employees. The at-risk-of-poverty rate for the self-employed in 2017 was 26.8%, up 3.8 pps from the previous year but still somewhat lower than in 2013, when it was the highest since first measured. The at-risk-of-poverty rate for the employed rose after the crisis; among those with permanent employment contracts (at 3.6% in 2017), it was higher than before the crisis and higher than one year before (the same applying to those working full-time).

Among employed persons, those in atypical forms of employment face the highest risk. The at-risk-of-poverty rate for people on fixed-term employment contracts is lower than before the crisis, although it rose again in 2017 (to 9.9%). People working shorter hours are the only group among the employed to see the at-risk-of-poverty rate decline year on year in 2017, but at the same time, this is also the group with the greatest increase in the at-risk-of-poverty rate with regard to the pre-crisis period, by 7.1 pps to 15.2% in 2017.

Figure: At-risk-of-poverty rate of employed persons aged 18 years or more

21. Absence from work due to illness

Following a decline during the crisis, absenteeism has again been rising in Slovenia in recent years. The decline in absence from work in the crisis years can be mainly attributed to the decline in employment and the higher risk of losing employment. Since 2014 absenteeism has been rapidly rising. Among the main reasons for this we note the high level (and growth) of employment, later retirement, prolongation of waiting times and increased participation of children in kindergartens. Absenteeism is significantly higher among women than men and the gap is widening every year. In 2017 persons employed were on average absent from work for 15.3 calendar days, the share of sick leave from work averaging 4.2% (NIJZ, 2019). A further rapid increase in absenteeism is also indicated by data on the number of sick leave cases: it increased by 7.0% in 2018, by 32% in 2015–2018 and by 42% in 2008–2018 (HIIS, 2019). According to HIIS data, the number of long-term absences in particular has surged in recent years, which can be partly explained by the ageing of the active population and changes to pension legislation, but may also be related to the unlimited duration of entitlement to sickness benefits.

In terms of working days lost, Slovenia exceeds the EU average. After several years of decline during the crisis, the number of working days lost per employed person due to illness, as reported to international databases (excluding the first day of absence and absence to care for a family member), rose in 2015 and 2016. In 2016 the number of compensated work days lost per year due to illness totalled 12.2 in Slovenia and 11 in the 23 EU Member States for which comparable data are available. The international comparability of this indicator is, however, limited because of methodological differences in data capture and the differences in the health and social care systems and in eligibility criteria for sickness benefits.

Figure: Number of working days lost per worker, 2016

1. Resource productivity

During the crisis, resource productivity improved significantly due to a decline in construction activity, but the rebound in this activity has slowed further improvements. In 2007–2012 productivity expressed as a ratio of GDP to material consumption had been rising faster than in the EU overall, then followed the fluctuations of construction activity and the consumption of non-metallic mineral products. In 2017 it increased again amid strong GDP growth, despite the rebound in construction activity and hence greater material consumption. The lag behind the EU average declined to 13%. As in 2018 construction activity increased further, it can be assumed that growth in material productivity eased.

Material consumption per capita and its structure are comparable with the EU average. Material consumption had been rising until the onset of the crisis, then fell sharply and was around one-fifth lower in 2017 than in 2000. Its level was strongly affected by economic activity, particularly in construction, a sector that uses a large amount of raw materials, particularly gravel and sand. In the breakdown of domestic resources consumed, 57% is sand, gravel, limestone and gypsum, 16% crop residues, 14% lignite, and 11% wood. The proportion of biomass is slightly lower and the proportion of non-metallic minerals slightly higher than in the EU as a whole. Material consumption per capita in Slovenia is similar to the EU average, but lower than in three-quarters of Member States.

Slovenia’s self-sufficiency for materials is rising; it is somewhat higher than the EU average. Like most other EU Member States, Slovenia is a net importer of materials; its net imports account for around 11% of consumption (in the EU overall somewhat more). The bulk of net imports are petroleum products and gas, while in net exports, wood exports have risen significantly in the period following the glaze ice damage. The latter is favourable with regard to the impact on material consumption, though it is economically less desirable from the aspect of efficient use of scarce domestic resources, where value added could be created by domestic manufacturing.

Figure: Resource productivity and material consumption per capita, 2017

2. Energy efficiency

After declining in the first half of the decade, primary energy consumption increased again in Slovenia in 2016 and 2017. Following a period of moderate economic activity, changes in thermal power generation and lower demand for heating in some of the years, in 2016 a significant contribution to its annual growth came from higher energy consumption in transport. Total consumption is however also affected by other factors, such as the schedule of regular overhauls in the nuclear power plant and annual river-level fluctuations. In 2017, the year when there was no overhaul, a significant part of the increase in primary energy consumption stemmed from higher consumption of nuclear energy. We assume that in 2018 total primary energy consumption remained more or less unchanged, which is indicated by higher sales of automotive fuels and increased hydropower consumption, amid lower consumption of nuclear energy. Regarding the improvement in energy efficiency, which means reduced energy consumption compared with that projected under the no-policy-change scenario, Slovenia is on track to meeting its Europe 2020 Strategy target.

Over the long term, energy productivity has been rising at roughly the same pace as in the EU as a whole. The growth of energy productivity (defined as the ratio of GDP to total energy consumption) slowed notably only in the first years of the crisis. In 2017 it increased much more than on average in the EU owing to higher growth in GDP. Slovenia’s lag thus decreased to around 15% and was the smallest in the last decade.

Final energy consumption is significantly influenced by fluctuations in energy consumed in transport and for heating. After falling from 2008, final energy consumption has again risen to the pre-crisis level in the last few years. Broken down by sector, energy consumption fell considerably in industry, particularly due to the modernisation of aluminium production, while rising notably in transport owing to increased transit after EU enlargements. It also dropped in households, mostly as a consequence of higher temperatures during the heating seasons, but also due to the mandatory installation of heat cost allocators, more efficient heating appliances and energy renovation of buildings. In 2017 energy consumption increased in industry, amid strong economic growth, while it declined in other sectors. In recent years total energy consumption also rose on average in the EU, though it remained lower than before the crisis.

Figure: Final energy consumption by consumer sector, Slovenia and the EU average

3. Share of renewable energy sources

The share of renewable energy sources (RES) in final energy consumption is higher than the EU average, but it has stagnated for several years and is far from the Europe Strategy 2020 target. In recent years it rose markedly only in 2009, when final energy consumption fell by 8% because of the crisis while RES consumption increased by almost one-quarter. Up to 2017 it had grown only marginally – the minor changes were due to fluctuations in RES consumption for heating (because of milder winters) and in the use of hydropower (owing to great differences in annual river flows); the growth of RES consumption was also impeded by declining consumption of biofuels. Between 2004 and 2017, RES consumption rose by 35% in Slovenia and by 95% in the EU. Slovenia is one of the seven EU countries whose shares were lower in 2017 than determined in the action plan for meeting the 2020 target.

Slovenia has a relatively large share of traditional RES but a significantly lower consumption of other RES in comparison with the EU. Traditional RES (solid biomass and hydropower) still account for almost 90% of total RES consumption in Slovenia, compared with only around 60% in the EU overall. The extensive consumption of biomass (for heating), however, is not favourable from the aspect of particle pollution. The share of other RES (wind, solar and geothermal energy, biofuels, heat pumps, and biogas) is among the lowest in the EU. Slovenia lags behind the EU average particularly in the use of wind farms and heat pumps, which account for almost one-fifth of RES consumption in the EU. In terms of reaching the EU 2020 target, the low use of biofuels in transport is problematic in particular.

Within the support scheme for electricity from RES, in recent years, three-fifths of support has been granted to solar power plants, though these account for only two-fifths of total electricity generation. In 2018 the total amount of support declined according to data for the first three quarters of the year. With a greater share of solar power plants in the scheme (supports are also provided for electricity generation from biogas, wind, biomass and hydropower plants), the total amount of support per unit of electricity generated also rose significantly (in comparison with that at the beginning of the scheme, when support for small hydropower plants predominated).

Figure: Share of RES in final energy consumption, 2017

4. Emission productivity

The emission productivity of the economy, though rising, lags behind the EU average. After increasing in times of economic growth owing to faster growth in GDP than greenhouse gas (GHG) emissions, productivity as measured by the ratio of GDP to GHG emissions remained almost unchanged in the first years of the crisis. However, as the EU average increased further during the crisis, Slovenia saw its gap with the EU widen. After the crisis, productivity growth again accelerated. In 2016, when it swung downwards, around 17% less GDP per unit of GHG emissions was generated than on average in the EU.

After having declined during the crisis, as expected, the volume of GHG emissions increased slightly again in subsequent years. After increasing relatively fast during the times of economic boom, emissions dropped owing to lower activity and the shutdown of one of the thermal power plants. In 2014 they were around one-quarter lower than their peak in 2008. Since then they have again been slowly rising, largely owing to the rising energy-related and transport emissions. According to preliminary estimates for 2017, total emissions did not increase that year, primarily owing to lower activity in transportation, the sector that generates the most emissions.

Over the longer term, emissions have been falling across all sectors but transportation. Since 1990 emissions from transportation have nearly doubled, to a great extent owing to stronger international trade flows through Slovenia and advantages granted through tax policies (for example refunding of excise duties). Emissions from all other sectors declined, especially emissions from the consumption of fuels in industrial processes and households and from the energy sector. Around six-tenths of total emissions derive from the energy and transportation sectors, while agriculture (livestock production in particular) and the consumption of fuels in industrial processes contribute one-tenth each. The share of other sectors is relatively modest.

Figure: Emission productivity, 2016

5. Modal split of transport

In Slovenia around two-thirds of goods are transported by road, which is less than in the EU as a whole. After 2009 road freight transport stagnated, with an increase in freight transport by rail. Its share in total freight transport therefore declined, while after 2014 its volume started to rise and its share increased slightly again. Owing to its transit location, Slovenia has high levels of freight transport per inhabitant (road transport is a fifth higher than in the EU on average and rail transport 2.5 times as high). The construction of the planned second track of the Divača–Koper railway may contribute to a higher share of transport by rail, which is desirable from the environmental perspective.

Slovenian hauliers already perform almost nine-tenths of their activities abroad, while their share in journeys at home is one of the lowest in the EU. This is related to Slovenia’s small size and transit location, but also to the common transport market in the EU, which enables competition of hauliers from different Member States. Slovenian hauliers perform the most journeys in Austria and Italy, in each by almost half more than in Slovenia; they are also among the five most important foreign hauliers in Croatia and Greece. They account for less than one-quarter of journeys performed in Slovenia, followed by hauliers from Hungary, Croatia and Romania (which account for 19%, 15% and 11% respectively).

Transport by passenger car is the predominant mode of passenger transport in all EU Member States; Slovenia has one of the highest shares in the EU. This is in part attributable to the diversity of its landscape and its dispersed settlements, which – in spite of subsidies – makes it difficult to extend the network of public transport appropriately and limits its profitability. More people have difficulty in accessing public transport than on average in the EU (in 2012 one-quarter in Slovenia, compared with one-fifth on average in the EU). With such a passenger transport structure (where public transport is relatively little used in comparison with transport by car), passenger transport is generally also more expensive. The share of transport expenditure in total household expenditure in Slovenia is the highest among all EU Member States, at around 16% (the EU average being 13%). Particularly the shares of spending on buying and operating vehicles are relatively high, while the share spent on transport services is relatively low.

Figure: Road freight transport, 2016

6. Waste

The quantity of generated waste, having declined during the crisis, has started to rise again in the last few years. In 2017 it was – for the fifth consecutive year – higher than one year previously and around four-tenths higher than in 2012. In 2012–2017, waste from production and service activities, which accounts for around four-fifths of total waste, increased more than municipal waste. This contributes the remaining fifth. In terms of the amount generated per person, the quantity of municipal waste approached the EU average. Among total waste, the majority is construction waste (because of its high specific weight), followed by waste from thermal processes and municipal waste. Around 2% of total waste generated is hazardous waste, where chemical waste predominates. Of special importance is food waste, which indicates consumers’ attitude to the environment.

With increased recovery, the quantity of landfilled waste is being successfully reduced. In 2017 the total quantity of recovered waste was around one-quarter higher than in 2012. Recycling, a very desirable form of recovery from an environmental perspective, rose by one-tenth during this period, but was still significantly lower than during the crisis. Landfilling, which is the least favoured option in the waste-management hierarchy, continued to be successfully reduced. Having been rising until the crisis, the quantity of landfilled waste then dropped sharply and accounted for only 3% of the total amount recovered in 2017. The share of landfilled municipal waste also decreased further, to around 7% of generated waste. More than two-thirds of municipal waste was already collected separately and all residual mixed municipal waste was treated before going to landfill.

Regarding municipal waste, Slovenia performs better than the EU as a whole. Having increased in recent years, the quantity of municipal waste generated per person has approached the EU average, though it is still slightly lower (in 2017 by 16 kg or around 3%). The structure of waste management is also better than in the EU as a whole, a larger share of municipal waste being recycled (in Slovenia 58%; in the EU as a whole 46%) and a smaller share landfilled. According to the level of recycling municipal waste, Slovenia is in 2nd place together with Austria.

Figure: Municipal waste generated and landfilled, 2017

7. Environmental taxes

The rise in taxes on energy during the crisis significantly increased revenue from environmental taxes, but in the last few years this revenue has been stable. The rise in environmental taxes – which include taxes on energy, transport, and pollution and the use of natural resources – is due to the increase in energy taxes particularly in 2009 and 2012. This was primarily a result of a rise in excise duties on motor fuels and the introduction of a CO2 tax on energy in 2012, which had mitigated the fall in some other tax revenues in the first years of the crisis. Revenues from transport taxes and taxes on pollution and the use of natural resources did not change much in the last ten years. With the increase in taxes on energy, much greater than the EU average, the share of environmental taxes in GDP has risen relatively more than in the EU as a whole. In Slovenia the level of environmental tax revenues had already been relatively high before, which is a consequence of relatively high purchases and consumption of energy, given its large volume of transit traffic, strong transport sector, dispersed settlement and poorly developed public transport infrastructure.

To ensure the competitiveness of individual parts of the economy, Slovenia has retained some tax reliefs that are not contributing to the lowering of the environmental burden. Within the Green Budget Reform, the Government’s strategic development project, which ended in 2018, particularly the refunds of excise duties for commercial transport, agricultural and forestry mechanisation, and for industrial and commercial purposes, the ratio between excise duties on unleaded petrol and diesel, and insufficient consideration of environmental measures in motor vehicle taxation were identified as subsidies or incentives that do not help reduce environmental harm. According to simulations, the ending of certain tax reliefs and a thorough revision of motor vehicle taxation could contribute to the achievement of environmental objectives, while in others, these effects would not be achieved due to Slovenia’s transit location. This indicates that in order to reduce environmental harm, tax policies need to be complemented with other national policies (development of public transport infrastructure etc.) and coordinated with international environmental policies.

Figure: Revenue from environmental taxes, 2017

8. Ecological footprint

The ecological footprint, a composite indicator of environmental sustainability, is relatively high in Slovenia, much as in the EU as whole. It is expressed in standardised units of biologically productive area, i.e. global hectares (gha). The biologically productive area is the fertile area required to satisfy the needs of the population for food and a particular lifestyle and to absorb and dispose of the wastes generated in the process. The largest component of the ecological footprint is (i) the carbon footprint, which is a result of high carbon dioxide and other GHG emissions. This is followed by (ii) the biological footprint, i.e. the footprint of cropland, forestland, grazing land and other fertile areas, and (iii) the footprint of built-up land (i.e. infrastructure). Slovenia’s ecological footprint declined during the recession, following a rapid increase in the period of economic growth. In 2014 it was at approximately the same level as in 2001, similar to the EU average yet larger than in most neighbouring countries (it being larger only in Austria). This indicates economic development with relatively high use of natural resources and environmental pollution.

The ecological footprint should be compared with biological capacity (biocapacity), which is considerable in Slovenia due to its large forest area. Biocapacity, i.e. biological areas with regeneration capacity, is also expressed in global hectares. Each global hectare produces the same quantity of biological materials, its productivity thus equalling the average productivity of the total biologically productive area. Biocapacity is significantly more stable than the ecological footprint and does not change significantly from year to year. The bulk of Slovenia’s biocapacity is accounted for by forests, but despite their large surface area, they do not suffice to absorb emissions of carbon dioxide, the largest contributor to the ecological footprint.

In Slovenia, the difference between ecological footprint and biocapacity has been decreasing since the crisis but is still relatively significant. The results of calculations show that the difference between the two, known as the ecological deficit, is above the EU average. With the current lifestyle in Slovenia, 2.8 planet Earths would be needed to provide the resources we use and to absorb our waste.

Figure: Ecological footprint and the ecological deficit/reserve, 2014

9. Utilised agricultural area

Agricultural area in Slovenia accounts for less than one-quarter of the total area and this share is decreasing. Total utilised agricultural area (UAA) covers around 480,000 hectares. In the last ten years alone, it has decreased by 3.4%, around 1 pp more than in the EU as a whole. The decline is mostly due to the abandoning of agriculture and the consequent overgrowth of land by trees and shrubs. Forests cover approximately two-thirds of the total land area, which places Slovenia among the most forested countries in the EU. The share of other land categories, which is high particularly in countries with a lot of infertile land or with high population density, is relatively low.

In the structure of agricultural land, permanent grassland (meadows and pastures) predominates, there being relatively little arable land. Permanent grassland constitutes around six-tenths of the total agricultural area, which is to a great extent a consequence of natural conditions. The relatively large total production of fodder crops is, in turn, reflected in the relatively large share of livestock breeding in Slovenia’s agriculture. The area taken up by fields, the most important type of land from the aspect of food security, is low – Slovenia is one of the four EU countries with the least arable land per person, at around 8 ares (the EU average being around 2.5 times as high). The share dedicated to the growing of vegetables is also relatively low, as a large share of fields is used to grow fodder crops. The area taken up by permanent crops, where vineyards predominate, has increased somewhat in the last decade, to around 6% of agricultural area.

Organic farming, the best form of agricultural production from the environmental perspective, is more widespread in Slovenia than in the EU as a whole and is increasing. Around one-tenth of all agricultural holdings were involved in controlled organic farming in 2017. Permanent meadows and pastures dedicated to the production of fodder account for by far the largest share in the structure of this land, the shares of other categories being relatively low. This is however not in line with demand for ecologically produced food, which is greatest for fresh vegetables, fruit and vegetarian processed foods. There remains significant scope for the further development of organic farming in Slovenia given its natural conditions, i.e. the high share of farms in mountainous and other remote areas where intensive conventional farming is not possible.

Figure: Arable land per person, 2017

10. Agricultural intensity

Slovenia is not among the countries with high farming intensity, according to its moderate average yields and the numbers of animals per unit of agricultural area. A comparison with the EU average in crop production does not paint a uniform picture. This is evident from the average yields for Slovenia’s two most important crops, wheat and maize:. the yield per hectare tends to be lower than the EU average for wheat and higher than the EU average for maize. With improvement in technology, the yields of all crops are rising over the long term, though there are pronounced annual fluctuations due to weather conditions. An increase in yield – as long as it is not too great – is a sign of better exploitation of natural resources than in previous years. The environmental burden of livestock production, as measured by the number of animals per unit of agricultural area, is relatively high, partly as a result of natural conditions, but the situation is improving. The relatively low average milk yield per animal, in contrast, is rising, which is favourable from the perspective of the environmental burden per unit of GDP generated. The intensification of agriculture is increasing, which is related to a decline in the number of agricultural holdings and hence greater concentration of crop and animal production, but so is the area under ecological farming, which is particularly desirable from the environmental perspective.

The consumption of main agricultural inputs, mineral fertilisers and pesticides, has declined considerably over the long term. The consumption of main macronutrients (NPK fertilisers, i.e. nitrogen, phosphorus and potassium) per unit of utilised agricultural area had been declining particularly until the end of the previous decade, while since 2012 it has remained roughly the same, with minor annual variations. The use of pesticides, measured in terms of the total quantity of active ingredients sold, has also been falling, though fluctuating significantly from year to year due to weather conditions. After three consecutive years of growth, it was approximately at the 2011 level in 2017. The consumption of both inputs is above the EU average, but particularly for pesticides international comparisons are difficult to make, as data on the quantity of pesticides used refer to the sum of active ingredients with different toxicity levels.

Figure: Number of livestock units* per unit of utilised agricultural area, 2013

11. Intensity of tree felling

Tree felling, having already been rising in the long term before the glaze ice damage, has been fairly pronounced since. Following the severe glaze ice damage in early 2014, around half more wood mass has been cut in Slovenia forests per year than in 2013 and twice the amount felled on average in the previous decade. The recorded annual tree felling has thus come close to the maximum felling level allowed, after lagging considerably behind. Tree felling intensity, expressed as the ratio of annual felling to annual wood increment, rose to around 70% in the three years following the glaze ice damage. This is close to the maximum level set in the Action Plan to Ensure Sustainable Development (75%). However, the structure of cut wood changed significantly: felling for tree-tending purposes, which normally accounts for the largest share and was on the rise before the ice damage, declined, while the scope of sanitary felling increased. The severe tree damage caused by the glaze ice was then exacerbated by the rapid spread of the spruce bark beetle in subsequent years, because of which three times more wood had to be cut then ten years before, when the bark beetle had previously caused the greatest damage. In 2017 total felling declined but was still relatively high.

Raw wood production increased, but so did exports of the highest-quality wood, which is an untapped development potential for Slovenia. The utilisation rate of felled wood as measured by the ratio between the production of raw wood categories and felled wood had fallen in the first year after the ice glaze damage, then improved again in subsequent years. After the ice damage, production increased for all wood categories, particularly pulpwood but also sawlogs and veneer logs, the highest-quality wood that generates the most value added. However, exports of unprocessed wood increased much more than total production. While imports dropped by around a fifth, exports almost doubled, with exports of the highest-quality wood rising steeply. The share of sawlogs and veneer logs for export in terms of their total production declined only in 2017, this from 67% to 57%. The rapidly rising exports of this high-quality raw material represent a lost opportunity for Slovenia to increase employment and achieve higher value added in other sectors up the forest–wood chain.

Figure: Forest area, 2015

12. Quality of watercourses

The quality of rivers is relatively good in Slovenia; the concentrations of phosphates in rivers and nitrates in groundwater are also lower than the EU average. The quality of rivers as measured by biochemical oxygen demand, which was similar to the EU average at the beginning of the previous decade, has improved significantly since 2005 and was the highest among all EU countries according to the latest data. The decline in organic pollution, which is usually caused by municipal and industrial wastewater discharges and runoff from agricultural land, has been a result of a significant improvement in wastewater treatment and the ending of certain economic activities which had been polluting watercourses with wastewaters in previous years. The concentrations of nitrates in groundwater and phosphates in rivers are also declining and are lower than the EU average.

The majority of water is abstracted from surface water sources; around one-fifth of wastewater is treated before discharge. In 2017 around 930 million m3 of water in total was abstracted in Slovenia, which – fairly rich in water resources owing to its diverse natural conditions – has a relatively high amount of freshwater resources available per capita. Four-fifths of water was abstracted from surface waters and used primarily in industry. The remainder was from groundwater resources. Most of this water is intended for the public water supply system, i.e. final consumers such as households, kindergartens, schools and other activities. Around 960 million m3 of wastewater was discharged into the environment. Approximately one-tenth of this water was discharged without treatment and approximately one-fifth was treated; the remaining majority was polluted only thermally, mainly after being used as a coolant in thermal power plants. The share of water treated before discharge is rising, partly owing to assistance from EU funds, and is twice that in 2012.

Figure: Biochemical oxygen demand in rivers

13. Air quality

The quality of ambient air in Slovenia is strongly related to excessive particulate matter (PM) pollution, which reflects inappropriate burning of wood biomass and poor ventilation of some areas. The majority of particle pollution (around 60%) is due to emissions from small combustion sources, largely owing to households’ outdated wood biomass furnaces and the often unfavourable weather conditions in poorly ventilated basins and valleys of the continental part of Slovenia. Owing to pronounced temperature inversions, even a relatively low density of emissions can cause excessive air pollution. As these problems do not occur in the warm half of the year, data on the average annual values show a better picture than those on the number of days with exceeded daily limit value typical of the cold part of the year. Another major source of particle pollution is road transport, particularly emissions from diesel-fuelled vehicles, followed by emissions from energy use in industry. The general average exposure of the urban population to particle pollution has been declining in recent years, particularly as a result of milder winters, but has remained higher than the EU average.

Another problem is the locally high presence of ground-level ozone. As the formation of ozone requires sufficient sunlight, the excessive concentrations of ozone – in contrast to particulate matter – mainly occur during the summer months. They are primarily the result of road traffic, the main source of ground-level ozone precursors. The ambient concentration of ozone in Slovenia (which is significantly affected by transboundary air pollution and hence highly dependent on winds from the west) is the highest in the Primorska region. Owing to strong dependence on weather conditions, the multi-annual series of data does not indicate a clear trend, but the urban population’s exposure to ozone is higher than the EU average.

Figure: Urban population exposure to PM2.5, 2017

14. Functionally derelict areas

The spatial distribution of functionally derelict areas (FDAs) reveals the great extent of functionally degraded land in Slovenia. Underused or abandoned areas with visible signs of former use and reduced economic value can be found in both urbanised and rural areas. Overall 1,081 FDAs were indentified in Slovenia in 2017 (with a total area of 3,400 ha), among which wholly abandoned sites account for more than half (or one-third of the total area). FDAs are a consequence of many factors and social processes. The high rate of land degradation to date has been due to fast social and economic changes and the consequent abandonment of activities and changes in their spatial needs. FDAs can be found in four-fifths of Slovenian municipalities, even in many smaller ones, and indicate changes in the structure of the economy. In terms of surface area, the most are in the Osrednjeslovenska, Jugovzhodna Slovenija and Posavska regions, mainly as a result of the abandonment and poor planning of industrial and commercial activities and, to a lesser extent, the abandonment of service activities. The abandonment of services tends to have a strong negative impact on quality of life. The most FDAs from services activities are in peripheral areas of the north-eastern part of Slovenia.  

Rehabilitation plans are in place for a mere 15% of all FDAs, while for as much as 44% of derelict land no plans have yet been made. Functionally derelict areas represent spatial development potential for re-use or new investment which does not require expansion of activities into vacant land. Rehabilitation and revitalisation of an FDA is a difficult task, however, as the low number of adopted revitalisation plans also suggests. The main reason hindering rehabilitation is that it requires a relatively high level of investment and cooperation between different stakeholders, one of the greatest obstacles being heterogeneous ownership. The interest in revitalising an FDA also depends on the type of degradation and the possibility of integrating activities into areas that are partially still operational. In terms of FDA rehabilitation plans, Gorenjska and Goriška are the most successful regions.

Map: FDAs in Slovenian regions by size and degree of abandonment, 2017

1. Trust in institutions

In 2013–2018 trust in institutions increased, but it remained low and below the EU average. It was highest and above the EU average in 2006, but since then it has dropped significantly, particularly during the crisis. In most institutions the level of trust was the lowest at the end of the crisis, but in recent years it has been rising, which can be attributed to the improvement in macroeconomic indicators and lower dissatisfaction of respondents with the current economic and general situation in Slovenia. The exception is trust in political parties, which improved slightly only in 2017. At the end of 2018, trust in the Government, Parliament and political parties increased further compared with the preceding year, which can be attributed to political changes (for example the elections to the National Assembly). Trust in local authorities declined, but this is still the institution people trust the most, while the least trusted institution is political parties.

Trust in the EU and its institutions remains below the EU average. It was the highest in 2006, but since 2008 it has dropped strongly. In Slovenia 37% of respondents trust the EU, which is less than the EU average. The largest share of respondents trusts the European Parliament (38%) and slightly fewer trust the European Commission and the European Central Bank (36%). All these shares are below the EU average. In 2018 only trust in the European Central Bank increased relative to 2017.

Figure: Trust in EU institutions, Slovenia

2. Executive capacity

The executive capacity indicator, which measures strategic governance of public institutions, remains very low in Slovenia compared with other EU Member States. It is a sustainable governance indicator measuring government and institutional performance in eight dimensions: strategic capacity, inter-ministerial cooperation, regulatory impact assessment, societal consultation, policy communication, implementation of set measures, adaptability and the capacity for reforming public administration. Over the last few years the indicator value has not improved significantly. Slovenia thus still lags markedly behind the EU average and ranks almost at the bottom of EU Member States (in 25th place). The low executive capacity score is largely a consequence of the low values of government and institutional performance indicators.

Slovenia lags behind the EU in all indicator dimensions. The score is strongly affected by the absence of effective strategic planning and the low participation of various expert groups in government decision-making processes. Major shortcomings were also observed in inter-ministerial cooperation. Moreover, new legislation is still not subject to regulatory impact analysis (RIA), a systematic and comprehensive assessment of the potential impacts of proposed regulations on public finances, the economy and society. The implementation of policy measures at various government levels is assessed significantly more negatively than in other EU Member States, in particular owing to excessive political interference in recruiting in the state administration, even at expert levels.

Figure: Indicator of executive capacity by dimension, 2018

3. Rule of Law Index

Slovenia being ranked in the lower half of EU countries on the Rule of Law Index points to weaknesses in the adherence to the rule of law. The rule of law highlights the principle of equality before the law and emphasises the inviolability of the authority of laws and rules. This means that the government itself respects the law, that the functioning of government bodies is bound by law, and that fundamental human rights and freedoms are ensured. Slovenia was placed 14th among 21 EU countries according the Rule of Law Index in 2018, its ranking not having changed significantly in the last few years. It scores best in the category of order and safety, where it is close to the top-ranking Scandinavian countries. The only other category where Slovenia ranks around the EU average is fundamental rights, where it scores well on the indicators of absence of discrimination, right to life and security, and freedom of expression and religion. On the other hand, it lags significantly behind the EU average in the area of criminal justice, the indicators in this area reflecting mistrust in the justice system, especially in its independence and timeliness. The weaknesses in the adherence to the rule of law are also indicated by low indicator values in the areas of constraints on government powers (for example the sanctions for official misconduct indicator) and absence of corruption (for example the risk of corruption in the executive branch and in the legislature).

Figure: Rule of Lax Index by sub-components, 2018

4. Expected time needed to resolve civil litigious and commercial cases

The estimated time needed to resolve civil litigious and commercial cases has not changed significantly in recent years and is longer than the EU average. By implementing the Lukenda Project and other structural reforms (such as new solvency legislation), Slovenia shortened the expected duration of civil litigious and commercial cases by more than 40% in 2008–2014. Since 2015 the time needed to resolve a case has remained unchanged (280 days in 2016), but the number of cases has declined. Despite the shortening of the length of proceedings in the previous decade, Slovenia still lags behind the EU average. However, owing to the different methodology and data used in the calculation, the expected disposition time differs from the time actually taken by the courts to resolve a case.

The average actual disposition time for major cases has not changed significantly in the last three years; in 2018 it was eight months. Up to 2016 the time needed to resolve a major case was rapidly decreasing, largely a consequence of a smaller incoming caseload and greater efficiency on the part of the courts. As in the previous period, the clearance rate for major cases has exceeded 100% in the last three years, meaning that the courts are resolving more cases than come in. The time needed to resolve a major case has stopped decreasing in the last three years, which can be attributed to a larger number of more demanding proceedings and new competences given to the courts with changes of legislation. The share of pending major cases in total unresolved cases is therefore increasing (it was 56% in 2018). The average time needed to resolve a case fell further, to 1.8 months.  Although it is reasonable to expect that the average time needed to resolve a case will shorten further, it should be noted that excessive shortening of the length of proceedings may be detrimental to the parties concerned (violating their right to be heard, for example) and have a negative effect on the quality of justice (proceedings conducted in a fair and reasonable manner to reach a fair decision).

Figure: Major cases at courts, Slovenia

5. Corruption Perception Index

The perception of corruption has not declined significantly in the last few years and remains higher than the EU average. The Corruption Perception Index (CPI) is based on the rate of public sector corruption as perceived by businesspeople, experts and analysts. After 2011 the perceived level of corruption rose markedly in Slovenia (the number of reports of suspected corruption increasing significantly), which can, in part, be attributed to the more visible role of the Commission of the Prevention of Corruption and hence greater awareness of corruption and more corruption cases reported. The Commission meanwhile finds that the most corruption in the public sector is perceived to exist in public procurement (around 15% of all incidences reported), in administrative procedures, in circumstances that represent a conflict of interest, in procedures regarding the disposal of physical assets owned by the government or municipalities, and in healthcare and pharmacy. The perceptions of corruption have not changed significantly over the last few years, as, according to Transparency International, there have been no key systemic changes towards improving the prevention and persecution of corruption. According to Eurobarometer, 89% of persons asked think that corruption is widespread in Slovenia, but at the same time, a large majority of respondents have no personal experience of corruption. The high perception of corruption in Slovenia can to a great extent be attributed to respondents believing that high-profile and major cases of corruption are not adequately sanctioned. In 2018 Slovenia was ranked 36th among 180 countries and 15th in the EU. The perceived levels of corruption are the lowest in the Scandinavian countries and the highest in Hungary, Greece and Bulgaria.

Figure: Corruption Perception Index

6. Global Peace Index

Slovenia is ranked among the most peaceful countries in the world. Its position has not changed significantly in the last six years. In 2018 it was placed 11th among all 163 countries on the Global Peace Index list and 7th among EU Member States. It ranks the highest in the area of militarisation (4th), although its position has deteriorated on the indicator of cooperation at UN peacekeeping operations in the last year. It also scores high regarding societal safety and security (12th position), while its position has deteriorated in the domestic and international conflict area (to 62th), this mainly owing to the worse assessment of relations with neighbouring countries and the intensity of organised internal conflict. It has also slipped slightly on the indicators of the number of internal security officers and police per 100,000 people, the level of perceived criminality in society, and the likelihood of violent demonstrations. Slovenia nevertheless ranks relatively high in these areas compared with other countries, the slightly lower scores pointing only to certain weaknesses that do not jeopardise peace in the country. The Global Peace Index shows that Europe remains the most peaceful region in the world, with six of the ten most peaceful countries in the world coming from this region (of which 5 are EU Member States). Iceland remains the most peaceful country in the world and Syria the least. The results of the Global Peace Index otherwise deteriorated over the ten-year period, primarily owing to the intensifying of conflicts in the Middle East and terrorism.

Figure: Global Peace Index, 2018

7. Share of households reporting problems with crime, vandalism or violence in the local area

In 2017 the share of households reporting problems with crime, vandalism or violence in the local area declined for the third consecutive year and remained below the EU average. In Slovenia it totalled 8.0% and was, like the EU average (11.6%), the lowest in the last ten-year period. The share of persons having had a personal experience with crime in the local area is low, but there are significant differences between the regions. More problems with crime are reported in the western part of Slovenia. Osrednjeslovenska stands out with the highest share of all regions, while Obalno-kraška also exceeds the Slovenian average. In the eastern part of Slovenia, the Slovenian average is exceeded in Jugovzhodna Slovenija and in Podravska. The lowest values, four times lower than in Osrednjeslovenska, are in Pomurska. Problems with crime, violence or vandalism in the local area were most frequently reported by single persons with dependent children (12.7%), followed by households of two adults and two children (9.5%), and households of two adults where at least one is older than 65 years (9.4%). All these shares are lower than the EU average.

Slovenia remains a safe country compared with other countries in the EU, which has a positive impact on the quality of life. The results of the European Social Survey for 2016 indicate that 9% of respondents had a personal experience with burglary or physical assault in 2016, which is less than in previous years and lower than the average for countries included in the survey. In 2017, 97% of Slovenians said that their immediate neighbourhood was a secure place to live in and 95% of them said that Slovenia was a secure place to live in, which is more than in 2015 and more than on average in the EU.

Figure: Crime, vandalism or violence in the local area, 2017

8. Expenditure on official development assistance

Expenditure on official development assistance remains significantly lower than international commitments. Official development assistance is defined as aid provided by advanced countries in support of sustainable development in developing countries. Slovenia allocated EUR 67.2 million for development assistance in 2017, 9% less than in 2016. As a similar decline was also recorded in other EU Member States, Slovenia’s share remains significantly below the EU average (the gap with the EU average being wider than a decade before). Expenditure on official development assistance (0.16% of GNI) falls considerably short of international commitments, according to which Slovenia should strive to increase the share of GNI for official development assistance to 0.33% by 2030.

Particularly expenditure related to the refugee and migrant crisis, which had been the main reason for the increase in development assistance in previous years, declined in 2017. Migration developments related to the situation in the Middle East significantly influenced the structure of assistance in 2015 and 2016, which was reflected particularly in increased costs of caring for refugees and migrants in Slovenia. These costs dropped significantly in 2017. Dedicated humanitarian contributions to other international organisations meanwhile increased, largely owing to the higher contribution to the EU Facility for Refugees in Turkey. Development assistance is a sum of multilateral assistance (funding provided for regular development activities of international organisations) and bilateral assistance. Slovenia dedicated EUR 22.1 million for bilateral assistance in 2017, around 85% of which to the Western Balkans and Turkey. Most of this aid was focused on projects in the area of education. Expenditure on multilateral assistance, most of which is dedicated to EU development cooperation programmes, declined in 2017, as did the contribution for UN peacekeeping operations.

Figure: Official development assistance as a share of GNI in EU Member States in 2017, in %