Development Report


Development Report

Development report 2020

In March 2020, a coronavirus epidemic was declared in Slovenia, which, with its enormous negative socio-economic impact on the economic and social situation, will significantly change the baselines for the realisation of the Slovenian Development Strategy 2030 (SDS), which is monitored by the Development Report – an annual publication prepared by the Institute of Macroeconomic Analysis and Development. As a consequence of the urgent protective measures, the current situation will have a significant negative impact on economic activity. At the same time, it has also shown that in some areas where Slovenia has not taken appropriate measures in the past or where progress has been too slow, it has become even more vulnerable during the period of the epidemic (e.g. a high share of precarious jobs, no systemic regulation of long-term care, waiting times in health care, lack of digital skills among the population, administrative barriers and the length of certain procedures). In the short term, an absolute priority is measures to support the functioning of the health system and, in the economic area, measures to alleviate the consequences of the epidemic, which will help businesses and the population bridge liquidity problems due to loss of income and ensure, to the greatest possible extent, the preservation of jobs and social potential. The measures for a gradual revival of the economy and stabilisation of the economic and social situation should be designed in a way that they will, as far as possible, also be oriented towards solving Slovenia’s key development challenges, which are analysed in our Development Report 2020.

Among Slovenia’s main long-term development challenges analysed in the Development Report 2020, we highlight the following areas:  

-    Accelerating productivity growth by increased investment in (i) R&D and innovation, (ii) digital transformation and industry 4.0, (iii) knowledge or ensuring appropriately qualified human resources, in particular the so-called skills and competences of the future, and (iv) infrastructure for digital connectivity and sustainable development;
-    Adapting to demographic change by (I) reforming social protection systems in such a way as to ensure high-quality health and long-term care services and adequate income, (ii) ensuring a sufficient workforce, (iii) strengthening lifelong learning and adapting workplaces to allow older people to remain active longer and to better integrate into society, and (iv) promoting healthy lifestyles;
-    Transitioning to a low-carbon circular economy by: (i) speeding up the introduction of solutions for more sustainable mobility, (ii) introducing low-carbon and circular business models, including more efficient dealing with waste disposal problems, and (iii) significantly increasing capacity for greater use of renewable energy sources, particularly by more efficient siting of new development projects.
-    Strengthening the developmental role of the government and its institutions by: (i) improving the strategic governance of public institutions to be able to identify development challenges early and to address them in a coordinated and effective manner, (ii) improving the legislative and business environment, and (iii) restructuring general government revenue and expenditure in line with development challenges.

1. Gross domestic product per capita in purchasing power standards

In 2016–2018 Slovenia was reducing its gap with the EU average in terms of economic development as measured by GDP per capita in purchasing power standards (PPS). With 26,900 PPS, Slovenia reached 87% of the EU average in 2018, which is two percentage points more than in 2017 and three less than the highest value before the onset of the economic crisis in 2008. Its GDP per capita was at approximately the same level as in 2005, i.e. before the significant acceleration of economic growth in the years before the economic and financial crisis. A breakdown of per capita GDP into productivity and employment rate shows that since 2016 the decline in the lag behind the EU average was mainly due to a relatively faster increase in the employment rate than in the EU as a whole and, to a lesser extent, to productivity growth. The employment rate was otherwise above the EU average in Slovenia throughout the analysed period; in 2018, it exceeded it by 6%. Productivity, however, remained relatively low (82% of the EU average in 2018), the lag in this area fully explaining the relatively low level of Slovenia’s economic development measured by per capita GDP.

In terms of growth in GDP per capita in comparison with the period before the outbreak of the crisis in 2008, Slovenia ranks in the bottom half of EU Member States. In 2018, GDP per capita expressed in relation to the EU average lagged the most behind the levels from the middle of the previous decade in Greece, Italy, the UK and Cyprus, while the most progress in this period was made by Iceland and some new EU Member States (Romania, Lithuania, Estonia and Poland). Before the crisis, the countries closest to Slovenia in terms of GDP per capita in PPS were Greece and the Czech Republic; in 2018, these countries were Cyprus (89%) and the Czech Republic and Spain (91%). The gaps in GDP per capita in PPS between EU Member States have been declining over the years. From the beginning of the previous decade to 2018, the ratio between the most and the least developed Member State dropped from 1:9.5 (Romania/Luxembourg) to 1:5.2 (Bulgaria/Luxembourg).

Figure: Change in GDP per capita in PPS 2005–2018, EU-28 = 100

2. Real GDP growth

GDP increased for the sixth consecutive year in 2019; its growth, which had started to moderate in 2018, slowed noticeably. Following the double-dip recession, real GDP has been rising in Slovenia since 2014. In 2014–2017, economic growth was strengthening, while since 2018 it has been slowing. In 2018, its slowdown was primarily due to more moderate growth in exports and thus industrial production, while in 2019 to a somewhat greater extent also to lower growth in investment. The easing of growth in exports and investment, the main drivers of growth in 2017, largely reflects the moderation of economic activity in trading partners and significant uncertainty regarding external trade and political relations. In 2014–2018, economic growth was, in addition to rising exports, increasingly driven by growth in domestic consumption, but in 2019 this slowed considerably owing to weak investment growth. Growth in household consumption remained solid. It continued to be boosted by favourable labour market conditions and hence higher growth in (net) wages, which was also partly due to government measures. In 2017 and 2018, a significant contribution to growth came from rebounded growth in investment in fixed assets, which had declined significantly during the crisis (2009–2012). In 2019, its growth slowed the most in the segment of machinery and equipment. Growth in non-residential construction investment was also considerably lower. For the fifth consecutive year, growth in domestic consumption was also supported by increased government consumption.

In 2019, the growth of real GDP, which contracted more in Slovenia than in the EU as a whole during the crisis, was still higher than the EU average. Economic growth, having slowed at the global level after 2017, remained above the EU average in Slovenia (2019: 2.4%, compared with 1.5%). In addition to robust growth in private consumption, it was due to growth in exports that was higher than on average in the EU. However, the slowdown of growth in Slovenia was more pronounced than in other new EU Member States, behind which Slovenia lagged almost by 17 percentage points in terms of the cumulative growth since 2005.

Figure: GDP growth

3. General government debt

The improvement in the general government balance in circumstances of strong economic growth was reflected in a rapid decline in the general government debt as a share of GDP in the 2015–2019 period. The share of debt, having increased strongly after the financial crisis and many years of persistently high general government deficits, fell by 16.5 pps to 66.1% of GDP from 2015 to 2019. The decline was even larger than required by the Stability and Growth Pact. The share of debt also dropped notably on an international scale – among EU Member States, it was higher only in Ireland. In 2019, the debt-to-GDP ratio was 20 pps lower than the euro area average. The decline reflected the improvement in the primary balance (surplus). The contribution of economic growth was also favourable, but in 2019 it declined. In nominal terms, the debt has remained more or less unchanged for several years (having declined only in 2016 and 2019), partly on account of the strengthening of liquidity reserves in conditions of low interest rates. In such circumstances and due to active debt management, which involved buy-backs of dollar-denominated bonds with high interest rates issued during the financial crisis, the implicit interest rate dropped to 2.5% (in 2008: 5.7%).

General government debt, 2019

4. General government balance

Slovenia significantly improved its fiscal position in the 2015–2019 period. In 2017, the general government budget was balanced, while in 2018 and 2019, it was in surplus. The primary budget balance (the fiscal balance excluding interest payments) has been positive since 2015. In 2019, Slovenia was in the group of approximately half of EU countries that had a general government surplus, while some larger countries, such as Italy, Spain and France, were still in the group of countries with deficits (a deficit being also recorded for the EU average). The improvement in Slovenia’s balance was a consequence of measures to stabilise the situation after the financial crisis, improved economic conditions, and measures to increase revenue and contain expenditure. In 2019, revenue growth started to moderate under the impact of lower economic growth, the easing of the tax burden on holiday allowance and, with the sale of ownership stakes in companies owned by the government, a decline in property income, which until 2018 had been rising. At the end of 2019, an additional package of tax changes entered into force, which further decreased the tax burden as of 2020. On the expenditure side, austerity measures were relaxed amid more favourable economic conditions in recent years, particularly those relating to social benefits and transfers and compensation of employees, while in 2019, growth in this expenditure also strengthened as a result of certain new measures. In 2018 and 2019, investment activity also increased more significantly again, partly due to the increased drawing of funds from the EU budget. In 2019, expenditure growth thus outpaced revenue growth for the first time since 2013. Meanwhile, interest expenditure dropped markedly as a result of low interest rates and the active debt management after 2015. In 2019, it totalled 1.7% of GDP, which is one of the lowest levels in the last ten years.

Figure: General government balance, 2019

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

The surplus on the current account of the balance of payments in 2019, at EUR 3.1 billion (6.6% of GDP), was the highest to date. The current account surplus recorded in Slovenia since 2012 reflects the extensive deleveraging of banks and companies abroad, favourable conditions internationally and the improved competitive position of Slovenian exporters amid modest growth in imports due to relatively low domestic spending. Particularly in 2013–2016, the surplus also widened as a result of better terms of trade, which, owing to the fall in energy and other primary commodity prices, contributed around EUR 950 million to the change. From the perspective of the savings/investment gap, the surplus reflected a high level of savings amid the still relatively low level of domestic investment. At the sector level, the surplus of savings over investment arose from both the private sector (an increase in household savings and the excess of savings over investment in non-financial corporations) and the public sector (the entire period of the surplus being marked by an improvement in the general government balance).

The current account surplus is reflected in both an increase in external claims and a decline in external liabilities. The improvement in Slovenia’s international investment position in 2015–2019 was attributable to the net outflow of government and private sector financial assets, which exceeded the net inflow of assets of the BoS. The government placed long-term deposits in accounts abroad, where interest rates are higher than in domestic banks, and repaid a portion of debt to foreign portfolio investors. The private sector (commercial banks and mutual and pension funds) significantly increased financial investment in foreign debt securities; in addition, commercial banks continued to deleverage abroad. Inward FDI flows rose in recent years, this on account of the sale of ownership stakes in domestic companies, and exceeded outward FDI flows. The BoS was 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. At the same time, the BoS lowered its financial assets in foreign accounts and increased its liabilities within the Eurosystem.

Slovenia’s net international position, which has been gradually improving since 2013, has been below the indicative threshold of external imbalances since 2015 (35% of GDP). At the end of 2019, it amounted to 19.3% of GDP.

Figure: Breakdown in NIIP change, in EUR million (flows)

6. Financial system development

The level of development of the banking system and capital market is low compared with the EU average and the gap has not narrowed in recent years. The indicators of development in both segments of the financial system did not even reach one-third of the EU average. The value of banks’ total assets increased by 5.0% in 2019, however. This is the first somewhat more pronounced growth after a longer period of decline (since 2010), during which the volume of loans to the non-banking sector contracted, while banks were heavily burdened by the repayment of liabilities to foreign banks. On the asset side, last year's growth was driven by the growth of deposits at the ECB and lending to the domestic and foreign non-banking sectors. Growth in lending activity was supported particularly by growth in domestic non-banking sector deposits, while the dependence on foreign sources of finance was low. The value of the capital market, having fallen sharply at the outbreak of the financial crisis in 2009, did not improve significantly in the period of economic recovery. In 2019, the market value of shares increased but was still more than 60% lower than before the financial crisis. Trading in shares declined even more (by 85%).

The development gap is the smallest in the insurance sector. After the onset of the economic crisis in 2008, the share of insurance premiums in GDP increased due to the contraction of economic activity, then stabilised at slightly above 5% of GDP in recent years. The largest part of the insurance sector is still accounted for by non-life insurance premiums, while the share of life insurance premiums in GDP remains low, which we assess is also a consequence of (too) low saving for old age.

Figure: Banks’ total assets as a % of GDP, 2019

7. Regional variation in GDP per capita

GDP per capita is the highest in the Osrednjeslovenska region, which exceeded the Slovenian average by more than 40% in 2018. Osrednjeslovenska is the region with the most jobs and, consequently, high daily commuter flows, which raises its GDP per capita (GDP pc). The only other region where GDP pc exceeds the Slovenian average is Obalno-kraška, which is one of the regions that were the most affected during the crisis in 2009–2013 but also the region that had the strongest economic growth of all Slovenian regions in 2014–2018. Jugovzhodna Slovenija, which is moving ever closer to the Slovenian average in terms of GDP pc, recorded strong GDP growth in 2018 again and was just behind the Osrednjeslovenska region with the highest growth. Zasavska has been at the tail end of regions for a number of years with below-average economic growth, gradually increasing its lag behind the Slovenian average in GDP pc.

Regional disparities, which narrowed slightly during the economic and financial crisis, have been stable in recent years, albeit somewhat higher than in 2000, when they were the lowest. In 2018, the relative dispersion of GDP per capita was 2.7 pps lower than in 2009, when regional disparities were the highest, yet higher than its 2000 low (19.6%). After 2009, the dispersion decreased until 2015 and was stable in the subsequent three years. The ratio between the regions with the highest and the lowest GDP per capita was 2.7:1 and was slowly, yet persistently, rising in the long term.

The eastern cohesion region experienced a smaller decline in GDP pc during the crisis, mainly due to weaker population growth. After 2008, economic growth declined less in western Slovenia (Zahodna Slovenija), but until 2013 GDP per capita was falling more slowly on average in eastern Slovenia (Vzhodna Slovenija) due to slower population growth in this region. The differences in development between the two cohesion regions were thus declining. With a rebound in economic activity after 2014, GDP per capita was again rising somewhat faster in Zahodna Slovenija, the gap with the EU average thus narrowing again. In 2018, Zahodna Slovenija thus exceeded the EU average in GDP per capita for the second consecutive year, while Vzhodna Slovenija (at 71%) remained among the less developed EU regions.

8. The development risk index for regions

According to the development risk index (DRI) for 2019, two regions stand out in terms of the risk to development; the differences between the other regions are smaller. Particularly Osrednjeslovenska stands out in a positive way, its DRI value being half lower than the Slovenian average. The DRI does not exceed the Slovenian average in only three regions: Osrednjeslovenska, Gorenjska and Jugovzhodna Slovenija. Pomurska stands out negatively, as its DRI exceeds the Slovenian average by more than two-thirds. Disparities between other regions are significantly smaller. The coefficient of variation, which shows the deviation from the average, totals 25.7%. If the two extreme regions are excluded from the analysis, the ratio between the new two extreme regions is much smaller (1:1.9), the coefficient of variation totalling 20%.

The improvement in the indicators encompassed in the DRI index, for the most part, did not reduce the regions’ gaps with the Slovenian average. The indicators, which make up the DRI index (Pečar, 2018), improved for the majority of regions, the most for Osrednjeslovenska. The gaps of the other regions with the Osrednjeslovenska region and the Slovenian average therefore widened. The ratio between the two extreme regions (which in 2019 were still the same as in 2014) deteriorated from 1:2.7 to 1:3.5, while the coefficient of variation increased by around 2 pps. The Pomurska region made progress on some indicators (particularly the indicators of the level of development), but not sufficiently to reduce its lag behind the Osrednjeslovenska region. The regions’ rankings changed only slightly. The greatest change was observed for the Podravska region, which fell by two places. A comparison of the DRI indices between 2014 and 2019 shows that more developed regions adapt more easily to fast economic changes. In these regions, the economic situation was improving more rapidly after the crisis (2009–2013), which means that regional disparities are again rising.

Map: Development risk index for regions, 2019

 

9. Productivity

Slovenia’s productivity gap with the EU average in 2018 was slightly wider than before the beginning of the crisis in 2008 and quite far from the SDS 2030 target, despite the gradual convergence in the past few years. The post-crisis decline in trend productivity growth is largely related to the absence of capital deepening – in the period between 2000 and 2008, capital deepening explained half of productivity growth in Slovenia (significantly more than in the EU overall). In the absence of this factor in the post-crisis period, trend productivity growth has been based solely on the contribution of total factor productivity, i.e. more efficient utilisation of capital and labour. Particularly in 2016 and 2017, total productivity growth was again also supported by a more pronounced cyclical contribution, but in 2018 and 2019 its impact was gradually weakening. From the point of view of the impact of changes in the sectoral structure of the economy on productivity growth, the structural contribution of the reallocation of labour to sectors with higher (or more rapidly rising) productivity was significantly smaller than in the pre-crisis period. Growth was mainly based on the otherwise slower within-sector productivity growth, i.e. productivity growth in individual sectors (see Section 1.2.1).

After 2009, in most business sector activities productivity growth has been lower than in the pre-crisis period, although comparable with or higher than the EU average; a significant lag is still recorded in construction and ICT activities. In 2009–2019, productivity growth was the highest (around 3% per year on average) in transport (H) and administrative and support service activities (N), particularly in the segment of employment agencies. In these sectors, productivity increased considerably more than the EU average. Relatively strong productivity growth was also recorded in manufacturing activities, whose movement was roughly comparable with the EU average, which is partly a consequence of their significant integration into global value chains. A significant lag behind the pre-crisis level is still evident in construction, despite the favourable developments in 2016–2018. ICT activities stand out even more in a negative way in international comparisons. With foreign demand cooling, productivity growth slowed cyclically again in 2018–2019. Productivity in manufacturing activities had already declined in 2018, but in 2019 real growth slowed (or turned negative) in the majority of activities.

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

10. The European Innovation Index

With the latest measurement of the European Innovation Index (EII), for 2018, Slovenia saw a significant deterioration in its ranking and slipped into the group of moderate innovators. The EII value for Slovenia has been deteriorating for most of the period since 2014, while the EU average has been rising. The EII is a composite indicator measuring performance of national research and innovation systems in EU countries. Based on its values, countries are classified into four innovation performance groups. The latest EII measurement, for 2018, shows a decline in Slovenia's performance relative to the preceding year, which arises from deterioration in most EII indicators (15 of 27). Looking at individual EII dimensions, the decline in performance and the widening of the gap with the EU average are largest in innovation activity of enterprises and sales impacts. Slovenia has also seen a deterioration in its performance on the indicator of linkages and collaboration of different actors (where most data refer to the period until 2016) and in firm investments in support of innovation but remains close to the EU average. It performs the worst relative to the EU average in the finance and support dimension, where the low values of venture capital expenditures stand out, and in sales impacts, where the share of knowledge-intensive services exports in total services exports is particularly low (see Indicator 1.14). The decline in R&D expenditure in the public sector between 2012 and 2017 could also be reflected in the EII value in subsequent measurements (for example in innovation activities, linkages and collaboration between the public and the private sector, and intellectual assets), as the effects of the instruments promoting these areas tend to show with a lag.

Figure: Dimensions of the European Innovation Index, 2017 and 2018

 

11. The Digital Economy and Society Index

In recent years, Slovenia has progressed at a similar pace as the EU in terms of the Digital Economy and Society Index, meaning that its ranking among the medium-performing EU countries has remained fairly unchanged. The index monitors digital competitiveness of countries in areas of connectivity, human capital, use of internet services, integration of digital technology and digital public services. Slovenia scored similar to the EU average according to the overall index and most of its sub-components for 2019; the SDS 2030 target is to reach at least 9th place in all areas. Only the use of internet services was considerably lower than in the EU overall, particularly the use of advanced services, where, despite an increase, the gap with the EU has been narrowing only slowly in recent years. In connectivity and integration of digital technology, Slovenia has advanced at a similar pace and in digital public services somewhat faster than the EU average in the last period. In human capital (the share of ICT specialists in the workforce, the share of ICT graduates and digital skills of the population), progress has been very modest since 2017 and slower than in the EU. In digital skills of the population, Slovenia lags behind the EU average, which could to some extent explain the relatively low use of internet services. The slow progress in the area of human capital for digitalisation represents a serious barrier to the digital transformation of the business and the public sectors. Although in recent years, the integration of digital technology in businesses has taken place at a similar pace as in the EU, for Slovenia to more effectively follow the rapid progress in introducing ICT technologies to penetrate the group of more successful EU countries, additional efforts will be required, particularly to meet the increased demand for staff with appropriate digital skills. In the area of connectivity, broadband coverage (including fast broadband) is relatively high. However, the challenge is to further increase its use, particularly by improving the digital skills of the population and the affordability of these connections. In introducing the 5G network, test activities are underway. The allocation of the 5G-suitable frequency band is planned for 2020. The supply of digital public services is relatively good in the areas of e-health and open data. E-government services have also developed relatively rapidly in recent years, but the share of people using them is relatively low due to poor knowledge of these services and the complexity of procedures.

Figure: The Digital Economy and Society Index (DESI) and its components, 2019

12. Export market share

In 2013–2019, the export market share of Slovenian goods on the world market was increasing. In 2007, Slovenia met around 0.2% of world import demand for goods. This was followed by a strong decline in its market share on the world market in 2008–2012, one of the largest among EU countries. More than half of the market share decline in that period can be explained by the unfavourable orientation (particularly geographical) 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, particularly since 2016. In 2013–2018, its growth was one of the highest among EU countries, but over a longer period, world market shares of new EU Member States increased significantly more. We estimate that in 2019 the growth of the Slovenian export market share was still relatively high (3.5%), but it was more narrowly based as it was essentially supported only by individual products.

In 2019, market share growth was strongly accelerated by re-exports of medicines, which did not contribute significantly to economic activity. Since 2000, the Slovenian export market share has been rising fastest in the segment of high-technology goods, particularly under the impact of exports of medicines. In 2019, exports and the market share of medicines increased even more than in preceding years, but this time they were crucially influenced by re-exports of medicines (mostly to Switzerland), which had no major impact on economic activity. Market shares are based on the concept of gross exports and do not explain how much added value has been generated. Exports of medicines to Switzerland excluded, the Slovenian export market share on the world market even dropped slightly in 2019 (-1%). In 2019, Slovenia also recorded relatively modest export market share growth on the otherwise already slowly growing EU market (1.5%), particularly due to a decline in the last quarter.

Figure: International comparison of growth in EU countries’ world market shares (left) and the movement of the Slovenian world and EU market shares (right)

13. Unit labour costs

After five years of aligned wage and productivity growth, unit labour costs increased more markedly in 2019. Under the impact of a fall in productivity (2009) and relatively strong wage growth considering the economic situation at that time (2010), Slovenia significantly deteriorated its cost competitiveness position at the beginning of the economic crisis. The adjustments, which arose mainly from the labour market, were followed by a period of relatively aligned increases in wages and productivity (2014–2017). Over the course of 2018 and especially in 2019, unit labour costs started rising again under the impact of higher wage growth and a decline in productivity growth.

In the export-oriented sectors of the economy, unit labour costs had already started to increase in 2018, while in 2019 they also rose in most other sectors. In the post-crisis period, the alignment of wage and productivity increases was mainly due to sectors that are exposed to international competition, i.e. manufacturing and some traditional market services (such as trade and transportation). Unit labour costs in manufacturing started to rise again in 2018. While wage growth did not deviate from the average growth in the entire economy, growth in productivity, i.e. value added per employee, eased strongly due to the slowdown in import demand in main trading partners. In 2019, the stronger growth of unit labour costs also spilled over into other activities of the business sector. Increased cost pressures, particularly in the tradable part of the economy, were otherwise also typical of most other EU countries, to a lesser extent in older Member States (EU-15), while in most new EU Member States (EU-13) they have already been recorded for several years.

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

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

After rising before and during the economic and financial crisis, the share of high-technology products has been fairly stable and higher than the EU average in recent years. It increased more noticeably between 2008 and 2010, when some other less competitive industries started to contract more strongly due to the beginning of the economic crisis. This period was marked by the restructuring of goods exports towards a higher share of high-technology products amid a concurrent sharp decline in the share of low-technology products. More than half of high-technology exports are accounted for by medicinal and pharmaceutical products, alongside electrical machinery, apparatus and appliances, but the share of these in total exports has been shrinking since 2005. Compared with the EU as a whole, Slovenia stands out particularly by its high share of medium-technology products, which are highly integrated into global value chains and thus the most vulnerable to fluctuations in foreign demand.

The share of knowledge-intensive services in total exports of services is low in international comparison, but their export orientation has been rising in recent years. Between 2010 (20.6%) and 2017, the share of knowledge-intensive services in total services exports had been rising, while in 2018 it declined by 1 percentage point to 23.6%. This further increased the gap with the EU average, which has been hovering just above 13 pps for several years. Most services lagged behind the EU average, most notably computer services (by around 7 pps). In Slovenia, a higher share than the EU average was recorded particularly for telecommunication services, but their share in total exports of services declined in the three years to 2018. In Slovenia, exports of technical, trade-related services increased the most in 2010–2018, by 10.5% per year on average, and in the EU, exports of information services, by 15.2% per year, where particularly Eastern European Member States recorded significantly stronger export growth than Slovenia (around 20% per year, compared with 7.7% per year).

Figure: Share of knowledge-intensive non-financial market services in total exports of services, 2018

15. Foreign direct investment

Since 2014, inward FDI has been rising faster, while outward FDI has remained modest. Higher inward FDI, whose stock increased by as much as 58% in the last five years (2014 to 2019) has mainly been 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 more greenfield investments. The results of the SPIRIT surveys in 2014–2018 show that each year 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 2019, its stock was only slightly higher than the 2009 peak (EUR 6,143 million). The inflows of equity almost doubled year on year in 2019 (an increase of 97%, to EUR 1,052 million), while the outflows dropped significantly (from EUR 314 million to EUR 35 million).

Despite the relatively rapid increase in inward FDI flows, Slovenia remains among the EU countries with the lowest stock of inward FDI as a share of GDP. Although by 2019 the share of inward FDI in GDP had increased to 33.6%, which is 10.9 pps more than at the beginning of the crisis (2008), Slovenia still lags behind other new EU Member States on this indicator. In 2009–2018, however, it recorded the largest increase in inward FDI as a share of GDP of all new Member States. Among EU Member States, only Finland, France, Greece, Italy and Germany had a lower share. The share of outward FDI stock in GDP declined to 13.0% in 2019, from 17.0% in 2009, when it was the highest. Among new EU Member States, Slovenia thus lagged only behind Hungary and Estonia in this regard, both these countries having significantly higher shares.

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

16. R&D expenditure and number of researchers

The growth of R&D expenditure in 2018 did not offset its decline in previous years. At 1.95% of GDP, R&D expenditure was below the EU average in 2018. The exceptions were Jugovzhodna Slovenija (the impact of the innovation-intensive pharmaceutical industry) and the Osrednjeslovenska region (an additional impact of the concentration of research institutions). In the public sector, R&D investment declined by EUR 117 million in 2012–2016 and the increase in the next two years compensated for around 40% of this decline. Up to 2015, the business sector was an important driver of R&D expenditure growth, its share in total R&D expenditure being also high in international comparison (Slovenia 2018: 62.6%; EU 2017: 58,0%). The decline in business sector expenditure in 2015–2017 was a consequence of several factors: (i) a lower volume of EU funds in 2013 and 2014, when the co-financing of R&D projects in excellence, competence and development centres was terminated; (ii) after 2015, the amount of R&D tax relief claimed started to decline. R&D funding from abroad was mostly rising in 2008–2018. The private and the public sector are financing R&D investment mainly out of their own resources, which is not encouraging in terms of collaboration and knowledge-sharing between the sectors. The self-financing rate of the business sector rose from 93% to 97% in 2008–2018. In the public sector, the self-financing rate fell from 88% to 80%. The remaining public sector funds were used to finance R&D investment in the business sector.

In 2008–2018, the number of researchers was rising particularly in the business sector, which employs the most researchers. In 2018, the share of business sector researchers was 62.3% (EU 52.7%). In the last ten years it was mostly rising. In the public sector, the several-year decline (since 2012) came to a halt in 2018. In the future, given the age structure of researchers (around 41% of researchers being older than 45 years), the shortage of human resources in the public sector may reduce the potential for basic research, which is a basis for the application of advances in the business sector and a driver of breakthrough innovations.

Figure: Researchers by age group, Slovenia, 2018

17. Intellectual property

Since 2008, Slovenia has made great progress in terms of EU trademarks, but its gap with the EU average with regard to patents and Community designs has widened. With regard to the level of patenting activity as measured by the number of first patent applications per million inhabitants, Slovenia retained its leading position among the new EU Member States and its ranking around 14th place in the EU throughout the 2008–2019 period. In 2008–2013, Slovenian applicants filed the most first patent applications in the fields of technologies for human necessities (which also include medical and veterinary science) and chemical technologies, which is related to the high share of the pharmaceutical or chemical industry in Slovenia and its investment in R&D. The intensity of filing patent applications is to some extent also conditional on the structure of the economy and technologies used in individual sectors. In the legal protection of EU trademarks, Slovenia generally increased the number of applications per million inhabitants in 2008–2019 and significantly exceeded the EU average in 2019. However, in the number of registered Community designs per million inhabitants, the gap with the EU average remains wide, indicating insufficient awareness of the importance of design for increasing value added and competitiveness. EU trademark or Community design protection can be obtained by a single application and is valid throughout the EU. The costs are lower than in patent protection and the registration procedures much shorter, which makes these intellectual property rights increasingly attractive for enterprises in all sectors, including service activities, where small and micro enterprises are particularly active.

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

18. Corporate environmental responsibility

In terms of the prevalence of environmental certificates, Slovenia ranks in the middle of EU Member States. This is mainly due to the higher prevalence of ISO 14001 environmental certificates than in the EU as a whole. As a result of changes in reporting, data on the number of ISO 14001 certificates for 2018 are not comparable with those from previous years, which, amid significant annual fluctuations, did not indicate growth for Slovenia in a longer period. The prevalence of other environmental certificates (EMAS and the EU Ecolabel) is much lower, but it is gradually rising. The prevalence of the Ecolabel (EU Flower), which can be obtained not only for manufactured products but also accommodation and campsite services, is higher than in the EU as a whole, while the participation in EMAS is lower. Some countries are encouraging organisations to join EMAS by various measures – the most tax exemptions and tax breaks have been introduced by Germany, Italy, Spain and Austria. The participation in EMAS in these countries is higher than the EU average. To stimulate the uptake of EMAS, Slovenia participated in the LIFE B.R.A.V.E.R. project between 2016 and 2019 (the project ended at the end of 2019). During this time, five (of the proposed nine) measures to support EMAS were introduced. In 2019, the participation in EMAS decreased, but this may be only temporary due to the changed conditions for registration. The criteria for obtaining the Ecolabel are also being revised and expanded. In 2019, their number at the EU level (temporarily) decreased mainly, as the criteria for tourist accommodation and campsite services expired and the contracts are still in the procedure of renewal.

Figure: The prevalence of ISO 14001 certificates, 2018

1. Share of the population with tertiary education

The share of adults (25–64 years) with tertiary education has increased over the long term and is approximately the same as the EU average. In 2018, it amounted to 32.5% (EU: 32.3%), which is lower than the SDS target for 2030 (35%). Its long-term growth, attributable to the high participation of young people in tertiary education, came to a halt in 2018. According to our assessment, this is related to demographics (i.e. a decline in the generation of young people, among whom the share of those with tertiary education is higher than in older age groups). In 2008–2018, the share of tertiary-educated adults rose the most in the 35–44 and 25–34 age groups (within the latter, the share of young people aged 30–34 has already been above the EU average and the Europe 2020 strategy target for several years). From the point of view of increasing human capital and the competitiveness of the Slovenian economy, these trends are favourable, but given the population ageing, increased demand for tertiary-educated workforce and labour market mismatches, the supply of appropriately educated people lags behind the needs of both society and the economy. Broken down by gender, the share of women is significantly higher than the share of men. According to cohesion regions, more tertiary-educated people are in Zahodna Slovenija (37.7%) than Vzhodna Slovenija (27.9%). The share of people with tertiary education is increasing faster in regions with better access to higher education institutions and more jobs for tertiary-educated workforce.

Figure: Share of the population aged 25–64 with tertiary education, 2018

2. Enrolment in upper secondary and tertiary education

The number of young people enrolled in upper secondary education is falling for demographic reasons. In 2008/2009–2018/2019 it dropped by 16.4%, to a greater extent in general upper secondary than in vocational and technical education. Such developments, which are set to continue for several years according to demographic projections, are reducing the number of candidates for direct enrolment in tertiary education and the supply of young people on the labour market. The decline in the number of young people enrolled in vocational programmes is unfavourable from the point of view of the needs of employers, which for demographic reasons had difficulty finding personnel with appropriate skills (despite the high share of young people enrolled in educational programmes compared with other countries). Moreover, Slovenia also has a high rate of transition from upper secondary to tertiary education, which is additionally diminishing the supply of workers with vocational education. The number of adults enrolled in upper secondary programmes, who could increase the supply of workforce, is decreasing as well.

The number of students enrolled in tertiary education has also been falling for demographic reasons for several years. In the 2012/2013–2018/2019 period, it declined by around one-quarter, in all fields, the most in social sciences. We estimate that the number of graduates will therefore also decline in the coming years. Of all fields, the share of students enrolled in health and welfare courses increased the most but is nevertheless still below the EU average and does not meet the rising needs of the ageing society. The share of students enrolled in science and technology fields also rose, but as their overall number is declining, it still lags behind the needs of innovation activity. The insufficient enrolment is due to the too small number of available places in some study programmes and, partly, to low interest in certain other programmes. To satisfy the needs, it would be necessary to strengthen the cooperation between higher education institutions and the economy. In the coming years, Slovenia could improve the responsiveness of the tertiary education system by establishing a system for monitoring the employability of graduates.

Figure: Students enrolled in tertiary education, structure by field of education, 2017

3. Graduates from tertiary education

The number of tertiary-level graduates fell in the ten-year period analysed. After declining for several years, it increased in 2018 but was still among the lowest in the last ten years. Given the falling enrolment rates, we estimate that the number of graduates and hence their supply on the labour market will continue to fall in the coming years. In 2012–2018, the number of social science graduates fell the most, and thus their share in the structure of graduates. The share and number of health and welfare graduates increased but nevertheless still lagged behind the rising needs of a long-lived population. The share of science and technology graduates also rose. In 2017, it was roughly at the level of the EU average, but, given the decline in their number, it still lagged behind labour market needs. The supply of workforce is also being diminished by migration abroad, where graduates from health and science and technology fields are in great demand. The potential for increasing the number of science and technology graduates lies in women, who account for about one-third of graduates in this field, which is below the EU average (in total tertiary education, for around 60%). The number of new doctors of science, including those in science and technology fields, has also decreased in recent years, which is unfavourable for innovation activity. In the structure of tertiary-level graduates, 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 higher share than in the EU as a whole. The supply of appropriately educated personnel is also being diminished by the low rate of transition of students from the first into the second year of study and the relatively low completion rate in Slovenia compared with other countries. The supply of tertiary-level graduates could also be enriched by studying abroad, but in 2017 the share of tertiary graduates who completed part of their studies or training periods abroad was lower than the EU average and lower than the objective of the Strategic Framework for European Cooperation in Education and Training (Education and Training 2020/ET 2020), which is at least 20%. The potential for increasing the supply of graduates also lies in the return of people with tertiary education who have moved abroad (in 2018, for the first time in many years, more people moved to Slovenia than emigrated from it).

Figure: Structure of graduates from tertiary education, by field of education, 2017

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

The performance of Slovenian 15-year-olds in mathematics, science and reading is good. According to the PISA 2018 survey, they score higher than the EU average in all three literacy types. The SDS target in this area is ranking in the upper quarter of EU Member States. Slovenia has reached this goal in mathematics and science, but is still below target in reading. 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 science but it is still below target in reading and mathematics. Girls achieve better results than boys in reading and science and the same results as boys in mathematics. Between 2015 and 2018, Slovenian 15-year-olds’ scores in science and particularly in reading fell, while their performance in mathematics remained approximately the same.

The good results are related to good educational (material and human) resources. Material resources include textbooks, library materials, laboratory equipment, etc. As regards human resources, there is no shortage of teachers in Slovenia according to the PISA 2018 survey. Slovenia’s favourable position in this area is also related to the number of certified teachers (i.e. teachers who have obtained a licence or passed a professional examination), the pupil/teacher ratio and a lower rate of student truancy. There is, however, still room for improvement in some indicators, such as class size, disciplinary climate, participation of teachers in professional development programmes, teachers’ enthusiasm for teaching and teacher support to pupils in class.

In reading literacy, 15-year-olds from the highest socio-economic backgrounds achieve the best results. Those with the lowest socio-economic status perform the worst. Although between 2015 and 2018 the gap between the two groups widened, it remained smaller than on average in the EU. Immigrant pupils achieve worse results in reading literacy on average than their native peers, the difference being greater than on average in the EU.

Figure: Average performance of 15-year olds in mathematics, science and reading (PISA)

5. Education expenditure

Public expenditure on education (as a % of GDP) has declined over the long term and is lower than the international average; private expenditure is comparable. In 2012, public expenditure declined mainly as a consequence of austerity measures and changes in social legislation (see Development Report 2019). In 2018, it increased by 8.5% in real terms due to higher transfers to households/students, which are mainly related to methodological reasons, and due to higher expenditure on educational institutions related to the increase in investment and a higher wage bill. As public expenditure rose more than GDP, its share in GDP increased (the most at the primary level) to 4.66% of GDP in 2018. Despite the increase, this is one of the lowest shares in the longer period. Compared with other countries, in 2016 (the year for which the latest international data are available), public expenditure on education was below the average of those EU countries that are also OECD members (EU-23), the gap being widest at the tertiary level. Private expenditure on education is diminishing. In 2018, it totalled 0.57% of GDP, while according to data for 2016, it was comparable with the EU-23 average.

Although expenditure (both public  and private) per participant in education increased in the long term, it remained low by international comparison. Except for the second age period of the pre-primary level, it increased at all levels of education in 2016 (the latest international data), the most at the tertiary. At all levels except primary and lower secondary education, it was lower than the EU-23 average despite the increase. The gap was widest at tertiary and upper secondary levels, where the participation of young people in education is high, while public and private expenditure per participant is low, which hampers the potential for improving the quality of education.

Figure: Expenditure (public and private) on educational institutions per participant, 2016

6. Participation in lifelong learning

The participation of adults (aged 25–64) in lifelong learning declined over the longer term and is just above the EU average. It has dropped significantly since 2010, when it was at its highest, and totalled 11.4% in 2018 (EU: 11.1%). It was thus lower than the objective of the Strategic Framework for European Cooperation in Education and Training (ET 2020) (15%) and the SDS 2030 target (19%). Particularly problematic is the low participation of low-skilled workers, older people, men and foreigners, as this is diminishing their possibilities for successful inclusion in society and participation in the labour market. From the point of view of regional development, the low participation in some economically weaker regions is unfavourable. In the long term, participation in lifelong learning has declined in all regions and no longer meets the ET 2020 target in any region, not even Osrednjeslovenska, which has the highest participation rate.

Broken down by activity status, in 2017, participation in lifelong learning was highest among employed people, although it dropped the most in this group over a longer period. The participation of unemployed persons does not lag significantly behind that of the employed. Markedly lower is the participation of inactive persons, which is below the EU average. Differences also exist among the employed – for example, participation in lifelong learning in small enterprises (up to ten employees) is lower than in those with more than ten employees and in the public sector it is higher than in the private sector. Participation in lifelong learning is particularly low in those occupational groups and sectors that have larger shares of people with low education. Broken down by activity status, participation among the employed dropped the most in 2008–2018, the surplus over the EU average thus narrowing sharply. This is unfavourable from the perspective of employee adaptability to changes in the workplace and industry 4.0 and hinders improvement in business sector competitiveness.

Figure: Participation of employed persons aged 25–64 in lifelong learning, 2018

7. Attending cultural events

The average attendance at cultural events per inhabitant remained roughly unchanged in the last-four years analysed. It was highest in 2012, owing to the many performances hosted by Maribor, the European Capital of Culture that year. In the remaining three years it was around 5–6 visits per inhabitant, which is far below the SDS 2030 target. With a significant increase in the number of cultural performances, attendance at houses of culture and cultural centres rose the most in 2008–2018. In 2018, they recorded the highest number of visits of all cultural institutions. Higher attendance was also recorded for events performed by cultural associations, whose number and hence supply increased in the period under review. The broadening of cultural associations’ activities helps to connect people at the local level and has beneficial social and economic effects. Favourable movements were also recorded for cinema attendance, where the number of visitors to screenings of Slovenian films increased significantly. Theatre and opera attendance also went up with a higher number of theatrical performances in the period analysed. Musical institutions were the only type of institutions where attendance declined.

Figure: Attendance at cultural events, Slovenia, 2018

8. Share of cultural performances held abroad

Share of cultural performances held abroad is rising. 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 2015–2018 and the figure for 2015 is SURS' estimate (see note under the table). In 2018, the share of cultural performances held abroad totalled 5.1%. It was higher than in the preceding year and above the SDS target for 2030 for the second year in a row. According to our assessment, the rise in the share reflects the systematic promotion of international cooperation in the field of theatrical activity, which is reflected in a rising share of performances abroad, while in museums, this share has been declining. Among cultural events held abroad, those in the EU accounted for the highest share, more than three-quarters, which indicates the geographical attachment of Slovenian culture to this area.

Figure: Share of cultural performances on tours abroad, Slovenia

1. Healthy life years

Slovenia’s gap with the EU as regards healthy life expectancy at birth and at the age of 65 has widened since 2015. The indicator for 2017 shows that a person born in Slovenia can, on average, expect only 55 years of healthy life (in the EU, slightly less than 64 years). Healthy life expectancy at the age of 65 is only 7.2 years on average in Slovenia, compared with 10 years in the EU. In the last three years under review, the lag increased particularly for women. Since 2015, in Slovenia the number of healthy life years has 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. A SURS and NIJZ analysis has shown that the very low value of the indicator in Slovenia is related to the translation of the survey question and the methodology of the survey, so we expect a correction in the next years, similar to that carried out a few years ago for Sweden and Germany.

The lag behind the EU in the ratio between healthy life years and life expectancy has also widened further in recent years according to the available data. A worse ratio (a smaller share of years that a person on average spends in a healthy state) means higher pressure on social protection systems because of early retirement and higher demand for health and long-term care services. Following several years of improvement, the ratio deteriorated again in Slovenia in 2014–2017, while improving markedly in the EU as a whole. 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 than women, though largely on account of their lower life expectancy.

Figure: Proportion of years lived in good health, 2017

2. The Gender Equality Index

According to the latest calculation, the gender equality index for Slovenia declined slightly, but it is still above the EU average. The gender equality index is a composite index calculated on the basis of 31 indicators within six domains. With a value of 68.3, Slovenia ranks 11th in the EU. An index value of 1 means total inequality and 100 full equality. Slovenia has lagged behind the same Northern European countries (Scandinavian countries, the Benelux countries, the UK and Ireland) and France in all years. Now it has also been outpaced by Spain. In the EU average, the values of all six domains of the gender equality index are the highest thus far. Slovenia has advanced by 7.5 points from the first index calculation in 2005. To meet the SDS 2030 target, it should improve the index value by 10 points in 2019–2030.

According to the gender equality index, Slovenia is stronger in the domains of health, money and work and weaker in the domains of time, power and knowledge. The deterioration in the (otherwise best) domain of health is related to respondents’ worse assessments of access to dental and medical services. Other than that, there have been no significant changes in this domain, while women rate their health somewhat worse than men. The number of healthy life years for women is on average lower than for men (see Indicator 3.1), but women on average live almost six year longer than men (see Indicator 3.3). Meanwhile, Slovenia has made additional headway in the already stronger domains of work and money, which is largely a consequence of the narrowing of the gender gap in the employment rate. Since 2015, it has made the most progress in the domain of power, due to the introduction of gender quotas, i.e. a mandatory share of both genders on candidate lists. The deterioration in this domain in the calculation for 2019 is attributable to a lower share of women in the parliament compared with the previous one. A slight improvement was also observed in knowledge, the only domain where Slovenia scores below the EU average. This can be mainly attributed to a large difference in the share of students enrolled in tertiary education programmes, which is related to persistent stereotypes about the inferiority of women and women’s work.

Figure: Gender Equality Index (GEI)

3. Life expectancy

Life expectancy at birth has stopped improving both in Slovenia and in the EU as a whole in recent years. Since 2002 (since data for the EU have been available), life expectancy increased by three months per year in Slovenia and two months per year on average in the EU. The improvement can be attributed to factors such as better socio-economic conditions, better education, healthier lifestyles and advances in medicine. Life expectancy in Slovenia has been higher than the EU average since 2014. After 2011, life expectancy gains slowed, however, and in 2014 they came to a halt, 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, increased obesity and a higher prevalence of diabetes.

Life expectancy is higher for women and people with tertiary education. In 2002–2017, the gender gap in Slovenia declined by 2.1 years to 5.8 (in the EU, by 1.2 years to 5.2). Broken down by educational attainment, the gap is widest among people with low education, where women can expect to live 7 years longer than men (75 years).

In 2018, life expectancy was higher than in 2011 in all regions. Women in the Osrednjeslovenska region have the highest life expectancy at birth – 84.6 years, which is 2.2 years more than women in Koroška, the region with the lowest life expectancy. Life expectancy for men in the Koroška region is 3.6 years shorter than for women, but it is the longest life expectancy for men among all regions. Regional disparities reflect a number of socio-economic factors (lifestyle, nutrition, educational structure of the population and other), which have a different impact on individual population groups and geographical areas.

Figure: Life expectancy at birth, 2017

4. Avoidable mortality

Avoidable mortality dropped sharply in 2011–2016 but remained above the EU average. The rate of avoidable mortality, i.e. mortality from causes that could be avoided, declined by 17% or 46 persons per 100,000 inhabitants in Slovenia in 2011–2016 (in the EU as a whole only by 9%). Avoidable mortality is divided into (1) preventable and (2) treatable mortality. Slovenia was very successful particularly in reducing treatable mortality, which declined by 26%.

Preventable mortality was slightly above the EU average in 2016, but the share of preventable premature deaths in the population under age 75 was very high compared with the EU as a whole. In Slovenia, in 2016, 184 deaths per 100,000 inhabitants could have been avoided by reducing behavioural risk factors or through primary prevention (in the EU, 161). In 2011–2016, 13% more deaths were prevented than in 2011 (in the EU, 9%). The preventable mortality rate for people under 75 years is nevertheless still high, at 54.5%, the highest among all EU countries. The difference in preventable mortality between men and women is very high in Slovenia, which is a consequence of the significantly higher rates of ischaemic hearth disease, lung cancer, accidents, alcohol-related disorders and suicide in men.

The rate of treatable mortality was already significantly below the EU average in 2016, which indicates relatively effective health care from the aspect of treatment and early detection of diseases. In Slovenia, 80 persons per 100,000 inhabitants died from causes that could have been avoided through timely and effective healthcare (EU: 93 per 100,000). The indicator points to relatively effective health care, particularly with regard to the relatively lower investment in health than in countries that reach comparable results. The countries with mortality rates below 70 persons are Switzerland, France, Norway, Italy, Spain, Sweden 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. In all countries, the indicator is significantly worse for men. In Slovenia, the favourable indicator can be attributed to the relatively good provision of primary care, although the long waiting times at the secondary level remain a major problem.

Avoidable mortality rates in EU countries, 2016

5. Health expenditure

Measured by total health expenditure per capita, the gap with the EU average increased in the last period analysed. While Slovenia had been at 85% of the EU average in terms of health expenditure per capita in 2013, it achieved only 83% of the EU average in 2018. In contrast, in terms of economic development measured by per capita GDP, Slovenia narrowed its gap with the EU in this period, from 82% to 87%.

The level of public expenditure on health in Slovenia is closely connected with HIIS revenues, i.e. contributions by insured persons. In 2018, 92% of all public health expenditure was covered by the compulsory health insurance system or the pension insurance fund. In the structure of contributions for compulsory health insurance, contributions for insured persons accounted for 78%, the transfer from the pension insurance fund for 13.5% and the government transfer only for 3.2%. Due to a high share of contributions from labour, HIIS expenditure is strongly exposed to cyclical swings. In the period of the financial crisis (2009–2013), a number of measures were therefore adopted to contain expenditure. Since 2013, HIIS revenues have increased with faster growth in employment and wages, which has enabled stronger expenditure growth.

The share of direct budgetary sources for health and transfers from the state budget for financing compulsory health insurance has been very low in Slovenia compared with other countries. The share of direct expenditure from the general and local budgets (excluding transfers) in 2017 was the second lowest in the EU. Moreover, the majority of countries with the Bismarck model of social health insurance (Austria, Belgium, the Czech Republic, France, Luxembourg, the Netherlands and Germany) also have higher indirect funding from the budget through transfers to compulsory social health insurance. In Slovenia, the transfer is lower than in most countries even if the contributions for pensioners from the pension insurance fund are included (in total, 16.7% of total contributions for compulsory health insurance).

Figure: Total health expenditure per capita, in EUR PPP, 2013 and 2018

6. Expenditure on long-term care

Slovenia is widening its gap with the EU average in terms of expenditure on long-term care (LTC). In 2017, total LTC expenditure accounted for 1.21% of GDP in Slovenia, compared with 1.5% of GDP on average in the 24 EU countries for which data are available. Public expenditure declined somewhat in Slovenia – to only 0.89% of GDP in 2017, while the EU average has remained at around 1.3% of GDP for several years. Broken down by source of funding, the share of public expenditure dropped significantly in the ten-year period between 2007 and 2017; 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.

Demand for long-term care is rising faster than for healthcare and a significant share of the needs in this area are already unmet. Public expenditure on LTC grew rapidly only in the period before the crisis, when significant capacity was added to nursing homes. During the crisis, its growth was modest, albeit still stronger than growth in health expenditure, while in 2012 to 2017 it slowed significantly and lagged not only behind the EU average, but also behind health expenditure growth. Particularly the growth of HIIS expenditure on health services in nursing homes and other social institutions and for community nursing was low, which is also one of the reasons for deteriorating care in recent years. At same time, private, out-of-pocket expenditure on LTC has been rising very rapidly. This expenditure, which is the most problematic in terms of affordable care for all, is growing substantially faster than private expenditure on health (see Economic Issues 2019, Figure 29). The need for long-term care can therefore strongly affect the disposable income of individuals and their families and become, over a longer period, a heavy burden on informal caregivers within the family, reduce their productivity and availability on the labour market, lead to early retirement, increase poverty, and cause excessive use of more accessible health services.

Figure: Public expenditure on long-term care as a share of GDP and in USD PPP, 2017

7. Overweight and obesity

The share of overweight adults declined somewhat in Slovenia in 2007–2014, but it still significantly exceeded the EU average, especially for men. 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. Cardiovascular diseases are the main cause of mortality in Slovenia and indeed in most developed countries. Obesity can, moreover, have not only medical but also socioeconomic consequences (social exclusion, lower income, higher unemployment, more working days lost and early retirement). Amid a decline in the share of overweight adults (overweight and obese), income inequalities were also relatively high in this period. The large share of overweight and obese adults in Slovenia can be attributed to bad dietary habits, especially among young people. 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 even significantly lower than in the EU as a whole. The SHARE survey for 2011–2017 shows a slight increase in the share of overweight older (50+) people (from 69% to 70%) particularly in the fifth quintile, while in the first quintile this share declined.

The economic burden of overweight and obesity in Slovenia is slightly below the EU average. OECD calculations take into account the impact of overweight on the employment rate, presenteeism, absenteeism and early retirement. In the EU as a whole, individuals with at least one chronic disease which is a consequence of overweight are 8% more likely not to be in the labour force than those with the same age and level of education and normal weight; if employed, these individuals have a 1.5% higher absenteeism rate and are 20% more likely to retire early. As almost 50% of the adult population in the EU is overweight (more than 15% being obese), these numbers have very serious economic implications. According to the OECD model calculations, GDP will be 3.3% lower each year in the EU on average in 2020 to 2050 due to the impact of overweight (in Slovenia 3.1% lower). Reducing overweight will require more targeted and restrictive measures than in the past.

Figure: Share of overweight and obese adults by income, 2014

8. Unpaid voluntary work

The proportion of people who carry out unpaid voluntary work on a regular basis is slightly above the EU average in Slovenia. 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 (the latest available data) relative to 2012. In Slovenia, 34% of respondents carried 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 was the highest among young people (18–24 years) and more voluntary work was 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%) were lower (and also lower than the EU average). The proportion of respondents doing voluntary work in community and social services, political parties and trade unions was the highest in the 25–34 age group; it was slightly higher for men. Women performed 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

9. At-risk-of-social-exclusion rate

In 2018, the rate of the risk of social exclusion was the lowest thus far and among the lowest in the EU. In 2014–2018, the rate of the risk of social exclusion declined, to reach 16.2% at the end of the period, which is less than before the economic and financial crisis. A total of 326,000 persons were still at risk of social exclusion in 2018, which is 19,000 fewer than in 2017 and 34,000 fewer than in 2008. Slovenia has thus come very close to its target under the Europe 2020 strategy, i.e. to reduce the number of people at risk of social exclusion to 320,000 by 2020.

Of the three components of the risk-of-social-exclusion rate, in 2018, only the at-risk-of-poverty rate was still higher than before the financial and economic crisis. The second component, the share of persons living in households with very low work intensity, had declined by 1.8 pps to 5.4% and the third, the severe material deprivation rate, by 3.1 pps to 3.7% in comparison with 2008. Both were the lowest thus far. The at-risk-of-poverty rate in 2018, at 13.3%, was at the same level as in 2017 but still 1 percentage point higher than in 2008. The at-risk-of-poverty threshold for a single-person household was set at EUR 662 per month in 2018, 26 euros more than in 2017. A total of 268,000 persons lived below the poverty threshold in 2018, which is 27,000 more than in 2008.
 
The rate of the risk of social exclusion did not fall in all regions in 2008–2018, however. In 2018, it rose relative to 2008 in Primorsko-notranjska, Goriška and Zasavska. This was mainly due to the rising at-risk-of-poverty rates in these regions, as these regions, especially Zasavska, also have relatively low disposable income per capita, which increased the least among all regions after 2008.

Figure: The at-the-risk-of-social exclusion rate, EU countries, 2018

10. Inequality of income distribution

Slovenia has been among the countries with the lowest income inequality for many years. This is attributable mainly to the progressive personal income taxation and, to some extent, to social transfers. The top 20% of households received 3.4 times as much income as the bottom 20%, which is within the SDS target. In the EU as a whole, this gap was 5.2-fold and had widened somewhat since the crisis, while in Slovenia it had narrowed. A further breakdown of income distribution in Slovenia shows that the gap between the fifth quintile and the third quintile, which includes the median, is 1.79 (2018). It is somewhat smaller than the gap between the third and the first quintile (1.89 in 2018). The poorest fifth of households account for around a tenth of total disposable income, while the wealthiest fifth account for a third.

In 2008–2018, inequality of income distribution changed only marginally. The quintile share ratio (80/20) in Slovenia was equal to that in 2008 according to the latest available data. It increased the most in Luxembourg and fell the most in Poland and Portugal. In Slovenia, inequality of income distribution increased slightly in 2009–2014, mainly due to the beginning of the economic crisis and the adoption of austerity measures. In 2014, it started to decline again with rapid economic growth and the phasing out of austerity measures. Similar movements for Slovenia are also indicated by the most commonly used measure of economic inequality, the Gini coefficient. In 2018, the Gini coefficient was 0.234, equal to that in 2008, having been declining since reaching its highest level in 2014.

Figure: Inequalities of equivalised disposable income distribution, quintile share ratio 80/20

11. Experience of discrimination

The share of people who have experienced discrimination or harassment declined in Slovenia in the last ten-year period and is within the SDS target. Overall, 9% of respondents felt discriminated against or harassed in 2019, which is significantly less than the EU average (17%) and one of the lowest shares in the EU. Lower shares were recorded only in Malta (8%), Greece (7%) and Portugal (6%). The most frequently mentioned reasons for discrimination were gender, age, religion or beliefs, and general physical appearance (2%). Discrimination on the grounds of disability, ethnic origin, sexual orientation, social class, political opinions, skin colour or being of Roma origin was experienced by 1% of respondents. Except discrimination on the basis of sexual orientation, religion or beliefs, and being Roma, which was equally frequent, discrimination for other personal reasons was less frequent than in the EU as a whole. In Slovenia and the EU overall, the share of respondents discriminated against on the basis of age declined the most compared with 2015. Experience of discrimination was more frequently mentioned by individuals who considered themselves being part of a minority group.

In Slovenia, the most frequently reported form of discrimination is discrimination at work. The share of respondents who felt discriminated against at work totalled 33% in 2019, which is the highest share among all EU countries and significantly above the EU average (21%). It is followed by the share of those discriminated against in a public place (17%), a restaurant or a night club (13%), or when looking for a job (12%). Only 1% of respondents felt discriminated against by health care personnel, which is the least among EU countries. To stop all forms of discrimination, it is important for the country to step up efforts in this area and inform people about their rights in the event of discrimination. The share of those who consider the efforts made in the country to fight discrimination to be effective increased in Slovenia, while the share of individuals who have themselves taken action to fight discrimination remains low.

Figure: Experience of discrimination, 2019

12. Median equivalised disposable income

After its growth had been interrupted by the economic and financial crisis, median equivalised disposable income increased again with the rebound in economic activity in 2014–2018. The strong growth in 2006–2009 was followed by a period of negative or low growth (2010–2013) as a consequence of the crisis and austerity measures. Since 2014, median equivalised disposable income (expressed in euros) has again been rising, which indicates improvement in the living standard of the population. In 2018, it came close to the real values from 2009, when it was the highest in the entire period. The movements of the median equivalised disposable income in the EU as a whole were comparable to those in Slovenia, but the increases and decreases in growth rates were less pronounced, meaning that it already exceeded the 2009 level in real terms in 2016.

In comparison with the EU average, the relatively low levels of the median equivalised disposable income of people over 65 years of age and those with higher education stand out in Slovenia and the gaps have widened since the crisis. After widening during the crisis, the gap in the median equivalised disposable income (expressed in euros) with the EU average narrowed and reached 23.8% in 2018. The movement and the gap of the median equivalised disposable income for employed people in the 18–46 age group, which has the highest values both in Slovenia and in the EU, were also similar, as expected. The median equivalised disposable income of the age group of 18 and under is similar to the total median equivalised income, which is mainly a result of policies for protecting the material well-being of children and young people in Slovenia. On the other hand, the lag of the median equivalised disposable income of people over 65 years of age behind the total median equivalised disposable income had doubled by 2018 with regard to the EU average, which is mainly a consequence of modest growth in the average pension in Slovenia due to the restrictive indexation policy during the crisis. Significant differences were also observed for the median equivalised disposable income of the population with tertiary education, where in 2013 and 2014 the gap with the EU widened further, partly due to the progressive reduction of public servants’ wages, although Slovenia’s lag decreased somewhat in the last two years of the period analysed.

Figure: Median equivalised disposable income

13. Life satisfaction

In 2019, life satisfaction in Slovenia and the EU reached the highest levels thus far and was above the EU average in Slovenia. With 92% of people satisfied with life, Slovenia was, together with Germany, in 7th place in the EU in 2019 (four places higher than in 2018) according to the Eurobarometer survey. The highest levels of satisfaction were recorded in the northern EU (Denmark, Sweden, the Netherlands, Finland, Luxembourg, Ireland and Germany). In 2019, satisfaction of Slovenian respondents with the economic and employment situation in the country declined, while their satisfaction with the financial situation of their own household and personal employment situation remained high. Their expectations for the next 12 months moved in a similar way – the share of respondents who expected an improvement in the employment and economic situation at the country level declined, while the corresponding share at the personal level remained almost unchanged.

In autumn 2019, Slovenian respondents for the first time pointed to climate change as one of their main concerns at the EU level, while at the personal and the country level they did not yet perceive it as a main problem. When asked to identify two main issues at the EU level, Slovenian respondents again pointed to immigration (53%) as the most important problem by far, followed, for the first time, by climate change (18%), while in the previous year terrorism had been one of their two main concerns. The third most frequently mentioned issue was the economic situation (13%), which, after being of lesser concern in the previous three years, was perceived as more problematic again according to the most recent (autumn 2019) measurement. At the country level, Slovenian respondents otherwise most frequently cited social and health security as the main problem (38%), albeit 9 percentage points less frequently than in the spring. Fewer respondents than in the spring were also concerned about immigration, unemployment, inflation and the cost of living, while more of them were again worried about the economic situation and housing. At the personal level, their main concerns in 2019 were social and health security (21%), pensions (18%) and working (17%) and living (16%) conditions. Since the spring, the shares of respondents who perceive these areas as a problem at the personal level increased, except in the case of pensions, where the share declined.

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

14. Social protection expenditure

In 2008–2017, social protection expenditure was rising somewhat faster in Slovenia than the EU average. In Slovenia, it increased by 2.3% per year in nominal terms, in the EU as a whole by 2.7%. During the crisis, expenditure on unemployment benefits increased the most, albeit significantly more in Slovenia than on average in the EU. During the crisis, the movement of social protection expenditure in Slovenia was marked not only by an increase in expenditure on unemployment, which otherwise accounts for a smaller share of total expenditure, but also by a decline in expenditure due to the adoption of austerity measures and the implementation of new social legislation. The main expenditure categories are expenditure on sickness/health care and expenditure on old age (75% of total expenditure); expenditure on the sickness category increased particularly in the last three years as a consequence of higher expenditure on sickness benefits, while expenditure on old age rose due to the resumed pension indexations in 2016 and 2017, the introduction of a guaranteed pension in 2017, higher pensions for new pensioners and growth in the number of beneficiaries, which is otherwise moderate. Slovenia allocated 12.6% more for social protection in real terms in 2017 than in 2008.

Slovenia lagged behind the EU average in terms of social protection expenditure as a share of GDP throughout the period, allocating less than the EU average for the areas of disability, unemployment and housing and more for the area of health care. It has the widest gap with the EU average in the area of unemployment, mainly owing to the small share of unemployment benefit beneficiaries among the unemployed compared with other EU Member States. The share of expenditure on disability has been declining for a longer period mainly due to a lower number of beneficiaries of disability pensions. The relatively low expenditure on housing (0.1%; EU: 1.9%) is to a great extent attributable to the very high share of owner-occupied dwellings and the relatively poorly developed rental housing market.

Figure: Social protection expenditure, as a % of GDP, 2017

15. Housing deprivation rate

Slovenia is among EU countries with the highest housing deprivation rates. In 2018, more than a fifth of its population lived in poor housing conditions. Since 2011, however, this share has declined more than on average in the EU. Regional disparities increased during this period. In 2017, 37% of households lived in poor housing conditions in the Goriška region and only 14% in the Koroška region. The high regional disparities in housing deprivation are largely attributable to the more intense construction of flats in some municipalities in the Osrednjeslovenska (Ljubljana) and Podravska regions (Maribor).

One of the reasons for the high housing deprivation rate is the relatively old and poorly maintained housing stock. More than 80% of dwellings were built before 1990, the most (almost 15,000 per year) between 1971 and 1980. Their renovation represents a great potential for improving the quality of housing, reducing environmental impacts and lowering household energy costs, but it is being hampered by a relatively high share of households with low income living in dwellings that are in need of renovation (Environmental Indicators, 2019). In 2018, more than 30% of households below the poverty threshold lived in dwellings exhibiting at least one of the housing deprivation measures. The housing cost overburden rate is also the highest among persons with the lowest income. Almost a quarter of persons overburdened with housing costs live in households with income below the poverty risk threshold, which is nevertheless significantly less than on average in the EU (38.5%). With the construction of new dwellings, the quality of the housing stock is improving only slowly.

In Slovenia, 4.8% of the population faced severe housing deprivation in 2018. In measuring the severe housing deprivation rate, the overcrowding rate is taken into account in addition to at least one of the deprivation elements. The overcrowding rate is below the EU average, as in the past, housing policy in Slovenia was geared towards building a larger number of smaller units with a larger number of rooms (Sendi, 2013). The severe housing deprivation rate had also declined since 2011, but in 2018 it rose to slightly above the EU average again.

Figure: Housing deprivation rate and severe housing deprivations rate, 2018

16. Material and income deprivation

In Slovenia and the EU as a whole, the material deprivation rate was rapidly falling in 2014–2018; in 2018, it was the lowest thus far. In the four years the material deprivation rate declined by as much as 6.8 percentage points, to 10.4% in 2018. In 2018, Slovenia was in 11th place in the EU and above the EU average, as in all previous years. Its ranking improved significantly in comparison with that before the crisis (17th place in 2008). At the EU level, we can say that the trends in material deprivation rates converged, as the differences between countries are much smaller than they were in 2008. The convergence has been a consequence of a decline in material deprivation rates in countries with the highest rates, but also an increase in material deprivation rates in countries such as Luxembourg, the Netherlands and Denmark, which in 2008, for example, had the lowest rates.

In 2018, the material deprivation rate was the highest for men in the 18–64 age group below the at-risk-of-poverty threshold and the lowest for children. Relative to 2017, it declined for all socio-demographic groups, including those living below the poverty threshold, except for men below the poverty threshold aged 18 to 64 years. In 2018, in Slovenia, the material deprivation rate was 10.7% for women and 10.1% for men, the gender gap being one the smallest in 14 years. Broken down by age, children were the least materially deprived group in all years under review. Throughout the period, the material deprivation rate was the highest among people over 65 years of age. Of all socio-demographic groups, women over 65 years of age were the most materially deprived group in all years (14.4% in 2018). The trends in material deprivation rates for people below the poverty line are somewhat different, both by gender and age. For women older than 65 years living below the poverty threshold, the material deprivation rate was the same as for their male peers (34%). Among all socio-demographic groups below the poverty threshold, the material deprivation rate was the highest for men in the 18–64 age group (34.6%); for women in this age group, it was somewhat lower (32.2%). The material deprivation rate in 2018 was on average nevertheless also the lowest thus far for people below the poverty threshold (31.6%; in 2017: 34.7%). The share of households able to handle unexpected expenses in the amount of EUR 600  was also the highest since measurements began. Meanwhile, the share of households making ends meet only with great difficulty (7%) was still higher in 2018 than before the crisis (6% in 2007).

Figure: Material-deprivation rate, in the EU

17. Employment rate

After several years of increase, the employment rate (20–64 years) significantly exceeded the pre-crisis level in 2019 and was in line with the SDS target. In the second quarter of 2019, it was 77.1% (EU average: 73.9%). In recent years its increase was also influenced by demographic trends, in addition to economic growth and stronger demand for labour. The employment rate is rising particularly fast among young (20–29 years) and older people (55–64), who belong to more vulnerable groups on the labour market. The improvement in the labour market situation of young people, who were strongly hit by the crisis owing to their high exposure to temporary employment forms and a decline in the volume of student work, reflects not only high labour demand and labour shortages in recent years, but also demographic trends (smaller generations) and active employment policy measures. Meanwhile, the employment rate of older people, which in fact also rose further during the crisis, remains among the lowest in the EU and approximately 10 percentage points below the EU average.

In the period of economic growth (2014–2019), the employment rate increased in all education groups, the most among people with secondary and upper secondary education. After low-skilled people had been affected the most by the economic and financial crisis in 2008 (a markedly greater decline in employment, also in comparison with the EU average), their employment rate increased the most in 2014 and 2015, which is related to the structure of economic recovery and the hiring in sectors that employ such workforce (construction and manufacturing). In recent years, the employment rate has also been markedly rising for people with secondary, upper secondary and higher education. In those with higher education, it remained above the EU average also during the crisis. In the second quarter of 2019, it was the highest in the EU.

In 2008–2011, the decline in employment was comparable in both cohesion regions, while in 2014–2018, the cohesion region Vzhodna Slovenija recorded faster growth. In 2018 employment growth exceeded the pre-crisis level in all regions except Pomurska, where it remained at almost the same level (due to bankruptcies of large companies), and Primorsko-notranjska, where is was well above the average before the crisis. It was the strongest in the Gorenjska region (78.7%), which also exceeded the Slovenian average in economic growth. After 2014, the cohesion region Vzhodna Slovenia recorded stronger growth, with Zasavska and Posavska standing out with their high shares of manufacturing activities and construction in the structure of the economy. The region with the most modest employment growth after 2014 is Primorsko-notranjska, where labour migrations to neighbouring regions are on a rise.

Figure: Employment rate (the 20–64 age group)

18. In-work at-risk-of-poverty rate

In Slovenia, the rate of in-work poverty risk has been below the EU average since measurements began, despite significant fluctuations. According to this indicator, Slovenia has been in the first third of countries in all years, being outpaced by only two countries in comparison with 2008. In 2018, the at-risk-of-poverty rate of employed persons aged 18 years or more was higher than before the crisis but lower than in 2013, when it had been the highest. The at-risk-of-poverty-rate of employed persons differs significantly between women and men: the already lower rate for women (4.2%, 1 pp less than in 2017) declined faster. Slovenia thus belongs to the countries with the lowest in-work at-risk-of-poverty rates for women. The in-work at-risk-of-poverty rate for men was significantly higher (7.6%) and declined only by 0.1 pps compared with the previous year, Slovenia thus being ranked in the middle third of EU countries in terms of the in-work poverty risk for men. In 2018, this rate for men was nevertheless lower than in 2013, when it was the highest (8.4%).

In 2018, the at-risk-of-poverty rate of persons in employment and self-employed persons was still higher than before the crisis in 2008. In 2018, the at-risk-of-poverty rate for persons in employment (4%) was 0.6 percentage points lower than in 2013, when it was the highest. The at-risk-of poverty rate for those on permanent employment contracts (3.4%) was still higher than before the crisis. Similar held for persons on temporary employment contracts  and part time workers. In 2018, Slovenia performed better than the EU average in all these categories and in the rates for both women and men, with the exception of the self-employed. In 2018, the at-risk-of-poverty rate for self-employed persons, at 23.9%, was 2.7 percentage points lower than in 2017, but still higher than before the crisis. Among the self-employed, the situation is reversed in terms of gender and ranking in the EU: in 2018, Slovenia was among the four worst performing EU countries in terms of the at-risk-of-poverty rate for self-employed women, lower rates being observed only in Romania, Latvia and Poland, and in the bottom third of EU countries in terms of the at-risk-of-poverty rate for self-employed men.

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

19. Unemployment and long-term unemployment rates

After several years of decline, the unemployment rate came very close to the pre-crisis level in the second quarter of 2019. By the second quarter of 2019, it had fallen to 4.2%, reflecting several years of vigorous economic growth and thus stronger hiring. Since 2013, the unemployment rates of women and men have been falling with similar dynamics. In 2019, the unemployment rate for men was just under one percentage point lower than the rate for women, but the latter was the lowest on record (4.7% in 2019). After the crisis, unemployment declined the most among people with low, secondary and upper secondary education, which is in line with the structure of the recovery of economic activity. The economic and financial crisis was especially hard on young people (15–24 years) – by 2013, the unemployment rate for young people had risen to 24.1% and exceeded the EU average, while since then it has been rapidly falling. In the second quarter of 2019, it was 6.5% (EU: 14.2%). The decline can be attributed to the increased volume of student work and active employment policy programmes specifically targeting young people (such as the Youth Guarantee Scheme). It is, however, also due to demographic factors, the number of young people already falling for quite a long perod.

The long-term unemployment rate, which since 2014 has been dropping, has been below the EU average again since 2017. In 2009–2014, it rose sharply as a result of weak demand for labour. During the period of economic growth, the situation first improved only for those who were out of work for a shorter period, while since 2015 the number of the long-term unemployed has also been falling thanks to active employment policies and high demand for labour in circumstances of a lack thereof. The share of the long-term unemployed among all unemployed also decreased sharply in the last three years analysed, being similar to the EU average in the second quarter of 2019.

Figure: Unemployment rate, annual average

20. Precarious and temporary employment

Following a significant fall in 2018 (the most recent data), the share of precarious employment, one of the indicators of the quality of employment, was similar to that ten years before. In 2018, the share of precarious jobs among women totalled 4.2% in Slovenia (EU: 2.1%) and among men 3.3% (EU: 2.1%). The higher share than the EU average can be attributed to the existence of student work in Slovenia and the greater importance of agriculture, where these forms of employment are the most common due to the seasonal nature of the work. According to the analysis of the European Commission, women, young people and low-skilled workers are most likely to work in precarious jobs. Given the high share of temporary employment among young people in Slovenia, we can conclude that the share of precarious jobs is also high in this population group. The decline in the share of precarious employment in Slovenia in 2018 was due to a decline in the volume of student work and to labour shortages, because of which more people were hired for an indefinite period of time.

In 2018, the share of temporary jobs, which had declined in the previous three years, was lower than at the beginning of the crisis. In the 20–64 age group, it was 16.2% among women in 2018 (EU: 13.8%) and 15.3% among men (EU: 12.8%). In Slovenia, temporary jobs are most common among young people, largely on account of the prevalence of student work, the most flexible form of employment for employers, which is not known in this form elsewhere in the EU. In the last three years analysed, particularly in 2018, the share of temporary jobs fell sharply particularly for young people. With several years of stable economic growth and a lack of workers, the share of new permanent contracts increased, but the share of new fixed-term contracts nevertheless remained high.

Figure: Share of precarious employment in the 20–64 age group, 2018

21. Absence from work due to illness

Since 2014, absence from work has been rising at an ever faster rate. After a decline in the period of the economic and financial crisis, absence from work due to illness has been rapidly rising in Slovenia since 2014. Among the main reasons we can cite the growth of employment in recent years, later retirement, prolongation of waiting times, increased participation of children in kindergartens and the ageing of the working-age population. Absence from work due to illness is significantly higher among women than men and the gap is widening every year, which can be partly explained by the increasing participation of children in kindergartens, full-time employment of women and their absence to care for parents due to the poorly functioning system of long-term care (informal caregivers being mostly women). According to NIJZ data, in 2018, employed persons were on average absent from work for 16.5 calendar days, the share of sick leave from work averaging 4.5%; this is already more than before the crisis in 2008 (NIJZ, 2020). According to HIIS data, the number of long-term absences in particular has surged in recent years, which is related to the ageing of the active population, changes to pension legislation and the unlimited duration of entitlement to sickness benefits.

In terms of working days lost, Slovenia increasingly exceeds the EU average. 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), has also risen in recent years. In 2018, the average number of compensated work days lost per year due to illness already totalled 13.5 in Slovenia (in the 23 EU Member States for which comparable data are available, 11.0). However, the international comparability of this indicator is limited because of methodological differences in data capture and differences in the health and social care systems and in eligibility criteria for sickness benefits.

Figure: Number of working days lost per worker, 2018

1. Emission productivity

The emission productivity of the economy is rising but remains lower than the EU average, which is the target set in the SDS. Emission productivity, measured by the ratio of GDP to greenhouse gas (GHG) emissions, remained almost unchanged in the first years of the crisis after increasing owing to faster growth in GDP than emissions in times of economic growth. As the EU average continued to increase during the crisis, Slovenia’s gap with the EU widened. It also remained wide after the crisis, when productivity growth again accelerated. Per unit of GHG emissions, 12.5% less GDP was generated in Slovenia in 2017 than on average in the EU.

Greenhouse gas emissions have increased again in the period of economic growth. After dropping in the period of lower activity and a concurrent shutdown of one of the thermal power plants and being around a quarter lower in 2014 than their peak in 2008, emissions have returned to their previous upward trajectory in recent years. In 2018, they were 6% higher than in 2014 according to preliminary estimates, largely owing to energy-related and transport emissions. Around two-thirds of total emissions derived from sectors that are not included in the EU Emissions Trading System (EU non-ETS or EDS) and one-third from those that are (EU ETS) and whose cost effectiveness is consequently dependent on the volume of obligatory purchases of emission allowances. Emissions have increased at roughly the same rate in both in the period since 2014.

Over the longer term, emissions have been falling across all sectors but transportation. Since 1990, emissions from transport have more than doubled, to a great extent owing to stronger international trade flows through Slovenia and the advantages granted through tax policies (for example the refunding of excise duties). Emissions from all other sectors declined, especially emissions from fuel consumption in industry and from waste. The most, around six-tenths of total emissions, derive from the transportation and energy sectors, with one-tenth each from agriculture and fuel consumption in industry and households. Somewhat less emissions are generated in industrial processes, while the share of other sectors is relatively modest.

Figure: Emission productivity, 2017

2. Energy efficiency

Primary energy consumption declined in post-crisis years as a result of reduced coal consumption, while the renewed growth in recent years has mainly come from continued higher energy consumption in transport. Following a period of moderate economic activity, changes in thermal power generation and lower demand for heating in some of the years, developments in the subsequent years were affected not only by rising energy consumption in transport, but also by certain other factors (such as annual river level fluctuations and the schedule of regular overhauls in the nuclear power plant). In 2017, the year when there was no overhaul, nuclear energy consumption increased, before dropping slightly in 2018 due to the reverse effect. For 2019, we estimate that, with lower consumption of solid and liquid fuels, total primary energy consumption declined further. Regarding the improvement in energy efficiency, which means reduced energy consumption compared with that projected under the no-policy-change scenario, Slovenia is still 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) came to a halt only in the first years of the crisis. In 2011, it was thus almost a fifth lower than the EU average. In 2018, it increased much more than in the EU on average due to higher growth in GDP in Slovenia. Slovenia’s gap in this comparison thus decreased to less than 15% and was the smallest since 2007.

In recent years, the growth of final energy consumption has, in addition to transport, also been affected by industry. After falling from 2008, final energy consumption has risen again in recent years, approximately to pre-crisis levels. Broken down by sector, energy consumption in industry fell considerably, particularly due to the modernisation of aluminium production, but in recent years it has again been rising due to stronger domestic economic growth. Energy consumption is also high in transport, having strengthened owing to increased transit following EU enlargements and then fluctuated for several years. On the other hand, energy consumption in households declined, this as a consequence of some periods of higher temperatures during the heating season, heat cost allocators, more efficient heating appliances and energy renovation of buildings. In recent years, total energy consumption has also risen in the EU but remained lower than before the crisis.

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

3. Share of renewable energy sources

The share of renewable energy sources (RES) in final energy consumption remained almost unchanged in the last ten-year period analysed. It rose markedly only in 2009, when final energy consumption fell by 8% because of the crisis and RES consumption increased by almost a quarter. Up to 2018, the share had grown only marginally, fluctuating between the years with regard to RES consumption for heating (the impact of milder winters) and the use of hydropower (the impact of annual river flows). Between 2004 and 2018, total RES consumption rose by 36% in Slovenia while more than doubling in the EU as a whole. Slovenia is one of the five EU countries where in 2018 the share was below the trajectory determined in the action plan for meeting the 2020 target (25%) and also distant from the SDS 2030 target (27%).

Slovenia has a high share of traditional and a significantly lower share of other renewable sources in total RES consumption. Traditional RES (solid biomass and hydropower) still account for around 84% of total RES consumption in Slovenia, compared with less than 59% in the EU overall. The extensive use of biomass for heating is generally desirable, but it can also be unfavourable from the aspect of particle pollution if biomass is not properly managed. The share of other RES (wind, solar and geothermal energy, biofuels, heat pumps, and biogas), however, is among the lowest in the EU. The gap is widest in the use of wind farms and heat pumps.

Within the support scheme for electricity generation from RES, support for solar power plants predominated in the last five-year period. Such support accounted for 59% of all support in 2018, which is significantly more than solar plants contributed to electricity production. In 2018 and 2019, the total amount of support declined (in 2019 to around EUR 96 million according to data for the first three quarters of the year). With the inclusion of solar plants into the scheme, the total amount of support per unit of electricity generated rose significantly.

Figure: Share of RES in final energy consumption, 2018

4. Modal split of transport

Owing to its transit location, Slovenia has relatively high freight traffic density on roads, but as a large share of freight is also transported by rail, the share of road transport in total transport is lower than in the EU as a whole. Over a longer period, the share of road transport declined slightly, to around two-thirds, which is less than the EU average (around three-quarters). In 2017, the last year for which data are available, road freight transport increased around 11 pps less than freight transport by rail, which is desirable from the environmental perspective. The volume of total freight transport per inhabitant is very high in Slovenia because of its transit location; it is higher only in five other EU Member States. Transport by road is a quarter higher than the EU average and rail transport three times as high. A large part of railway transport is linked to the transhipment of goods in the Port of Koper, meaning that with the planned modernisation of the Divača–Koper railway line, railway transport will increase further and partially alleviate the adverse environmental impacts of transport.

Slovenian hauliers perform almost nine-tenths of their journeys abroad, while their share in journeys performed by all hauliers in Slovenia totals one-quarter. This is related to Slovenia’s small size and its transit location, but also to the common transport market in the EU, which enables competition of hauliers from different Member States. Slovenian hauliers are among the most important foreign hauliers in Austria and Italy (performing almost half more journeys in each than in Slovenia) and also in Croatia and Greece. In Slovenia, Slovenian hauliers carry out 25% of journeys (a smaller share than domestic hauliers in their countries in the EU on average, which is 68%), followed by Hungarian, Croatian and Romanian hauliers with 19%, 15% and 12% shares.

Transport by passenger car is the predominant mode of passenger transport in all EU Member States, but Slovenia has one of the highest shares. 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 public transport network appropriately and make public passenger transport more profitable. More people have difficulty in accessing public transport than in the EU overall (in 2012, one-quarter in Slovenia against 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 transportation expenditure in total household expenditure in Slovenia is the highest among all EU Member States, at around 17% (the EU average being 13%). Within that, a particularly high share of spending goes to maintain and operate personal vehicles, while the share spent on transport services is relatively low.

Figure: Road freight transport, 2017

5. Resource productivity

Resource productivity, which in Slovenia is strongly dependent on activity in construction, has declined in the last few years with the rebound in this activity and hence greater material consumption. Resource productivity, expressed as the ratio of GDP to material consumption, had been rising in Slovenia amid lower construction activity in 2007–2012, then followed its fluctuations. In the period of intense motorway construction, the consumption of non-metallic mineral products, which is the main determinant of total material consumption, accounted for more than two-thirds of total consumption, then fell to a half in the next few years before rising again to around 60% by 2018. With strong growth in GDP, in 2018 construction activity increased even more, contributing significantly to a more than one-tenth increase in material consumption and a decline in resource productivity. The lag behind the average productivity in the EU increased to 17%. In 2019, growth in construction was lower, so we expect no major negative impact of this activity on resource productivity. On the other hand, material consumption per capita is comparable with the EU average (in 2018, in Slovenia 14.4 tonnes and in the EU 13.8 tonnes). In the breakdown of domestic extracted resources, around 60% is sand, gravel, limestone and gypsum, 16% crop residues, and around one-tenth each lignite and wood. The proportion of biomass is slightly lower and the proportion of non-metallic minerals slightly higher than in the EU as a whole. Total material consumption excluding non-metallic mineral products has not changed notably over the longer period, with only coal consumption dropping considerably due to changes in thermal power generation.

Slovenia’s self-sufficiency for materials is somewhat higher than the EU average. Slovenia's net imports account for around 13% of total material consumption, which is three percentage points less than the EU average. In the period until 2014, net imports had declined to less than a tenth of consumption, then rose slightly with economic growth. In 2018, the bulk of net imports were petroleum products, sand, gravel, iron and gas. In net exports, only net exports of wood, particularly sawlogs and veneer logs, have been relatively high after the ice glaze damage in 2014. With regard to the impact on material consumption, this is favourable, though it is less desirable from the point of view of efficient use of domestic resources, as it means untapped potential for creating higher value added in the domestic manufacturing industry.

Figure: Resource productivity and material consumption per capita, 2018

6. Waste

The quantity of generated waste, having declined during the crisis, has again been rising following it. In 2018, it increased for the sixth consecutive year: by 36% in 2018 alone and by 88% in the 2012–2018 period. The main reason is a significant increase in mineral, i.e. construction, waste, as the quantity of waste without mineral waste declined during this period, by around 8%. Total waste from production and service activities almost doubled, accounting for around nine-tenths of the total quantity in 2018. Municipal waste, which accounts for the remaining tenth, rose too, albeit less (by around a third in the period analysed). Among total waste, the majority is construction waste (because of its high specific weight), followed by waste from thermal processes and municipal waste. Hazardous waste, which increased over the longer term, accounts for 2%.

The share of recovered waste is increasing while the share of landfilled waste is being reduced, but storing the increasing amount of waste in landfills poses a greater and greater problem. In 2018, the total amount of recovered waste increased by 42%; in the six-year period it increased by 81%. Recycling, a very desirable form of recovery from an environmental perspective, rose by 12% in 2018, but the quantity of recycled waste was still significantly lower than in the first years of the economic 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 amount of landfilled waste then dropped sharply and accounted for only 2% of the total recovery in 2018. Within that, the share of landfilled municipal waste also decreased further, to around 6% of generated waste. Around 70% of generated municipal waste was collected separately, but the problems related particularly to the growing amount of packaging waste are becoming ever more acute.

Slovenia performs better than the EU as a whole regarding municipal waste, despite a relatively rapid increase in the amount of generated waste. The quantity of municipal waste generated per person was lower than in the EU as a whole in the entire period observed, although it has come very close to the EU average with relatively rapid growth in the last few years (in 2018, in Slovenia 486 kg per capita and in the EU as a whole 448 kg). Furthermore, the structure of municipal waste management is more environmentally friendly than on average in the EU: according to the municipal waste recycling rate, Slovenia ranks 2nd in the EU.

Figure: Share of municipal waste recycled, 2018

7. Environmental taxes

Nominal growth in revenue from environmental taxes, having been relatively strong over a longer period, eased in 2018. In Slovenia, this revenue has risen by 5.3% per year on average in nominal terms since 2000, in 2018 alone by 0.5%. Long-term revenue growth is mainly a consequence of the dynamics of fuel consumption in transport and revenue from excise duties on motor fuels, which increased significantly during the crisis. The lower growth in revenue from environmental taxes in 2018 is related to the reduction in excise duties on unleaded petrol and diesel to neutralise the pressure from high crude oil prices and the appreciation of the euro against the US dollar. According to preliminary state budget data, in 2019 revenues from excise duties on energy and electricity continued to fall, but less rapidly. Revenue from taxes on transport (i.e. ownership and the use of transport means) has increased significantly less since 2005, while the already modest share of revenue from taxes on pollution and the use of natural resources decreased during the period observed. From the environmental perspective, such movements are not encouraging, as by correcting price signals environmental taxes significantly contribute to the achievement of environmental goals related to pollution control, waste management and efficient use of natural resources. Moreover, Slovenia has also retained some tax incentives (tax reliefs and subsidies) that do not help reduce environmental harm. In order to achieve environmental goals, tax policies will therefore have to be complemented with other national policies (for example with a faster development of public transport infrastructure) and coordinated with neighbouring countries’ policies.

Revenue from environmental taxes as a share of GDP is above the EU average in Slovenia; in 2018 it was higher in only three Member States. In 2005–2015, the share of environmental taxes in GDP expanded due to the increase in taxes on energy; it then declined in the next three years, reaching 3.52% in 2018. It was considerably higher than the EU average, in 2018 by 1.12 pps. The gap arises from energy taxes, which accounted for 84% of all environmental taxes in Slovenia in 2018. The high value is a consequence of relatively high energy purchases and consumption, which is related not only to extensive transit traffic and the strong transport sector in Slovenia, but also to its dispersed settlement and poorly developed public transport infrastructure.

Figure: Revenue from environmental taxes, 2018

8. Ecological footprint

The ecological footprint, a composite indicator of environmental development, is relatively high in Slovenia, much as in the EU as a whole, and has been rising in the last years of the calculation. It is expressed in standardised units of biologically productive area, global hectares (gha). The biologically productive area is the fertile area needed to satisfy human needs for food and a particular lifestyle and to absorb or dispose of the wastes generated in the process. The largest component of the ecological footprint is (i) the carbon footprint, as a result of high carbon dioxide and other GHG emissions, 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). During the recession, Slovenia’s ecological footprint declined, then – unlike the EU average – increased for two consecutive years, reaching 5.1 gha/person. Its level was the same as in 2011, 0.6 pps higher than the EU average and higher than in most neighbouring countries. This indicates economic development with a relatively high level of natural resource use and environmental pollution.

With the increase in the ecological footprint, the ecological deficit, i.e. the negative difference between the ecological footprint and biological capacity, is again rising. Biological capacity or biocapacity refers to biologically productive areas that are capable of self-regeneration. Like the ecological footprint, they are 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 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 carbon dioxide emissions, the largest contributor to the ecological footprint. The share of other land-use types, particularly cropland and fishing grounds, is relatively modest compared with the EU average. According to the latest calculations, Slovenia’s ecological footprint is more than twice as high as the capacity of its nature to regenerate. The ecological deficit in Slovenia is higher than the EU average and the global average. In the EU, only some Northern countries with sustainable economies and relatively extensive fishing grounds have an ecological reserve.

Figure: Ecological footprint and the ecological deficit/reserve, 2016

9. Utilised agricultural area

Utilised agricultural area (UAA) in Slovenia accounts for less than one-quarter of total land, which is significantly below the EU average. The share of total utilised area, which was decreasing relatively rapidly over a longer period due to the abandoning of agriculture and the overgrowth of land by trees and shrubs, has been relatively stable since 2012 (somewhat less than 24% of total land, which is lower than the SDS target). Most of the land, around two-thirds, is covered by forests, which places Slovenia among the most forested countries in the EU. The share of other types of land, which is typically high particularly in countries with a lot of non-fertile land or with high population density, is relatively low in Slovenia. In the EU as a whole, utilised agricultural area covers around 41% of land. In the last decade it declined by 2% (in Slovenia by 3%).

In the structure of agricultural land, which does not change significantly, 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 a consequence of natural conditions. The large production of fodder crops is, in turn, reflected in a relatively large share of livestock breeding in Slovenia’s agriculture. In terms of arable land, which is the most important type of land from the aspect of food security, Slovenia is one of the last four countries in the EU. Arable land per person in Slovenia totals around 8 ares (the EU average being around 2.5 times as high). And within that, a relatively small share is dedicated to the growing of vegetables, as a large share of fields is used to grow fodder crops. The area taken up by permanent crops, where vineyards predominate, 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. One-tenth of all agricultural holdings were involved in controlled organic farming in 2018. Permanent meadows and pastures dedicated to the production of fodder account for the largest share of this land too, while the shares of other land types are relatively low. This is, however, not in line with demand, which is greatest for ecologically produced fresh fruit and vegetables 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, 2018

10. Agricultural intensity

Slovenia is not among the countries with high farming intensity, according to its moderate average yields and the number of animals per unit of agricultural area. A comparison with the EU average in crop production does not paint a uniform picture, which is evident from the average yields for Slovenia’s two most important crops, wheat and maize: for wheat the yield per hectare tends to be lower than the EU average while for maize it tends to be higher. Under the impact of weather conditions, the yields of all crops fluctuate significantly from year to year, but they are rising in the long term with improvements in technology. As long as they are not too high, this means 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. In contrast, the average milk yield per animal is relatively low, though it is rising in the long term, which is favourable from the perspective of the environmental impact per unit of product. Besides increased agricultural intensification, which is related to a decline in the number of agricultural holdings and thus greater concentration of crop and animal production, Slovenia is also seeing an increase in organic farming, which takes place in harmony with nature and is the most desirable from the environmental perspective.

The decline in the consumption of mineral fertilisers achieved in the previous decade stopped, while the consumption of pesticides has already been rising for several years. After declining relatively rapidly until the end of the previous decade, the consumption of main macronutrients from mineral fertilisers (nitrogen, phosphorus and potassium, i.e. NPK fertilisers) per unit of utilised agricultural area has remained roughly unchanged. The use of pesticides, measured in terms of the total quantity of active ingredients sold, was also falling in the previous decade. Pesticide sales depend on weather conditions and consequent plant disease and pest control, but since 2013 they have been rising. In 2018, they were at approximately the same level as ten years before. The total increase is a consequence of greater consumption of fungicides, which account for the largest share in total pesticides sold. The consumption of both agricultural inputs is above the EU average, but particularly for pesticides it is difficult to measure, because the figures are the sum of active ingredients with different toxicity levels.

Figure: Number of livestock units per unit of utilised agricultural area, 2016

11. Intensity of tree felling

Tree felling, having already been rising in the long term before the 2014 glaze ice damage, is still high as a result of sanitary felling. In the five-year period following the glaze ice, which severely damaged Slovenian forests, approximately half more wood mass was cut per year than in 2013. The relatively low recorded annual tree felling thus came close to the maximum felling level allowed. Tree felling intensity, expressed as the ratio of annual felling to annual increment, rose to 69% and approached the goal determined in the action plan with a view to ensuring 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, its share in total felling being around two-thirds. The severe tree damage caused by the glaze ice was, as expected, exacerbated by the rapid spread of the spruce bark beetle in subsequent years, while in 2017 and 2018 forests were additionally damaged by strong windstorms. As a result of the additional damage, sanitary removal also continued in 2019.

Increased removal was reflected in increased raw wood production, but also higher exports of the highest-quality wood, which is an untapped development potential. The growth of wood production is high, though somewhat lower than the growth of removal. The utilisation rate of felled wood, as measured by the ratio between the production of raw wood categories and felled wood, had fallen after the ice glaze damage, meaning that in 2018 it was among the lowest in a longer period. After the glaze ice damage, production increased for all wood categories, particularly pulpwood, but also sawlogs and veneer logs, which is the highest-quality wood and generates the highest value added. However, external trade in unprocessed wood increased more than total production. With imports dropping by around a sixth, total exports increased by around 80% in the period after the ice damage, exports of coniferous logs alone by 140%. In 2018, exports of this wood category accounted for 56% of its production and around two-thirds of total industrial wood exports. The high exports of this high-quality raw material, however, represent a lost opportunity for Slovenia to increase employment and achieve higher value added in other sectors up the forest–wood chain.

Figure: Round wood production

12. Quality of watercourses

After the significant improvement in the quality of Slovenian watercourses in previous years, the further improvement set in the SDS has come to a halt. The quality of watercourses, as measured by biochemical oxygen demand, which was similar to the EU average at the beginning of the previous decade, has improved significantly in Slovenia since 2005 and was the highest among all EU countries according to the most recent data. The decline in organic pollution, which is usually caused by municipal and industrial wastewater discharges and runoff from agricultural land, is a consequence of a significant improvement in wastewater treatment and the abandoning of certain economic activities which were polluting watercourses with wastewaters in previous years. The concentrations of nitrates in groundwater and phosphates in rivers have also declined in the long term and are below the EU average.

The majority of water is abstracted from surface water sources; around one-fifth of wastewater is treated before discharge. In Slovenia, which is fairly rich in water resources owing to its diverse natural conditions and has a relatively high amount of freshwater resources available per capita, around 960 million m3 of water in total was abstracted in 2018, 7% more than five years before. Four-fifths of water was abstracted from surface waters and used primarily in industry. The remainder was from groundwater resources. This water is mostly intended for the public water supply system, i.e. final consumers such as households, kindergartens and schools. Around 1,000 million m3 of wastewater was discharged into the environment. The share of water treated before discharge doubled in the last five-year period, to around one-fifth. The remaining majority of water remained untreated, but it was mostly polluted only by heat, mainly as it was used as a coolant in thermal power plants.

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 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. Ozone concentration being strongly dependent 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

Functionally derelict areas (FDAs) have increased with the strengthening of economic activity in recent years. Overall 1,132 FDAs (with a total area of 3,695 ha) were identified in the survey of functionally derelict areas in 2020. Between the surveys in 2017 and 2020, their number increased by 51 and their total area by 273 ha. Their average size rose slightly, amounting to around 3 ha. A total of 159 FDAs were identified anew, while 108 sites are no longer derelict as a new activity has been established there. The majority, around one-fifth by number or one-third by surface area, are sites degraded by former industrial and commercial activities. These are relatively large on average (around 5 ha). The smallest are FDAs for housing (around 1 ha).

The changes in the spatial distribution indicate great dynamics of FDA creation and revitalisation. On around two-thirds of the sites and on more than half of their surface area (681 FDAs on 2,060 ha), no changes occurred in the time between the surveys. The main reasons for inactivity are ownership problems, lack of owners’ interest in returning degraded areas to beneficial use and financial problems. In terms of changes, the remaining areas can be divided into three groups: (i) 292 FDAs (1,074 ha) experienced greater changes; some of these were positive – the beginning of rehabilitation processes and a revival of abandoned construction sites and some areas of industrial and service activities –, while others were negative – some FDAs are in an even worse physical condition, buildings are decaying and the state of degradation has worsened; (ii) 159 FDAs (on 561 ha) were additionally recorded or created anew; these are mostly a result of stranded investments, lengthy bankruptcy proceedings or illegal land use changes; (iii) 108 FDAs (208 ha) were rehabilitated successfully and a new function of the area was established. FDAs can be found in all regions, but the most are in the Osrednjeslovenska region. Their number declined in four regions: Osrednjeslovenska (by 21), Promorsko-Notranjska (by 3) and Savinjska and Zasavska (by 2 in each). The regions where it increased the most are Obalno-kraška and Podravska (by 25 and 17 respectively). If such trends continue, we can expect further revitalisation and establishing of new activities in functionally derelict areas, as the number of rehabilitation plans for FDAs has increased by around one-fifth compared to the previous recording.

Map: FDAs in Slovenia, changes 2017–2020

1. Trust in institutions

Trust in institutions has increased since 2013 but remains below the EU average. It was highest and above the EU average in 2006 but has dropped significantly since then, particularly during the crisis. In most institutions, it was lowest at the end of the crisis, while in recent years it has increased under the influence of an improvement in macroeconomic indicators and lower dissatisfaction of respondents with the current economic and general situation in Slovenia. An exception is trust in political parties, which improved slightly only in 2017. At the end of 2019, trust in the government, parliament and political parties increased further compared with the preceding year. Local authorities are trusted the most and political parties the least.

Trust in the EU and its institutions has increased since 2015. It was highest in 2006, but from 2008 it fell sharply to reach its lowest level in 2015. Since then it has been rising, which can be attributed to the increased reputation of the EU among Slovenian citizens. In 2019, trust in the EU increased significantly in comparison with the preceding year. People also had more trust in European institutions. In Slovenia, 46% of respondents trust the EU, which is more than the EU average; 45% of respondents trust the European Parliament and slightly fewer trust the European Central Bank (41%) and the European Commission (39%), all these shares being below the EU average.

Figure: Trust in EU institutions, Slovenia

2. Executive capacity

The executive capacity indicator, which measures strategic governance of public institutions, is improving gradually in Slovenia but remains low compared with other EU countries. The executive capacity indicator 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. In the last few years, the indicator value has improved only marginally. Although it has improved its ranking slightly, Slovenia still lags markedly behind the EU average and is in the second half of EU Member States (in 22nd place). Its low executive capacity score is primarily a consequence of the low values of government and institutional performance indicators.

Despite the improvement in individual dimensions, Slovenia still lags behind the EU average in all indicator components. 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. Although line ministries are required to use tools such as regulatory impact assessment (RIA) and stakeholder engagement when developing laws and regulations, challenges remain in ensuring that they implement these tools effectively. Moreover, new legislation is still not subject to a systematic and comprehensive assessment of the potential impacts of proposed regulations on public finances, the economy and society (RIA). The implementation of policy measures at various government levels is assessed as significantly worse than in other EU countries, in particular owing to excessive political interference in recruiting in the state administration, even at expert levels.

Figure: Indicator of executive capacity by dimension, 2019

3. The Rule of Law Index

Slovenia ranks in the lower half of EU countries on the Rule of Law Index; its ranking has not changed significantly since 2012. The rule of law highlights the principle of equality before the law and emphasises the inviolability of the authority of law 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. By being ranked in the lower half of EU countries on the Rule of Law Index, Slovenia lags behind the SDS target. Its ranking points to weaknesses in the adherence to the rule of law. Slovenia scores best in the category of order and safety, where it is close to the top-ranking Scandinavian countries. The only other category where it also ranks close the EU average is fundamental rights, where it scores well on the indicators of right to life, security and labour rights. On the other hand, it lags significantly behind the EU average in criminal justice, the indicators in this area reflecting mistrust in the justice system, especially in its independence. The weaknesses in the adherence to the rule of law are also indicated by the 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, 2019

4. Time needed to resolve litigious civil and commercial cases

The expected time needed to resolve litigious civil and commercial cases lengthened somewhat in 2014–2017, meaning that the gap with the EU average widened. By implementing the Lukenda Project and other structural reforms (such as new solvency legislation), Slovenia shortened the expected duration of litigious civil and commercial cases by more than 40% in 2008–2014. Since 2014, however, the time needed to resolve a case has lengthened slightly (to 292 days in 2017), being longest for court proceedings related to money laundering. Despite the shortening of the length of proceedings in the previous decade, Slovenia still lags behind the EU average and its gap with the EU is widening. This can be attributed mainly to new competences given to the courts and a larger number of major cases. Meanwhile, the expected length of second- and third-instance proceedings – where Slovenia performs better than the EU average – is shortening. However, owing to the different methodology and data used in the calculation, the expected disposition time differs from the time actually taken to resolve a case.

The average actual disposition time for major cases has not changed significantly in the last four years; in 2018, it was 7.9 months. Up to 2016, the time needed to resolve a major case was rapidly decreasing, largely as a consequence of a smaller incoming caseload and greater efficiency on the part of the courts. The clearance rate for major cases exceeds 100%, meaning that the courts resolved more cases than come in. Since 2016, the time needed to resolve major cases has no longer been decreasing, which can be attributed both to the larger number of more demanding proceedings and to new competences given to the courts through changes to legislation. The share of pending major cases in total unresolved cases is therefore increasing (45% in 2016; 60% in 2019). The average time needed to resolve a case more than halved in the last four years, to 1.4 months in 2019.

Figure: Major cases at courts, Slovenia

5. The Corruption Perception Index

The perception of corruption has not changed significantly in the last eight 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 number of reports of suspected corruption increased significantly, which in part can be attributed to a more visible role of the Commission for 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 health care 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 prosecution 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.

Figure: Comparison of Corruption Perception Index scores between years

6. The Global Peace Index

Slovenia is ranked among the most peaceful countries in the world. Since 2016, it has been among the ten most peaceful countries in the world according to the Global Peace Index. In 2019, it was 8th among 163 countries in the world and 4th among EU Member States, but the value of the index was the lowest in the last 12 years. While Slovenia is among the ten best performing countries in the area of militarisation (3rd) and societal safety and security (8th), it scores lower in the area of domestic and international conflict (60th), which is mainly due to the slightly worse assessment of relations with neighbouring countries and the intensity of internal conflict. In all three categories Slovenia still ranks higher than in the previous year. Since 2008, it has also scored slightly worse 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. Compared with other countries, Slovenia nevertheless ranks relatively high in these areas too, the slightly lower scores pointing only to certain weaknesses that do not jeopardise peace in the country. According to the Global Peace Index, Europe remains the most peaceful region in the world, with six European countries among the ten most peaceful in the world (five of which are EU Member States). The Middle East and North Africa remain the least peaceful regions. The most peaceful country in the world remains Iceland, while Afghanistan replaced Syria as the least peaceful country in the world. The results of the Global Peace Index otherwise deteriorated over the last decade, primarily owing to the intensifying of conflicts in the Middle East and terrorism.

Figure: Global Peace Index, EU Member States, 2019

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

The share of households reporting problems with crime, vandalism or violence in the local area has declined for the fourth consecutive year and remains below the EU average. In 2018, it was 7.9% in Slovenia, the lowest in the last ten-year period and in line with the SDS target. The incidence of crime is significantly affected by socio-economic factors, which is also evident from differences between the statistical regions. More crime problems are reported in urban areas and, broken down by region, in the more developed western part of Slovenia (the cohesion region Zahodna Slovenija), where only the Gorenjska region did not  exceed the Slovenian and EU averages according to this indicator. In the eastern part of Slovenia (the cohesion region Vzhodna Slovenija), the most developed region, Jugovzhodna Slovenija, stands out, exceeding both the Slovenian and the EU average. Problems with crime, violence or vandalism in the neighbourhood were most frequently reported by households of two adults where at least one is older than 65 years (9.6%) and households of two adults and two children (9%). Both shares were lower than the EU average.

Slovenia remains a safe country compared with other EU countries, which has a positive impact on the quality of life. The results of the European Social Survey indicate that 11% of respondents had a personal experience with burglary or physical assault in 2018, which is similar to previous years and lower than the average for countries included in the survey. Besides by the actual situation, assessment of quality of life is also affected by the feeling of being threatened in the immediate environment, but the share of individuals feeling unsafe remains low. In 2017, 97% of Slovenian respondents said that their immediate neighbourhood was a secure place to live in and 95% of them said that their country 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, EU Member States, 2018

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 70.76 million for development assistance in 2018, 5% more than in 2017, thus retaining the share of GNI dedicated for this purpose, which remained 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 this purpose to 0.33% by 2030.

In 2018, the structure of assistance was affected by migration developments, as in previous years. The costs of caring for refugees and migrants in Slovenia increased again, but these were significantly lower than in 2015 and 2016. Migration developments related to the Middle East situation had a significant impact on the change in the structure of assistance in 2015 and 2016, particularly on account of increased costs of assisting refugees and migrants in Slovenia. In 2017, these costs fell significantly. Together with assistance focused on specific projects, this made the greatest contribution to the increase in funds for official development assistance in 2018. Development assistance is the sum of multilateral assistance (funding provided for regular development activities of international organisations) and bilateral assistance. In 2018, Slovenia again dedicated the most of its bilateral aid to Western Balkan countries, 68% in total, which is more than on average in the last five years (61%). Most of this aid was allocated for projects in the area of education (funds for paying tuition fees and scholarships for citizens from partner countries studying in Slovenia). Expenditure on multilateral assistance, most of which is dedicated to EU development cooperation programmes, also increased last year.

Figure: Official development assistance as a % of GNI in EU Member States in 2018