Development Report

Development Report

Development report 2021

The Development Report, an annual publication prepared by the Institute of Macroeconomic Analysis and Development, which monitors the realisation of the Slovenian Development Strategy 2030, brings important recommendations for development policy. Short-term priorities continue to be highly related to preventing the spread of the covid-19 epidemic and mitigating its socio-economic consequences. These measures still play a very important role in sustaining economic and social potential, so their withdrawal should be gradual and well planned. At the same time, it is increasingly important to design well-targeted and efficient measures for the recovery, which should be combined with structural reforms for greater resilience of the economy and society to shocks and more sustainable development in the long term.

In 2020, the Slovenian economy was strongly marked by the covid-19 epidemic, which significantly affected quality of life, while also bringing certain new opportunities. The crisis caused by the covid-19 epidemic interrupted several years of economic growth and favourable labour market developments, although its impact on the economy and the population was markedly mitigated by government measures. In the period before the covid-19 epidemic and after the financial and economic crisis, Slovenia was again catching up with more developed Member States, achieving historically high employment rates and favourable values of social inclusion indicators. The efficiency of resource and energy consumption was also rising steadily. However, Slovenia also entered the year 2020 with some unresolved development challenges, which have been further deepened by the epidemic. Many of them also have increased its vulnerability in this period. Economic convergence in the last few years has been based only to a small extent on productivity gains, which is closely linked to insufficient investment, particularly in various forms of intangible capital. In the phase of recovery, it will therefore be necessary to strengthen investment activity and compensate for the lack of appropriate knowledge and skills of the future, which has so far been insufficiently addressed. Due to their high exposure to temporary employment forms, unemployment of young people rose at an above-average rate in 2020. But above all, the problems of social protection systems (long-term care, health system capacities and waiting times, the long-term sustainability of financing, especially pension expenditure) were exacerbated during the epidemic. From the environmental perspective, a pressing problem is a too slow introduction of changes towards a low-carbon circular economy, high GHG emissions from transport, a several-year stagnation in the use of renewable energy sources and insufficiently sustainable land use.

Among Slovenia’s main long-term development challenges analysed in the Development Report 2021, we highlight the following areas:
-    accelerating productivity growth 
-    strengthening inclusive social development and intergenerational solidarity 
-    accelerating the transition to a low-carbon circular economy
-    strengthening the developmental role of the government and its institutions 

Indicators of Slovenia's development:


1. Gross domestic product per capita in purchasing power standards

Slovenia continued to reduce the economic development gap with the EU average in 2019, measured in gross domestic product per capita in purchasing power standards (PPS), though it remained higher than in 2008. At 27.700 PPS, it reached 89% of the EU average, which is 2 p.p. above the value reached in the previous year and 2 p.p. below the highest value achieved before the onset of the global financial crisis in 2008. The decomposition of GDP per capita to productivity and employment rates shows that reducing the economic development gap with the EU average, which has been happening since 2016, was driven mainly by a relatively fast increase in employment rates relative to the EU and, to a lesser extent, by productivity growth. The employment rate in Slovenia was above the EU average every year and exceeded it by 7% in 2019. However, productivity remained relatively low (83% of the EU average in 2019), and the gap in this area thus fully explains the relatively low level of economic development of Slovenia as measured by the GDP per capita indicator.

Slovenia’s position in terms of the average level of development of the EU remained the same in 2019 as it was in 2005, while the majority of the new EU Member States made considerable progress in this period. Compared to 2005, 14 Member States improved their position relative to the EU average, most notably Ireland (by 43 p.p.), and all the other new Member States except Cyprus and Slovenia. Eleven Member States deviated from the EU average during this period, most notably Greece (28 p.p.). In 2008, Greece (95%) and the Czech Republic (86%) were closest to Slovenia in terms of GDP per capita in PPS; in 2019 it was Cyprus (90%) and Spain (91%). In 2019, compared to the previous year, 14 EU Member States improved their development position relative to the EU average, the most Romania (4 p.p.), while four Member States kept the same position and nine worsened their positions, most notably Germany (3 p.p.). Luxembourg still exceeds the EU average by 160%, followed by Ireland, by 193% of the EU average. The gap in the GDP per capita indicator in PPS between the EU Member States, which in 2000 was at 1:9.8 (Romania/Luxembourg), has been narrowing over the years, falling to 1:4.9 in 2019 (Bulgaria/Luxembourg).

Comparison of approaching the EU average by GDP per capita in PPS from 2005 to 2019 for new EU Member States, in percentage points (EU=100) 

2. Real GDP growth

In 2020, gross domestic product fell sharply, following six years of solid growth, due to the COVID-19 epidemic. Following a decline during the global financial crisis, real GDP had been growing since 2014. Economic growth was increasing over the period 2014–2017 and then began to slow down. The slowdown was largely due to weaker economic growth in trading partners and uncertainties in terms of international trade and political relations. In 2020, all GDP components declined due to the COVID-19 epidemic and the associated constraints, with the exception of government expenditure, which strengthened as a result of the epidemic-related measures. Due to restricted movement and limited supply during the quarantine period, when spending opportunities were severely curtailed, and due to increased uncertainty and precautionary and forced savings, private consumption fell sharply, although disposable income did not change much, backed by government support measures. These measures also prevented a significant fall in employment. Due to negative impacts from the international environment and foreign and domestic containment measures, exports and imports fell sharply, particularly in the spring. Fall in demand and increased uncertainty led to a contraction in corporate investment, both in buildings and in equipment and machinery, while public investment slightly strengthened. 

After years of higher growth, in 2020 real GDP declined less than the EU average. After a sharp fall during the global financial crisis, economic activity in Slovenia had grown faster than the EU average since 2014 and declined less in 2020 (Slovenia: -5.5%; EU: -6.2%), so Slovenia remains on a path of real convergence (i.e. approaching the EU average GDP per capita). The smaller fall in GDP in 2020 than the EU average predominantly resulted from the foreign trade balance, which was slightly positive in Slovenia and negative in terms of the EU average, and from a smaller fall in gross fixed capital formation, while the fall in private consumption was greater in Slovenia. However, the decline of economic activity in Slovenia was larger and the growth in recent years was slower than the average in other new EU Member States, which Slovenia has been lagging behind by 17 p.p. since 2005 in terms of cumulative growth. 


3. General government debt

General government debt increased sharply in 2020 after several years of decrease. Debt decreased by 17 p.p. in 2015–2019 during a period of economic growth and fiscal balance measures, with the debt decrease among EU Member States higher only in Ireland. The decrease also exceeded the requirements stemming from fiscal rules.  The sharp economic downturn in 2020, which caused a decline in revenue and whose consequences were mitigated by the government through generous measures to offset the effects of the epidemic, contributed to a significant deterioration of the primary balance (interest-free balance) and thus the general government debt (to 80.8% of GDP). The increase in debt also stemmed from the unfavourable "snowball effect" and large-scale pre-financing. In a low interest rate environment facilitated by expansionary monetary policy, the pre-financing of the state budget, which represents the bulk of the government debt, amounted to EUR 3.5 billion or 45% of its total annual indebtedness. This created additional liquidity reserves in uncertain circumstances before 2021, when the projected maturity of the principal debt is higher in relative terms than the multiannual average. The increase in debt in 2020 was largest in the countries with the most severe containment measures and a previous high level of debt; in Slovenia it was similar to the estimated EMU average.





4. Fiscal balance

The deep economic downturn and the measures aimed at mitigating the consequences of the COVID-19 epidemic have severely worsened the fiscal situation. The general government balance, which was balanced in 2017 and demonstrated a surplus in 2018–2019, turned into a deficit (-8.4% of GDP) in 2020. Already in 2019, the revenue growth slowed considerably as a result of the moderation of economic activity growth, reduced taxation (holiday allowance) and a fall in the government’s revenue from property due to the sale of ownership shares. In 2020, revenues fell sharply (-4.6%), mainly due to a cyclical decrease in tax revenues and further tax relief (personal income tax, reduction of excise duties on energy products) and also to tax exemptions provided by the emergency legislation . Revenues from property also decreased further. Expenditure growth gradually increased in 2018–2019 due to the easing of measures in place for a number of years following the financial crisis, new statutory obligations (particularly concerning social transfers and wages) and stronger increase in general government investments, which rose from the historically lowest levels in 2016 and 2017 (from 3.1% to 3.8% of GDP in 2019). In 2019, expenditure growth already exceeded revenue growth, and in 2020 an even stronger expenditure growth was mainly related to intervention measures aimed at mitigating the effects of the epidemic. It is estimated that this expenditure amounted to around 5.4% of GDP, most of which was devoted to maintaining jobs, mitigating the income situation of vulnerable groups and the operation of public services, in particular the healthcare system. Furthermore, investments continued to increase in 2020, as did some other expenditure on a permanent basis (compensation for employees due to the employment growth and the public sector wage agreement in 2018, personal assistance expenses, etc.).

The EC announced the decision to activate the general escape clause from the fiscal rules for the euro area shortly after the outbreak of the epidemic, which allowed countries to respond much more quickly than at the onset of the financial crisis. The general escape clause was activated in March 2020, and at the same time the EC made a recommendation to the EU Member States to provide targeted and temporary fiscal support under these circumstances while safeguarding the sustainability of public finances in the medium term. The deficit exceeded 6% of GDP in most countries; according to available estimates, it was around the EU average in Slovenia. In international comparisons, the impact of discretionary measures to mitigate the effects of the epidemic was in terms of general government expenditure higher in Slovenia than the EU average but smaller in terms of used guarantee schemes (EC, 2021; EU IFI, 2021).

5. Current account of the balance of payments and net financial position of Slovenia towards the rest of the world

In 2020, the current account surplus, which Slovenia has had since 2012, was the highest ever (EUR 3.3 billion or 7.1% of GDP). The surplus, which has accumulated since 2012, was related to extensive deleveraging of banks and companies abroad, favourable international conditions and an increase in exporters’ competitiveness along with moderate import growth due to relatively low domestic consumption. Positive terms of trade also contributed to the growth of the surplus over the period 2013–2016. In 2020, the impact of the epidemic was mainly reflected in the current account of the balance of payments in the segment of trade in goods and services. The higher current operations surplus was mainly due to a higher trade surplus, as the decline in real imports was stronger than the decline in exports, given a decrease in household consumption and investment. Owing to a fall in the prices of energy-generating products and the prices of industrial products, import prices fell more than export prices, which improved trade conditions by 1.2% and increased the trade surplus by approximately EUR 300 million. The service surplus decreased, mostly in the travel segment and partly in the transport segment. Net outflows of primary income were lower, mainly due to lower net outflows of equity income from direct investment. In terms of the savings and investment gap, the surplus of current transactions reflects extensive savings of the private sector (households and non-financial corporations).

Owing to the impact of the pandemic on international financial flows, Slovenia's international investment position deteriorated slightly in 2020 (to 16.3% of GDP). This trend was contributed to by a net inflow of financial resources from the public sector, which exceeded the net outflow of funds from the Bank of Slovenia and the private sector. The government placed liquidity surpluses on accounts abroad, and in 2020, due to the measures to mitigate the effects of the pandemic, it borrowed significantly from foreign portfolio investors in order to finance the budget deficit and repay the principal of government debt in 2021. Given the volatile situation on international financial markets, the government also increased its liabilities in financial derivatives, thereby hedging the issued government bonds against exchange rate and interest rate risks. The Bank of Slovenia increased its net capital outflow mainly due to higher receivables in the TARGET payment system. The private sector further increased financial investment in foreign securities, while at the same time, non-financial corporations reduced liabilities in the short-term commercial credit segment and commercial banks continued to deleverage towards the rest of the world. The inflow of foreign direct investment into Slovenia has increased in recent years due to the sale of ownership shares in domestic companies and exceeded the value of Slovenian direct investment in foreign countries.

6. Financial stability

The Slovenian financial system remained stable due to the rapid response of economic policymakers following the outbreak of the COVID-19 epidemic. As a result of the aggravated economic situation linked to the outbreak of the epidemic, risks to financial stability initially increased considerably, and capital markets responded most rapidly and most strongly to the outbreak of the epidemic. In the face of increased uncertainty, stock exchange indices decreased significantly, while interest rates on government bonds increased, especially in peripheral countries, including Slovenia. However, rapid and comprehensive action by economic policymakers to mitigate the negative economic consequences after the first wave of the epidemic restored confidence in the financial markets, which has remained relatively high, without significant fluctuations, in spite of increased uncertainty and the higher number of second-wave infections. Nevertheless, higher risks to financial stability are expected over the medium term, when, as a result of higher debt, the spill-over risks between public and private sector indebtedness and the financial system will also increase (ECB, 2020a). 

The situation in the Slovenian banking system improved considerably after the recovery following the last financial crisis and remained stable even at the outbreak of the epidemic. After declining rapidly in recent years, the share of non-performing assets remained unchanged in the third quarter of 2020. The liquidity of the banking system remained sound in 2020, and the ECB provided additional liquidity to banks through standard instruments and additional measures. Despite the deterioration at the beginning of the year, the capital adequacy ratio of the banking system, due to the relatively high credit activity before the outbreak of the epidemic, strengthened again in the third quarter of 2020 and remained better than the EU average. With retained profits, banks contributed to the strengthening of the highest quality capital. According to the Bank of Slovenia, the banking system’s exposure to the most badly affected activities is relatively low (BS, 2020), but despite this, the share of non-performing assets in the banking system can be expected to increase in the future.


7. Financial system development

In 2020, a relatively wide gap between Slovenia and the EU average in the development level of the banking system and the capital market increased further, despite the growth in the value of development indicators. The growth of the balance sheet total, peaking at 8.2%, was the highest in the last ten years and, together with a decline in GDP, led to a marked increase in the balance sheet total indicator relative to GDP. It stemmed from a relatively rapid increase in the deposits of domestic non-banking sectors, as household savings increased significantly during the epidemic and corporate deposits also increased as production and investment declined. As a result, the banking sector’s investment structure changed. Lending activity slowed down considerably and banks in particular strengthened their deposits with the central bank, which had a negative interest rate to some extent, which may have a negative impact on the business performance of the banking system. The loan-to-deposit ratio of the non-banking sector thus stood at 0.71 at the end of 2020, which is two-fifths below the average level in 2005–2008, i.e. before the onset of the global financial crisis. With the rapid growth of deposits from domestic non-banking sectors and modest lending activity, the banks’ need for foreign financing was modest and the share of liabilities to foreign banks remained low (5.3%). The market capitalisation of shares listed on the Ljubljana Stock Exchange is modest, declining by around 2% in 2020, while it remained almost unchanged in the rest of the EU. The financing of companies in Slovenia through the issue of shares is still negligible. 

The development gap with the EU average in the insurance sector is smaller than in other segments of the financial system but has remained at a similar level for a number of years. The share of insurance premiums compared to GDP has been slightly above 5% for several years and in 2019 was at around two-thirds of the EU average level. The relatively small development gap is due to the high (above-average) level of non-life insurance premiums, while the share of life insurance is modest as a result of the conservative savings habits of households and the too modest significance of old-age savings.



8. Regional variation in GDP per capita

In 2019, the Osrednjeslovenska region, the one with the highest GDP per capita, exceeded the Slovenian average by more than 40%. Located in this region is the capital, with its state-building functions and many jobs which also provide employment to inhabitants of other regions, who thus contribute to creating the highest GDP per capita in Slovenia. Jugovzhodna Slovenija, whose economy is primarily focused on the pharmaceutical and automotive industries, had the highest economic growth in 2019 and came very close to the Slovenian average. The Obalno-kraška region, which in 2018 still exceeded the Slovenian average in terms of GDP per capita, lagged behind it in the face of a real fall in economic growth in 2019. In 2020, it was also the region with the largest drop in employment due to the COVID-19 crisis (see Indicator 3.17). In 2019, the lag behind the Slovenian average also increased in the Goriška, Primorsko-Notranjska, Koroška and Pomurska regions. The Zasavska region, which lags most considerably behind the Slovenian average, experienced above-average economic growth in 2019, yet it still achieved only a good half of the national average GDP per capita. 

Regional disparities, which had increased most significantly in the global financial crisis, were stable in recent years and slightly higher than their lowest level in 2000. In 2019, the relative dispersion of GDP per capita (21.6%) was 0.2 p.p. lower than in 2018. However, it was still 2 p. p. higher than in 2000, when the ratio between the two extreme regions (1:2) was also lower than in 2019 (1:2.7). In that year, the disparities between the two cohesion regions also decreased slightly due to both higher economic growth and slower population growth in the Vzhodna Slovenija cohesion region, which had also been the reason for smaller disparities between the two regions in the first years of the global financial crisis. 

Since 2016, the Zahodna Slovenija cohesion region has re-established its position as one of the more developed European regions, while Vzhodna Slovenija remains one of the less developed regions. Among statistical regions, the Osrednjeslovenska region alone exceeded the EU average in 2019. Given the considerable lagging behind the European average of the majority of the regions, the catching up with the European average in terms of development seems to be an extremely complex long-term objective. For comparison, the gap between individual statistical regions and regions in the neighbouring countries which are at a similar development stage is indicated. In 2017 (the latest data), the Osrednjeslovenska region lagged behind the Klagenfurt–Villach region by 3 index points, the Goriška region behind the Italian Gorizia by 14 index points and the Pomurska region behind the Hungarian Vas by 8 index points.


9. The European Innovation Index

Regarding the European Innovation Index (EII), Slovenia has been classified in the group of moderate innovators since 2018, after having been classified among the strong innovators for a longer period of time. The EII monitors the performance of EU Member States’ national research and innovation systems on ten components. It is a composite indicator whose value determines the classification of countries into four groups. The calculation of EII 2019 includes data for the period 2016–2019, so the impact of the COVID-19 epidemic is not yet covered. The EII value for Slovenia has been deteriorating since 2015, while the European average started to increase a year earlier. Slovenia also regressed in the last EII measurement for 2019  compared to the previous year, with most of the EII indicators showing a fall (15 out of 27). Among the EII components, the worst result compared to the EU average was achieved in terms of finance and support, which is mainly a result of traditionally lowest values of risk capital, even in terms of international comparisons. In addition, the contribution of public sector investments in R&D in 2012–2016, when they were steadily decreasing even in absolute terms, was also negative, and between 2012 and 2019 Slovenia significantly increased the gap by 24 index points. A major setback and widening gap in comparison with the EU average was recorded between 2012 and 2019 in the innovation-friendly environment component as a result of a significant decline in the motivational entrepreneurship index in recent years, because the number of necessity-driven entrepreneurs grew more than the number of opportunity-driven ones. A significant deterioration in the human resources component, which was mainly a result of the changes in the education system in this period, was also recorded, and Slovenia thus moved away from the leading countries towards the EU average. There has also been a setback in linkages between different actors and firms’ investments to promote innovation, meaning that Slovenia is now only slightly above the EU average. However, an improvement in the result compared to the EU average was recorded in the employment impacts, mainly due to the high share of employees in the fast-growing enterprises of the most innovative industries, which increased by 57 index points between 2012 and 2019. 

European Innovation Index

10. Productivity

Following the global financial crisis, productivity growth slowed down and along with it also the closing of the productivity gap to the EU average in the direction of the SDS target. In 2000–2008, the average annual productivity growth stood at 3.0%, while in 2009–2019, it slowed to 0.6% (or to 1.4% in the period of economic expansion 2014–2019). A key factor in the slower growth was more modest capital deepening, even in the years when the environment for investment had already improved considerably. The slowdown in productivity growth also slowed the closing of gap with respect to the average EU productivity level and thus the process of real convergence with the more developed EU Member States. 

In 2020, productivity, measured by value added per employee, decreased sharply. With a sudden drop in demand and restrictions on activities due to the COVID-19 outbreak and the simultaneous large-scale job retention schemes, labour productivity, measured by GDP per employee, fell by 4.6% in 2020. The decline in productivity was comparable to the EU average both in total (-4.7%) and in most sectors. The largest decreases in value added per employee were recorded in services with restrictions on doing business, i.e. arts, entertainment and recreational activities, accommodation and food services and trade, both in Slovenia and in the EU. In manufacturing, which is the most export-oriented part of the economy and where productivity significantly determines its export competitiveness, the drop in productivity was among the lower in the business sector and among the milder ones compared to other EU Member States. This is even more true for the construction sector, while the decline in ICT productivity was larger than the EU average, thus continuing the trend of lagging productivity in these activities compared to the trends in other EU Member States. In Slovenia, the decline in the productivity of the overall economy was slightly lower than in the first year following the onset of the global financial crisis (deeper in the EU on average) and, in line with the nature of the crisis, the differences between activities were significant. Compared to the trends in 2009, the decline in productivity was much more pronounced in the above-mentioned non-financial market services and smaller in construction and manufacturing. 

11. The Digital Economy and Society Index

Despite absolute progress in digital competitiveness, Slovenia has been increasingly lagging behind the EU average, moving away from the goal of a timely and successful digital transition of the country. The Digital Economy and Society Index (DESI) measures the digital competitiveness of EU Member States in areas of connectivity, human capital, the use of internet services, integration of digital technologies and digital public services. The calculation of DESI 2020 is based on data for the previous year and does not yet include the impact of the COVID-19 epidemic. Although Slovenia improved its ranking by one place in the last report, it also saw its lag behind the EU average increase. The analysis by components shows that Slovenia is far behind the EU average in terms of the use of internet services, particularly regarding video calls and online banking and shopping. In terms of human capital and the integration of digital technologies in companies, it was closer to the EU average, but there was only a slight trend of catching up with more developed countries. Despite the average achievements, the results in these two areas are also assessed as insufficient in terms of the need for a faster digital transition of the country. The latest data showed low levels of basic digital skills and knowledge of the population, and for a more ambitious digital transition, the barely average (compared to the EU) availability of ICT professionals and graduates also proved to be problematic. Nor have the latest data been encouraging in terms of the speed of integration of digital technologies, which remains a challenge particularly in small and medium-sized companies (EC, 2020b). In terms of connectivity, Slovenia has been ranked above the EU average in recent years but has gradually lost its advantage. In the latest DESI (2020) publication, it thus achieved only an average result, mainly due to the lack of readiness for 5G and the slow expansion of mobile broadband connections. In addition, Slovenia faces the problem of a gap between urban and rural areas (ibid.) in high capacity broadband coverage. Developments in digital public services in recent years were somewhat more encouraging, especially in the provision of these services (pre-filled forms, the possibility of online provision of services, open data), but their use has remained low among both individuals and businesses. The reasons for this include the complexity of use of qualified digital certificates for the average user and, in the case of businesses, low trust and the absence of secure and unique identifiers (ibid.).

12. Export market share

After a sharp decline during the global financial crisis, Slovenia’s export market share was mainly increasing in 2013–2019 and after a decade returned to the pre-crisis level. In 2007, Slovenia accounted for around 0.2% of global goods import, which in 2008–2012 was followed by a sharp drop in the world market share, one of the largest in the region. More than half of the drop in the market share during that period can be attributed to the export orientation (mainly geographical) on slower-growing markets, while a strong decline in (cost) competitiveness at the beginning of the global financial crisis also had an adverse impact (see also Indicator 1.13). With an improvement in price/cost competitiveness and the strengthening of import demand in major trading partners, the market share after 2013 started increasing again, more markedly in 2016–2018. 

The outbreak of the COVID-19 pandemic had a highly asymmetrical impact on export markets and on quarterly dynamics, which importantly affected the Slovenian market share in 2020. The worldwide spread of the epidemic led to a sharp decline in global imports and exports, especially in the initial period. The fall in Slovenian exports in the spring months was even deeper than the fall in the global import; Slovenia’s market share on the world market (excluding exports of pharmaceutical products to Switzerland) decreased by 1.7% on average in the first three quarters of 2020. The first estimates for the last quarter, however, indicate strengthening of the Slovenian market share despite the poor epidemiological conditions. Fluctuations in Slovenian market share in 2020 were more related to the structure of Slovenian exports than to its competitiveness. Based on detailed data on the export and import flows of EU Member States, where approximately three quarters of Slovenian goods exports is oriented, it is estimated that the COVID-19 crisis had a largely asymmetrical impact across various product groups. One of the most affected was the import of passenger cars, which represents the largest group of Slovenian exports. The value of imports of iron and steel and power-generating machinery also fell significantly. The unfavourable impact of the export structure was mitigated by the increased import demand for medical and pharmaceutical products, with an above-average share in Slovenian exports. The export and production of these products generally fluctuate less with the business cycle, and in the current health crisis, the demand for these products increased markedly. At the same time, Slovenian exporters in this segment further increased their market share on the EU market, i.e. Slovenian exports increased more than the imports of EU Member States. At the end of the year, EU imports of electrical machinery and equipment, which also have a relatively high share in Slovenian exports, also increased considerably. 


Change in imports from the EU and Slovenian exports to the EU in 2020, by major product groups

13. Real unit labour costs

The divergence of productivity and wages that occurred during the global financial crisis and was reflected in the growth of real unit labour costs, only gradually decreased; due to the modest strengthening of the long-term productivity potential, it was based more on restrained wage and employment growth. At the beginning of the global financial crisis, Slovenia saw a significant deterioration in its cost-competitiveness as a result of declining productivity (2009) and a rather high wage growth  (2010) given the economic circumstances. Adjustments arising in particular from the labour market, more specifically restrained wage growth and (passive) productivity increase through declining employment, were followed by a period of relatively aligned wage and productivity growth (2014–2017). However, real unit labour costs started to increase again during 2018 and even more significantly in 2019 (1.9%). 

The outbreak of the COVID-19 epidemic led to a significant increase in statistically observed real unit labour costs, but in this crisis, most of the increased labour cost burden has so far been borne by the state. In 2020, real unit labour cost (hereinafter: RULC) grew by 5.9%. Due to higher increase in compensation of employees, the increase in RULC was more pronounced compared to the EU average, both in the total (EU 3.1%) and in the business sector which includes industry, construction and market-oriented services (Slovenia 3.6%; EU 3.0%). In the most export-oriented sector – manufacturing – decrease in productivity was less pronounced and the increase in RULC in 2020 (2.3%) was comparable to the EU average (2.1%). A strong increase in statistically observed RULC could indicate a deterioration of business results and, in sectors where their growth is higher than in the EU and other major trading partners, also impaired cost competitiveness, but such conclusions for 2020 are rather uncertain. Namely, in order to mitigate the consequences of the epidemic, part of the compensation of employees was born by the state rather than employers, in both Slovenia and its trading partners. In fact, we estimate that in Slovenia, the majority of last year’s increase in RULC burdened the budget, while the adjusted or actual RULC of companies did not increase on average. Although, according to official statistics, the increase in RULC in 2020 was higher than in the first year following the onset of the global financial crisis, we estimate that the impact on cost competitiveness and business results has so far been smaller due to more extensive government intervention.



14. Exports of high-tech products and knowledge-intensive services

The share of high-tech products was fairly stable in recent years and higher than the EU average. It increased more noticeably in 2005–2010 and especially during the global financial crisis, when some other, less competitive industries (certain low-tech products, such as textiles) began to shrink sharply. In the years following the crisis, high-tech exports increased in absolute values, while the share remained at the achieved level. Around half of these exports are medical and pharmaceutical products and electrical machinery and appliances; in recent years up to 2019, the export share of aeronautical products increased the most. Exports of medium-tech products account for the largest part of commodity exports and are strongly integrated into global value chains. In 2019, their share decreased slightly, which is associated with the slowdown in foreign demand, especially the activities in the automotive industry. 

The share of knowledge-intensive services is low in international comparison. Between 2010 and 2017, it gradually increased from 20.6% to 24.2%, and then merely fluctuated around the achieved level until 2019, which further increased the wide gap in comparison with the EU average (to 14 p.p.). The majority of services lagged behind the European average, with computer services demonstrating the greatest lag (in 2019 by more than 9 p.p.). Some of Slovenia’s closest competitors (e.g. the Czech Republic, Estonia and Portugal) achieved significantly higher growth in computer services exports in 2010–2019 (on average 20% per year against Slovenia’s 11.9%). In Slovenia, a higher share than the EU average was achieved mainly by telecommunications services, but this share has been decreasing since 2017. In Slovenia, exports of technical, trade-related services increased significantly over the ten-year period, i.e. by an average of 10.2% per year, while in the EU, the export of information services increased the most, i.e. by 20.2% per year, with Eastern European Member States leading in these exports. 



15. Foreign direct investment

Inward foreign direct investment (FDI) into Slovenia began to increase more rapidly from 2015, while outward FDI has remained modest. Higher inward FDI, which increased by as much as 43.3% in the last five years (2015–2020), was primarily due to the acceleration of the privatisation process and increased sales of equity stakes in Slovenian companies. There were also more expansions of the existing foreign-owned companies in Slovenia and new (greenfield) investment. The results of the SPIRIT survey in 2014–2018 show that every year more than 35% of surveyed foreign capital companies announced the expansion of their activities in Slovenia; in 2020, this share was 30.9%, which is slightly less than in the previous years. Outward FDI, however, has only modestly increased since 2014, following a decrease in 2010–2013. A more significant increase occurred only in 2019, but it was more or less followed by a stagnation in 2020, when the FDI stock was only 15.9% higher than in 2010. However, FDI inflows and outflows decreased significantly in 2020, following a previous drop in 2019 due to the outbreak of the COVID-19 epidemic. 

Despite a relatively rapid growth of FDI inflows a few years before the outbreak of the epidemic, Slovenia remains among the EU Member States with the lowest inward FDI stock as a share of GDP. Although the inward FDI stock as a share of GDP rose to 35.9% by 2020, which was 13.3 p.p. more than the stock at the beginning of the global financial crisis (in 2008), Slovenia was still lagging behind the other new EU Member States according to this indicator. In this context, the significant increase in the share in 2020 compared to 2019 was almost exclusively a result of the fall in GDP due to the epidemic. Nevertheless, in 2009–2019, Slovenia recorded the highest increase in the inward FDI stock as a share of GDP among all new Member States. Among EU Member States, only Finland, France, Greece, Italy, Germany, Denmark and France had a lower share than Slovenia. Slovenia’s outward FDI stock as a share of GDP decreased from 16.8% in 2010, when it peaked, to 15.3% in 2020. Accordingly, Slovenia, among the new EU Member States, only lagged behind the Czech Republic, Hungary and Estonia, which had considerably higher shares.



16. R&D expenditure and the number of researchers

Expenditure on research and development (R&D) has been increasing over the last two years, but expressed relative to GDP, it still lags far behind the peak value reached in 2013. It achieved its highest nominal value in 2019 and accounted for 2.05% of GDP, but it has been below the EU average since 2016 (in 2019, the lag was 0.2 p.p.), with the lag behind the leading innovators even larger (in 2019: 0.6 p.p.). Investments in R&D decreased in 2012–2017. By consolidation of public finances, they first dropped in the public sector (by EUR 117 million or around 40% compared to 2011); their growth in the last three years has covered around 70% of this drop. In 2015–2017, investments in R&D also declined in the business enterprise sector, which nevertheless still remains the driving source of R&D expenditure growth. Its share in the total R&D expenditure in 2008–2019 was for the most part above 60%, which was higher than the EU average (in 2018: 59.1%; Slovenia in 2019: 61.5%) and higher than in the leading innovators (2017: 58.7%). In addition to low, especially public, R&D expenditure, insufficient cooperation and knowledge transfer between different sectors continues to be a problem, which is also reflected in the high level of self-financing of individual sectors' investments into R&D (see also IMAD, 2020e).

Growth in the number of researchers in 2008–2019 was only recorded in the business enterprise sector, where the majority of researchers is employed. In 2008–2019, the business enterprise sector employed 53.0% of researchers, while in the countries that are more successful in terms of innovation, this share was significantly higher (e.g. in Austria and Sweden by more than 10 p.p.). In 2019, the share of researchers in the business enterprise sector reached 60.7% (EU: 55.2%), and in the leading innovators it was even higher (66.3%). The trend of a several years of declining in the number of public sector researchers was halted in 2018, but their number is still 243 lower than the 2010 peak. The unattractive working conditions , also associated with the government's failure to meet its commitments in the innovation–research ecosystem , human resources problems can only be expected to intensify in the future.

17. Innovation activity of enterprises

The share of enterprises that introduced innovation in 2016–2018 returned to the level before the decrease in 2010–2016 but still remains below the EU average due to a noticeable lag of SME. In 2016–2018, innovation-active enterprises (IAEs) in Slovenia accounted for 48.6%, and their share was much higher in manufacturing and traditionally lower in selected services. The share of IAEs increased by 8 p.p. compared to the previous (2014–2016) period, while in the EU by only 0.8 p.p. According to the type of introduced innovation, 27.1% of enterprises simultaneously introduced product along with business process innovations involving elements of services, which reflects their strong interdependence and intertwining. 9.8% of IAEs introduced product innovation only, which was 4.3 p.p. above the EU average and above the average of most of the leading and strong innovators. Only slightly more IAEs, i.e. 10.3%, implemented only business process innovation, which was 6.4 p.p. below the EU average and is proof of the too slow digital transformation in Slovenia. Revenue from the introduced product innovations in Slovenia accounted for 12.3% of total revenues from sales of products; this share was higher in manufacturing (19.7%) and in certain services, e.g. computer services, which are the most dynamic in terms of innovation (21.9%). In those EU Member States that are more successful in terms of innovation (e.g. Belgium, Estonia and Finland), the revenue from the introduced innovations amounted to as much as two-fifths. In computer services, the revenues from innovations new to the market (and not just to the enterprise) were also the highest among the various activities of the Standard Classification of Activities. In Slovenia, their contribution accounted for almost a tenth of the total revenues from sales of products, which was also favourable in international comparison regarding our closest competitors (Estonia: 3.7%). The innovation activity of enterprises increases with their size, similarly as in the case of digitisation; the latest data on the IAE share show that in addition to small enterprises, medium-sized enterprises are also lagging behind the EU average, while large enterprises have maintained their leading position. A significant share of companies highlighted the impact of legislation on innovation in companies as a positive trigger for development, particularly in the fields of environment and consumer protection. 



18. Intellectual property

Slovenia's long-standing lag behind the EU average in patents decreased significantly in 2020. According to provisional EPO data, Slovenian applicants filed 79 patent applications in 2020, the most in 2008–2020. About 30% were submitted in only three technological fields (biotechnology, chemical technology, and electrical machines, apparatus and energy) and about 10% in medical-related technologies. The latter have further consolidated their leading position in all technological fields concerning the patent applications with the EPO at the onset of the COVID-19 epidemic and achieved one of the largest annual growths (EPO, 2021). In terms of the level of patentability, measured by the number of first patent applications per million inhabitants, Slovenia maintained its leading position among the new EU Member States in 2008–2020. In 2008–2013, most of the first Slovenian patent applications were related to chemical technologies for human necessities (human medicine and veterinary medicine). This is associated with a significant share of pharmaceutical or chemical industry in Slovenia and its investments in R&D. The intensity of filing patent applications is also conditioned by the structure of the economy and the technologies  used in individual sectors.

Significant progress has been made in trademarks since 2011, while designs still lag far behind the EU average. In EU trademark legal protection, the number of Slovenia’s applications per million inhabitants was mostly rising in 2008–2020. The high gap in the number of registered Community designs is associated with a lack of awareness of the importance of design to increase competitiveness. With a single application, applicants can ensure the legal protection of these two intellectual property rights throughout the EU. The costs are relatively lower and legal protection procedures are significantly faster than for patents, which affects their attractiveness among companies of all activities.


19. Corporate environmental responsibility

The COVID-19 epidemic and containment measures, which limited the operation of service activities in Slovenia and the EU in 2020, did not have a negative impact on the number of environmental certificates. The number of EMAS certificates and Ecolabels (per million inhabitants) remained unchanged in Slovenia in 2020 compared to 2019, while it increased in the EU. From spring to autumn 2020, the number of EMAS certificates increased both in Slovenia and in the EU (according to the European EMAS Helpdesk). The number of Ecolabels in tourist accommodation in the EU and Slovenia also increased, although tourism was among the most affected sectors in the COVID-19 epidemic, indicating great market interest in organic products and services (EC, 2020). The number of EMAS certificates and Ecolabels, despite the increase, is still much lower compared to ISO 14001 certificates. In 2019, the number of ISO 14001 certificates in Slovenia and the EU increased. Their number per million inhabitants in Slovenia remained higher than the EU average, but it was still quite far from the leading countries in this field. Compared to the new EU Member States, the number of the ISO 14001 certificates in Slovenia is also lower. The opposite is true for EMAS, which is much more widespread in Slovenia than in the new Member States. In order to promote participation in EMAS, Slovenia participated in the LIFE B.R.A.V.E.R project, which expired at the end of 2019 and which resulted in the adoption of five incentive measures for EMAS (IMAD, 2020e). 



1. Share of the population with tertiary education

The share of adults (25–64 years) with tertiary education is approaching the SDS target, but at the same time it is much lower than in most economically developed countries. In 2019, it was 33.3% and was higher than the EU average (31.6%) but much lower than the top ten, where it is at least 40%. In the second quarter of 2020, when the first wave of the COVID-19 epidemic occurred, it increased further to 35.3%, about the same as in the third quarter of 2020, reaching the 2030 SDS target (35%). The long-term growth of the share is related to the high participation of young people in tertiary education and the transition of younger, on average more educated, people to higher age groups (demographic effect). As a result, in 2008–2019, the share of adults with tertiary education increased the most in the age groups 35–44 and 25–34, in which in 2019 it also exceeded the EU average the most. Between the ages of 30 and 34, it has also been higher than the EU target of 40% since 2013, though lower than in most economically highly developed EU Member States. The share of tertiary educated women (25–64 years) was higher than the share of men due to higher participation in tertiary education. A higher share of tertiary educated people is found in regions with better availability of jobs for the educated (the Osrednjeslovenska, Gorenjska and Obalno-kraška regions). 

In 2008–2019, the share of employees with tertiary education also increased, including the share of tertiary education in occupations for which low or secondary education is sufficient. The share of employees with tertiary education has been higher than the EU average in recent years; in most private sector activities it is lower than in the public sector . With the increase in the share of employees with tertiary education, the share of tertiary educated people (20–64 years) also increased in 2008–2019 in occupations for which basic or upper secondary education is sufficient, in 2019 amounting to 16.0% (2008: 7.1 %). It increased more in private sector activities, where it was also higher than in the public sector. This, in addition to the fact that there is a lack of certain tertiary education professionals in the labour market (ESS, 2020b), indicates a lack of coordination between tertiary education and the needs of society and the economy. 

2. Enrolment in upper secondary and tertiary education

The number of young people enrolled in upper secondary education is declining due to demographic reasons. In 2008/2009–2019/2020, it decreased by 16.9%, to a greater extent in general upper secondary than in vocational and technical education. As a result, the potential number of young people for direct enrolment in tertiary education and the supply of young people with upper secondary education in the labour market decreased. Although the share of those enrolled in vocational and professional programmes increased in 2008/2009–2019/2020 and is higher than the EU average, it has been difficult for employers to find suitable staff for many years. In our opinion, the latter is related to the low reputation of these professions, which is established by Cedefop (2017), and consequently the decisions of young people to enrol in tertiary education, which also allows a great transition from vocational to tertiary education. At the time of the COVID-19 epidemic, the implementation of safeguards made it difficult to acquire the practical skills of the CPI (2020). In a few years, according to demographic projections, the number of those enrolled in upper secondary education is expected to start growing again, and this will increase the potential supply of future labour force.

In the long run, the number of those enrolled in tertiary education has also decreased. It increased in the 2019/2020 school year but was still about a third lower than in the 2008/2009 school year, so we estimate that the number of graduates will decrease in the coming years (see Indicator 2.3). In 2012/2013–2019/2020, it decreased by more than a third in the social sciences, and thus their share in the structure of enrolled students also decreased. The latter increased the most in health and social security, where in 2018 it was close to the EU average, but the number of enrolled, despite the growth in recent years, does not reach the number from the school year 2012/2013 and lags behind the needs. The share of those enrolled in science and technology has also increased, but with a decrease in the number of students enrolled due to smaller generations, it is also not meeting demand. In order to meet the needs of society and the economy, it is necessary to strengthen the cooperation of higher education institutions with the economy, increase the number of enrolment places in programmes where the supply of staff is lower than demand, and encourage the enrolment of young people in these programmes. The harmonisation of enrolment with needs is made possible by the system for monitoring the employability of higher education graduates, which was established at the Ministry of Education, Science and Sport, and in the future will also be by the emerging platform for forecasting competency needs. 

3. Tertiary education graduates

The number of tertiary education graduates decreased in 2019 and was one of the lowest in the last ten years. In 2012–2019, it decreased the most in the social sciences, including their share in the structure of graduates, which strengthened the most in education. The share of health and social security graduates also increased, but in 2018 it was below the EU average, and their number has been declining in the last few years, in contrast to the growing needs of society due to demographic changes and, last but not least, the COVID-19 epidemic. The share of science and technology graduates also increased and was above the EU average in 2018, but their number in 2019 was lower than the peak reached in 2012 and lagged behind labour market needs. In our estimation, the number of graduates will decrease in the future due to demographic changes (smaller generations), as will the number of graduates enrolled in recent years and thus their supply on the labour market. Therefore, it is crucial to increase the number of enrolment places in programmes or for the professions for which the needs will grow the most and to update study programmes with content that will address future challenges (automation etc.). Among tertiary education graduates, 60% are women, and their share in all fields of education except science and technology is higher than that of men.

The number of new PhDs in 2019 was one of the lowest in 2009–2019. It increased in 2019, expressed per 1,000 population aged 25–34, and in 2018, at 1.8, was close to the EU average (1.9), though lower than in the leading and strong innovators. Such trends were related to the decrease in the number of those enrolled in doctoral studies from the school year 2012/2013 to 2015/2016, which could be attributed to the temporary suspension of co-financing of doctoral studies from public sources, years of reduced funding under the Young Researchers Programme, the abolition of the Young Researchers in Economics programme, less interest in enrolling in doctoral studies during the previous global financial crisis, and demographic changes (reduction of generations for doctoral enrolment). Such developments have adversely affected the country’s innovation potential. In our assessment, with the increase in the number of those enrolled in doctoral studies from the school year 2016/2017 onwards, the number of new doctors of science could increase again in the coming years, including doctors of science and technology, which are essential for innovation of companies.

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

In 2018, 15-year-olds in Slovenia achieved good results in mathematics, science and reading. According to the PISA 2018 survey, all three types of literacy, which are an indirect indicator of quality, achieved a higher score than the EU average. The SDS target (by 2030), which is to be ranked in the top quarter of EU Member States, was achieved in mathematics and science. Between 2015 and 2018, achievements in science and especially in reading deteriorated, while in mathematics they remained roughly the same. One of the 2020 targets set in the Strategic Framework for European Cooperation in Education and Training is that the share of 15-year-olds with low achievement (below proficiency level 2) in reading, mathematics and science should be less than 15%. Slovenia has achieved this goal only in science. The above-average results of 15-year-olds (in points) were mainly influenced by good human and material resources. 

Inequalities in the learning achievements of 15-year-olds increased between 2015 and 2018. In 2018, girls achieved better results (in points) than boys in reading and science and the same as boys in mathematics. Fifteen-year-olds with the best socio-economic situation performed better than their peers with the worst socio-economic situation; the difference between them was smaller than the EU average but increased between 2015 and 2018. Pupils from abroad performed worse in reading than locals, the difference between them being larger than the EU average. 

5. Education expenditure

In 2019, public and private expenditure on education (as a % of GDP) were at one of the lowest levels in the last ten years and, according to data for 2017, also lower than the international average. Public expenditure as a share of GDP has been on the decline since 2012, mainly due to austerity measures and changes in social legislation (see also IMAD, 2019), but also for demographic reasons and due to the rapid GDP growth since 2014. In 2018, expenditures increased due to higher transfers to households/students; in 2019, they remained almost the same (4.65% of GDP) as in the previous year and among the lowest in 2009–2019. Over the last ten years, expenditure has fallen the most at tertiary and upper secondary education levels. Public expenditure on education in 2017 (latest international data) was lower than the EU average of OECD countries (EU-23) and much lower than in economically highly developed countries (Denmark, Sweden, Belgium and Finland), lagging behind the most at the tertiary level. Private expenditure on education also decreased in 2009–2019, amounting to 0.57% of GDP in 2018; according to data for 2017, it was slightly below the EU-23 average (0.64% of GDP).

Although expenditure (public and private) per participant increased in 2009–2019, it was still low internationally. In 2017, for which internationally comparable data are available, it only exceeded the average of EU Member States that are members of the OECD (EU-23) at the lower secondary level (in Slovenia this includes the third triad of basic schools). It lagged the most at the tertiary and upper secondary school level, where the participation of young people in education is high and public and private expenditures are low, which limits the possibilities for raising the quality of education and, consequently, future human capital.

6. Participation in lifelong learning

The participation of adults (25–64 years) in lifelong learning has declined since the 2010 peak and slipped below the EU average for the first time in the second quarter of 2020. In 2019, it stood at 11.2% (EU: 10.8%), and with a decrease over the past decade, it has moved far from the goal of the Strategic Framework for European Cooperation in Education and Training by 2020 (15%) and even more from the SDS 2030 target (19%). It also lagged far behind the more developed northern European countries (Sweden, Finland and Denmark). Particularly problematic is the low participation of the low-educated, the elderly, men and immigrants. Among the regions, it was the highest in Osrednjeslovenska and the lowest in Pomurska, Posavska and Jugovzhodna Slovenija. In the second quarter of 2020, when Slovenia was hit by the first wave of the COVID-19 epidemic, the participation of adults in lifelong learning further declined sharply, across all regions. The multi-year decline in participation in lifelong learning is extremely unfavourable, as it has a negative impact on employment opportunities and the social inclusion of adults.

Broken down by activity status, in 2019, participation in lifelong learning was the highest among employed people, although it decreased the most in this group over the 2008–2019 period. It was higher than the EU average only in this segment. Differences in participation in lifelong learning also exist among the employed. In the private sector, where the share of the low-educated is higher, it was lower than in the public sector, with low participation in construction and manufacturing for many years and in small enterprises (with a maximum of ten employees). In 2008–2019, participation in lifelong learning decreased the most among employed people, especially in information and communication activities. Also, in the second quarter of 2020, the participation both of the employed and of the unemployed and non-active in lifelong learning decreased.  Adverse trends are slowing down the development of human capital and the raising of the competitiveness of the economy, the adaptability of employees to changes in the workplace and the labour market due to the COVID-19 epidemic, the expansion of Industry 4.0, etc.

7. Attendance at cultural events

The average attendance at cultural events per capita has been about the same in the last five years. It was the highest in 2012, owing to many performances hosted by Maribor, the European Capital of Culture that year. In the remaining years it was around 5–6 visits per capita, which is still quite far from the SDS 2030 target. In 2009–2019, the total attendance at cultural events mostly increased. With a significant increase in the number of cultural events, attendance at cultural events in houses of culture and cultural centres increased the most, and in 2019 they also recorded the highest number of visits among all types of cultural institutions. Higher attendance was also recorded for events performed by cultural associations, this being associated with the spread of amateur culture activities, increasing number of cultural societies, their membership and the number of events held. Favourable trends in the field of amateur culture have had a positive impact on the accessibility of cultural content at the local level and on networking and cooperation between people. In 2009–2019, the number of visits to theatres, opera houses and museums also increased, with the latter trying to attract a larger number of visitors through various activities. Most unfavourable, however, were the trends of visits to musical institutions and cinemas. Due to the COVID-19 epidemic and the non-operation of cultural activities, attendance at cultural events is estimated to have fallen sharply in 2020.

Cultural institutions carry out many activities enriching the cultural offer. The number of events held by institutions with stage activity fluctuated in 2016–2019; in 2019 it was 24,900. By type of activity, as in previous years, in 2019 there were the most film and video screenings, followed by events showing dramatic and other theatre works, and puppet theatre events, while the least were events of contemporary and composed music, ballet events, and events of intermedia art. The accessibility of culture is increased, among other things, by free events, of which there was a good fifth in 2019, in addition to which institutions with stage activities also carried out numerous cultural and artistic educational activities. It should be noted that some groups of the population (persons with reduced mobility and sensory impairments) face obstacles in accessing institutions and thus culture. In the field of film production, in 2019, the number of produced cinematographic films was the second highest in 2014–2019.

8. Share of cultural events held abroad

In 2019, the share of cultural events held abroad decreased after a few years of increase, and an even greater decline is expected in 2020 due to the impact of the COVID-19 epidemic. 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 time series, as data are only available for 2015–2019 (see note under the table). In 2019, the share of cultural events held abroad was 3.9%. It has decreased compared to the previous year, but is still above the 2030 SDS target. The share of tours in museums has been declining for several years, while in stage-related activity only in the last year. Among cultural events held abroad, in 2019, those in the EU accounted for about 80%, which indicates the geographical attachment of Slovenian culture to this area. In our assessment, due to restrictive measures to curb the COVID-19 epidemic in 2020, the number of cultural events held abroad has further decreased. 

The COVID-19 epidemic had a negative impact on hosting foreign events in Slovenia and on cultural production in Slovenia, which is essential for the promotion and recognition of culture abroad. In 2019, the number of guest events from abroad was the second highest in 2016–2019 in institutions with stage activity and the lowest in museums. Visiting events from abroad enrich the offer of cultural events in Slovenia and show cooperation with cultural institutions from abroad, which diminished in 2020 due to the COVID-19 epidemic. Cultural production in Slovenia was also curtailed; many cultural creators, especially in music, the performing arts, and film and audio-visual activities experienced a decline in orders (Matjaž, Černič and Kosi, 2020b) and filmmakers a delay caused by the state in fulfilling its contractual obligations. 

1. Healthy life years

According to the latest data, Slovenia's lag behind the EU as regards healthy life expectancy at birth is slightly smaller than in the past. The SURS (2019) analysis showed that the very low value of the healthy life years indicator in Slovenia in the past was mainly related to inadequate translation and the method of surveying. The latest data, for 2019, already reflect changes in the survey method, so the results for Slovenia have significantly improved, and in the future a change in the translation of the question is expected, so that it will more accurately reflect the content of the question. The indicator for 2019 shows that a person born in Slovenia can expect 60.9 healthy life years at birth (EU average: 65 years). Healthy life expectancy at the age of 65 is only 8.6 years on average in Slovenia (EU: 10.3 years). According to the latest results, the number of healthy life years is higher for women than for men, which is similar to the situation in most EU Member States (previously it was the opposite). Increasing the number of healthy life years, which requires higher investment in preventive care, is expected to make a significant contribution not only to the extension of individual’s activity, but also to slower growth in health and long-term care expenditure in the future.

According to the latest data, the lag behind the EU in the ratio between healthy life years and life expectancy is also significantly smaller. In Slovenia, we had an average of 74.8% healthy life years in 2019, which is still below the EU average (79.6%) but significantly better than in previous years. Slovenia’s gap with the EU average is still mainly due to the lower number of healthy life years. The smaller share of years that a person on average spends healthy means more pressure on social protection systems due to early retirement and greater demand for health and long-term care services. The COVID-19 epidemic will bring about major changes in the indicator in the coming years. We can expect that the many deaths will lead to a decrease in life expectancy, but it is difficult to predict what the negative impact will be on years of healthy living. 

2. The Gender Equality Index

In 2020, the gender equality index for Slovenia was around the EU average. With a value of 67.7, Slovenia remained ranked 11th among EU Member States. It has advanced by 5 points since 2010, though its score has slightly fallen compared to 2017. In order to meet the SDS 2030 target (> 78), Slovenia should improve the index value by more than 10 points in 2020–2030. 

In 2020, Slovenia again achieved the highest scores in the areas of health and money, while gender inequalities remain most pronounced in the areas of knowledge and power. There have been no significant changes in the field of health since 2010. Men more often than women consider that they are in good or very good health. On average, women live almost six years longer than men, but their number of healthy life years is lower. There were no major changes in the field of knowledge, where there is still a high gender gap in the share of tertiary educated people. Slovenia's progress in the areas of money and work is largely a consequence of the narrowing of the gender gap in the employment rate. Gender inequality continues to be reflected, in particular, in the unequal concentration of women and men in different sectors  and in the volume of part-time employment (more women than men). The wage gap has increased in Slovenia, but it remains small compared to other EU Member States.  Women had more difficulty reconciling work and private lives and did more hours of unpaid work than men. Due to changes in electoral legislation (gender quotas on candidate lists), women's political participation has shown an increase since 2011. The highest share of women in the Slovenian Parliament was in 2014 (38.2%), but after 2017 it decreased and, according to the latest data for 2020, is low (26.7%) (EIGE, 2020a). Various institutions and experts estimate that the COVID-19 pandemic and the response to it are exacerbating pre-existing gender inequalities (Eurofound, 2020a; EIGE, 2020c; UNDP, 2020; Blaskó et al., 2020).

3. Life expectancy

Life expectancy at birth has been improving more slowly in recent years in Slovenia and the EU. Since 2002, life expectancy in Slovenia has increased by more than three months per year on average (by more than two months per year on average in the EU). The improvement can mainly be attributed to factors such as better socio-economic conditions, higher education, better healthcare and lifestyle choices (OECD, 2017b). Slovenia exceeded the EU average in 2011. However, after 2011, life expectancy gains slowed, mainly due to a slower decline in mortality rates for circulatory diseases, which had been the main reason for life expectancy gains in previous years (OECD, 2018b). Stronger flu seasons, which mainly affected the elderly (2014/2015, 2016/2017 and 2017/2018) also contributed to the slowdown (OECD/EU, 2020). 

No further increase in life expectancy is expected in the short term. Due to the difficult flu season in Slovenia in 2019/2020 and the high excess mortality due to the COVID-19  epidemic in 2020, it is expected that life expectancy will stagnate or even decrease in the coming years, especially among those aged 65 or over. In addition to direct deaths due to COVID-19, the number of indirect deaths due to inaccessibility to preventive and emergency health services and psychosocial assistance may also increase (OECD/EU, 2020). 

In 2019, life expectancy was higher than in 2011 in all Slovenian regions. Women in the Obalno-kraška region (84.8 years) and men in the Osrednjeslovenska region (79.9 years) had the longest life expectancy at birth. In the Zahodna Slovenija region, life expectancy is longer in both sexes than in the Vzhodna Slovenija region: for women by 0.6 years and for men by about two years. Regional disparities reflect a number of socio-economic factors: income security, social protection, inequalities in health, education, living conditions, etc. The importance of adequate housing and access to health services has increased with the COVID-19 epidemic, as poor living conditions and insufficient access to health services increase mortality. 

4. Unmet needs for healthcare

In 2019, 2.9% of the population in Slovenia had unmet needs for medical examinations (EU: 1.7%), the main reason being waiting times. Differences between countries are large both in the share of the population and in the reasons for unmet needs and income gap. In Slovenia, waiting times are the main problem, while for financial reasons, there are almost no unmet needs for medical examinations (see table). In 2020, due to the COVID-19 epidemic and the cancellation of many health activities, unmet needs undoubtedly increased sharply, as accessibility was severely hampered. At the primary level, the number of visits, including distance consultations, decreased by 1.7% compared to 2019, after increasing by around 3% annually before the epidemic. The number of treatments in specialist ambulatory services decreased even more, by 20% (in imaging diagnostics by 15% and in inpatient treatments by 15%), which means that many patients did not receive treatment (HIIS, 2021a). As a result, the number of referrals issued and the number of people waiting has also decreased, but a rapid increase can be expected in waiting times after the end of the epidemic (see also Box 5 in Section 3.1). 

Unmet needs for dental care in Slovenia are also significantly higher than the EU average. In 2019, unmet needs for dental care were reported by 3.7% of the population, which is more than the EU average (2.8%). Unlike other Member States, in Slovenia the respondents do not report financial reasons but waiting times as the main reason for unmet needs. The latter is probably related to the fact that in Slovenia, adult dental care is also included in the healthcare benefits basket, which is covered partly by compulsory and partly by complementary health insurance, which is not the case for most EU Member States. However, in Slovenia this right is very limited by long waiting times, so as many as a quarter of the population do not have a chosen dentist (Pavlović, 2020). The OECD analysis (2020e) showed that in Slovenia the probability of a visit to the dentist for people with the same needs is almost 24 percentage points higher for higher-income individuals than for those with the lowest incomes. However, high income inequalities are mainly due to long waiting times, as individuals with higher income can finance a visit to a dentist outside the public network. The COVID-19 epidemic also had a strong impact on the availability of dental services, which were interrupted in the first wave, with the exception of emergency services; however, after the release of the measures and in the second wave, they were implemented to a limited extent due to strict security measures. According to the Health Insurance Institute of Slovenia, the realisation of the dental programme at the primary level decreased by 13% compared to 2019. 

5. Avoidable mortality

Avoidable mortality dropped sharply between 2011 and 2016, deteriorating slightly again in 2017 but remaining above the EU average. The rate of avoidable mortality, which consists of (i) preventable mortality and (ii) treatable mortality (avoidable by healthcare), improved by 43 persons per 100,000 inhabitants in 2011–2017 (latest available data), against an average of only 25 people in the EU. Slovenia very successful in reducing treatable mortality, which declined by 22% in six years (EU: 10%). 

Preventable mortality rose slightly again in 2017 and remained above the EU average. In Slovenia, in 2017, 187 deaths per 100,000 inhabitants could have been avoided by successful public health measures and prevention (163 in the EU). Preventable mortality is strongly dependant on gender: ischemic heart disease, lung cancer, accidents, alcohol dependence or heavy episodic drinking and suicide are much more common in men (EC, 2019). Greater improvement can be achieved by strengthening prevention at the primary level, expanding family medicine model practices and health-promotion centres, screening programmes, integrating health and long-term care, vaccination, and greater investment by employers in health.

The rate of treatable mortality decreased further in 2017 and was well below the EU average, which indicates relatively effective healthcare from the aspect of treatment. In 2017, 78 people per 100,000 inhabitants died in Slovenia due to causes that could have been avoided through timely and effective healthcare (EU: 93 per 100,000). The largest proportion of deaths are due to ischemic heart disease and colon and rectal cancer, followed by strokes and breast cancer. France, the Netherlands, Spain, Italy and Sweden reached rates below 70 in 2017, mainly due to very low mortality from cardiovascular diseases. In all countries, the indicator is significantly worse for men than for women. 

6. Healthcare expenditure

Measured by total current health expenditure per capita, Slovenia's gap with the EU average has widened in the last decade. During the global financial crisis, expenditure on healthcare in Slovenia dropped in real terms: the system was understaffed and financially limited and waiting times were too long. Nevertheless, real growth in total current health expenditure (hereinafter: CHE) in 2013–2019 averaged only 2.6% per year, lagging behind the growth of the EU average (3.0%). The relatively low growth in the economic boom period was due to the adjustment of HIIS expenditures to disposable revenues, which, despite high employment growth, increased more slowly than GDP growth, while part of revenues was used to create a reserve (which was almost completely used in 2020 due to the epidemic: see Box 5). In 2017–2019, the transmission of the financing of medical practitioners and traineeship to the state budget contributed to the additional revenues of the HIIS,  but this additional budgetary resource for the healthcare system was not sufficient. According to the initial estimate, CHE per capita in 2019 reached 8.3% of GDP or EUR 2,185 PPS per capita, or only 85% of the EU average (EUR 2,572 PPS), which is the same lag behind the EU as in 2013. On the other hand, in the same period Slovenia increased its GDP per capita from 83% to 89% of the EU average.  

In 2020, health expenditure related to the management of the COVID-19 epidemic was largely covered by the state budget. According to the first preliminary estimate, the state budget contributed EUR 578.6 million to current expenditure on healthcare in 2020 (in 2019: 127). In total current health expenditure, which reached EUR 4.7 billion, the share of budgetary resources (total state and local budget) in 2020 increased to as much as 13.4% of CHE (2019: 4.4%; 2018: 3.4%) and the share of total public health expenditure, which amounted to EUR 3.6 billion to 76.8% of CHE (HIIS, 2021b; see Box 5 in Section 3.1).

7. Expenditure on long-term care

The share of public expenditure on long-term care (LTC) in 2018 in Slovenia was significantly lower than the EU average. An international comparison of public expenditure on LTC in 2018 showed that it averaged 1.3% of GDP in 22 EU Member States for which data are available, while in Slovenia it was only 0.9%. In the structure broken down by sources of financing, the share of private expenditure in Slovenia increased sharply in 2008–2018; broken down by function, the share of expenditure on the health component of LTC, which is mainly financed from public sources, decreased. After 2012, the growth of expenditure of the HIIS, which finances health services in homes for the elderly and other social institutions, as well as community health nursing, was very low. It strengthened slightly in 2018. The situation for care recipients has also deteriorated in recent years, while private, out-of-pocket expenditure showed a rapid increase. These expenditures, which are the most problematic for the individual in terms of affordability, grew significantly faster than in healthcare (IMAD, 2019b). 

From 2019, the adoption of the Personal Assistance Act (the ZOA) will have a major impact on increasing public expenditure on LTC. With the enactment of the ZOA in January 2019, the opportunities for people with disabilities to live independently at home have greatly improved, but expenditure on personal assistance has been rising sharply for the second consecutive year: from EUR 3.8 million in 2018 to 36.8 in 2019 and 84.4 million in 2020 (MDDSZ, 2021b; IMAD, 2021). According to the international methodology, these expenditures will be included in public expenditures for long-term care (at home), and it is estimated that in 2021 they will amount to 0.2% of GDP. 

Due to the COVID-19 epidemic, public funding for institutional care increased in 2020. The epidemic revealed a critical shortage of staff in homes for the elderly, so EUR 26 million was allocated to ACP4 for an additional 550 jobs in 2020 and 2021. In addition, ACP5 provided funds to cover the loss of revenue due to unoccupied capacities in homes for the elderly and staff salary supplements, these in the amount of 20% for those redeployed between homes for the elderly and 30% for work in the grey and red zones. According to the EC estimate (2021), the effect on the increase in the share of public expenditure on long-term care will be around 0.1 percentage point of GDP. 

8. Overweight and obesity

Slovenia has a very high share of overweight children and adolescents from less well-off families. Obesity in children can lead to problems with self-esteem, learning success, depression, eating disorders, etc. It can also be an important risk factor for adult obesity and a factor in health and economic problems in adulthood. A WHO survey (Inchley et al., 2020) showed that in 2018, 21% of 15-year-olds in Slovenia were overweight or obese (EU: 19%), of whom significantly more boys (26%) than girls (16%), which is typical for all EU Member States. Inequalities in Slovenia were very high in terms of family welfare, the gap between more and less wealthy families being as much as 13 p.p. (EU-26: 8 p.p.). Other pre-epidemic research has also shown that the proportion of overweight and obese children and adolescents is declining, especially in families with a higher socio-economic standard and more in girls than boys.

The closure of schools and the ban on most sports activities for children in the spring of 2020 due to the COVID-19 epidemic has caused the largest increase in overweight and obese children in the last 33 years. The SLOfit survey in June 2020 showed an increase in subcutaneous fat in more than half of primary school children and a 20% increase in childhood obesity, which is the highest in the history of the survey. Such a proportion of the population with increased subcutaneous fat seriously increases health risks (Faculty of Sport, 2020). 

The share of overweight adults in Slovenia decreased slightly between 2007 and 2014 but is still well above the EU average, especially for men. Overweight and obesity  are important risk factors for the development of chronic diseases and premature mortality. A high proportion in Slovenia is also associated with poor eating habits, especially among adolescents. 

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

In Slovenia, the social exclusion rate has been among the lowest in the EU since the beginning of measurements in 2005, and in 2019 it fell below the level of 2008 for the first time and reached the set SDS target. The synthetic indicator of social exclusion consists of three dimensions: the at-risk-of-poverty rate, the severe material deprivation rate (see Indicator 3.16) and the share of people living in households with very low work intensity (less than 20% of total household potential). In Slovenia, the risk of social exclusion has been declining faster than in other Member States since 2014, mostly due to a larger decline in the share of the severely disadvantaged; according to the latest available data (EU-SILC 2019 with income from 2018) 293,000 people were exposed to social exclusion, which ranks us only behind the Czech Republic. Despite a significant decrease, the rate increased for some groups of the population, mostly for one-member older households (65 years or more) (by 3.1 percentage points) and single-parent households (by 1.4 percentage points).

In 2019, every eighth inhabitant in Slovenia was exposed to the risk of poverty, which ranks us fourth among the EU Member States after the Czech Republic, Finland and Slovakia. In 2019, 243,000 people lived below the at-risk-of-poverty threshold  (12% of the population; EU: 16.5%). By gender and age, women continued to be most at risk of poverty in 2019 (13%; EU: 17.1%), mainly over the age of 65 (23%, EU: 18.2%). According to the type of household, single-member households (38% of people below the poverty line) were in the worst position, especially women (41.1%). Among households with dependent children, persons in single-parent households with at least one dependent child were in the worst position (26.1%). The at-risk-of-poverty rate was the highest in the Zasavska region and lowest in the Gorenjska region – the difference between the two regions was high (11.8 p.p.). An increase in the risk of social exclusion due to the COVID-19 epidemic for 2020 is to be expected mainly among those population groups that have not been sufficiently reached by the government's anti-COVID-19 packages (EAPN, 2020a) and among the poorest not covered by statistical surveys (see IMAD, 2021).

10. Inequality of income distribution

The values of income inequality indicators (Gini coefficient and quintile class ratios) in Slovenia continue to be among the lowest in the EU. For many years, Slovenia has been one of the countries with low income inequality, mainly due to progressive taxation and, to some extent, to social transfers. In 2019, the top 20% of households in Slovenia received 3.4 times as much income as the bottom 20%, which has been within the SDS target for three years in a row and is equal for both sexes. Even for people aged 65 and over, the income ratio between 20% of the richest in income and 20% of the poorest in households is low (3.4 times), but is noticeably closer to the EU average than for those under 65. A further breakdown of income distribution in Slovenia for 2019 showed that the gap between the fifth and third quintiles was 1.84 (EU: 2.16) and was slightly lower than the gap between the third and first quintiles, which was 1.85 (EU: 2.24) (SURS, 2021; calculation by IMAD). The poorest fifth of households account for around a tenth of total disposable income, while the wealthiest fifth account for a third. 

In 2008–2019, changes in income distribution were small. 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 Bulgaria and fell the most in Portugal. In Slovenia, inequality of income distribution increased slightly in 2009–2014, mainly due to the global financial 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 2019, the Gini coefficient was 0.239, slightly higher than in 2008 and below the 2014 value, when it reached its highest level. 

11. Experience of discrimination

The share of people in Slovenia who have experienced discrimination or harassment has decreased in recent years and is within the SDS target. In 2019, 9% of respondents felt discriminated against, which is among the lowest shares in the EU. Lower shares were recorded only in Malta (8%), Greece (7%) and Portugal (6%). Last year, most frequently mentioned reasons for discrimination were age, gender, religion or beliefs, and general physical appearance (2%). Discrimination on the grounds of disability, ethnic origin, sexual orientation, social class, political beliefs, skin colour or being of Roma origin was experienced by 1% of respondents. Though discrimination was below the EU average in terms of most personal circumstances, it was as common as the EU average in terms of sexual orientation, religion or beliefs and being of Roma origin. 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.

The share of people who have experienced discrimination in Slovenia is relatively low; the most frequently reported form of discrimination is discrimination at work. In 2019, 33% of respondents felt discriminated against at work, which is the highest share among EU Member States and significantly above the EU average (21%). Discrimination at work was experienced by 34% of men and 31% of women and was most often reported by those in the 35–44 age group. This is followed by discrimination in public places (17%), in cafes, restaurants or nightclubs (13%), and when looking for a job (12%). However, only 1% of respondents felt discriminated against by health care personnel, which is the least among EU Member States. 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. In Slovenia, the share of those who consider the efforts made by the state to fight discrimination to be effective has increased. The population's awareness about the exercising of the rights of the Advocate of the Principle of Equality and that personal circumstance is the main factor in establishing discrimination has also increased, while the share of individuals who have taken action to fight discrimination remains low. 

12. Median equivalised disposable income

In terms of the median equivalised disposable income (EDI), Slovenia was in the middle of the EU Member States in 2019. The strong growth in 2008 and 2009 was followed by a period of negative or low growth (2010–2013) as a result of reduced economic activity, austerity measures (the ZUPJS) and changes in the allocation of transfers (ZSVarPre), which reduced the equivalised disposable income and thus its median value. After the recovery of economic activity (2014–2019) and gradual abandonment of austerity measures, the median EDI in Slovenia gradually increased, which contributed to the improvement in the living standard of the population. In 2019, it reached the highest level in real terms. The movements of the median EDI in the EU as a whole in the last decade were comparable to those in Slovenia, but the increases and decreases in growth rates were less pronounced. 

Slovenia is characterised by slow growth of the median EDI of people over 65 years of age and those with higher education. The median EDI in EUR increased in Slovenia in 2010–2019 similarly (19.9%) as in the EU average (19.3%), with the working population expected to reach the highest level in both Slovenia and the EU in the 18–64 age group. The median EDI of the age group of 18 and under is similar to the total EDI, which is mainly a result of policies for protecting the material well-being of children and young people in Slovenia. The median EDI of people over 65 years of age has been the lowest in recent years, mainly due to the modest growth in the average pension; therefore, the income of this age group in Slovenia lags behind the income of people aged 18–64 more than the EU average. The median income growth of the highly educated in 2009–2019 is noticeably lower than that of the middle- and low-educated, which was influenced by the progressive public servants’ wages during the fiscal consolidation period (2013) and an increase in the share of tertiary educated young people employed at places requiring secondary or lower education (see Section 2). The lag of the median EDI of Slovenia in PPS for Austria, which is at the top in terms of income , decreased in 2015–2019 and in 2019 amounted to 30%. The gap was higher among people over 65 (39%) and the middle-educated (33%). 

13. Life satisfaction

In 2020, life satisfaction in Slovenia was 2 percentage points lower than in 2019, but Slovenia remains above the EU average. More than in Slovenia, life satisfaction decreased in Luxembourg, Austria, Finland and Malta. At the level of the EU average, the highest share of those satisfied, which was recorded in 2019, was also recorded in 2020, despite the COVID-19 epidemic. Slovenia dropped from ninth to eleventh place in the EU. Belgium was again ahead of Slovenia, as was Spain and, for the first time, the Czech Republic. All three countries with the highest levels of satisfaction in 2019 (Denmark, Sweden and the Netherlands), further improved their satisfaction in the summer of 2020. 

At the national level, in the summer of 2020 the shares of those satisfied with employment and economic situation were lower than in the previous year, while the shares of those satisfied with their personal employment situation (65%) and financial situation of the household (74%) were the highest ever. The share of respondents who expressed pessimistic expectations increased in 2020. The optimism indicator for the employment situation at the private level was the lowest of all six indicators measuring expectations for the next 12 months, while at the state level, it was lower by more than half compared to the highest share in spring 2018. At the state level, in the summer of 2020, the shares of those satisfied with the employment and economic situation were lower than in the previous year by nine and eight percentage points respectively (EU both by 13 percentage points). 

When asked to identify two main issues at the national level, Slovenian respondents again pointed to health (57%) as the most important problem, followed by the economic situation (33%). This was followed by unemployment (21%), pensions (11%) and (with 9%) migration, public debt, inflation and rising living costs. At the personal level, the main concern of Slovenian respondents was health (28%), as in the previous year, followed by living conditions for the first time (20%) and by living costs with inflation and working conditions. This was followed by indicators that have been more frequently perceived as a problem at the personal level over the years: pensions, the financial situation of one's own household, the economic situation, unemployment and housing. 

14. Social protection expenditure

Slovenia lagged far behind the EU average in terms of social protection expenditure as a share of GDP and in purchasing power standards (PPS) per capita. Over the last ten years, these have been around five p.p. lower. In PPS per capita, Slovenia achieved 68.5% of average EU social protection expenditure in 2018; the level has been declining since the crisis in 2008 (74.5%) due to the adoption of austerity measures and the implementation of new social legislation. In 2018, Slovenia approached the EU average only in the area of expenditure for the poorest (other forms of social exclusion), where it reached 98.6% of the average. It was close to the EU average in the area of sickness and health care (79.1%).

The major part of social protection expenditure in Slovenia and in the EU is intended for pensions and sickness/healthcare. In 2018, Slovenia spent six p.p. more funding (75%) for these purposes than the EU average, as the expenditure on the sickness category has been increasing in recent years as a consequence of higher expenditure on sickness benefits and on old age due to resumed pension indexations (since 2016), the introduction of a guaranteed pension in 2017, and also growth in the number of beneficiaries, which is otherwise moderate. The third largest transfer in EU and in Slovenia was intended for families and children. Slovenia 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 to other EU Member States. The share of expenditure on disability has been declining for a long period, mainly due to a lower number of beneficiaries of disability pensions. The relatively low expenditure on accommodation, however, is to a great extent attributable to the very high share of owner-occupied dwellings and the relatively poorly developed rental housing market. The only area for which more funds were allocated in Slovenia as a share of GDP compared to the EU was the area of other form of social exclusion, which includes benefits intended for the poorest. 

15. Housing deprivation rate

Slovenia continues to have an above-average housing deprivation (HD) rate, although it has been declining faster than the EU average. Due to different measurement methods, the data for Slovenia are not completely comparable with those pertaining to the EU average.  The HD rate improved significantly in 2011–2019 (by 14.2 p.p.), but a fifth of the population (mostly in the Goriška and Pomurska regions) continues to live in poor housing conditions (EU: 12.7%). This is mainly due to the old and poorly maintained housing stock, as more than 80% of dwellings were built before 1990. In 2016–2020, only about 4,000 dwellings were built in total, the most in Osrednjeslovenska and Obalno-kraška and the least in the Zasavska region (SURS, 2021).

In 2019, a third of the population below the at-risk-of-poverty threshold lived in poorly maintained dwellings (in the EU around a fifth). The potential for improving the quality of housing, reducing environmental impacts and reducing energy consumption of households lies in the renovation of the housing stock. Low-income households often live in buildings in need of renovation, in some places with older members (e.g. the Goriška and Pomurska regions), which makes renovation difficult. In 2019, more than 30% of people below the at-risk-of-poverty threshold lived in dwellings exhibiting at least one element of deprivation. One-fifth of households below the at-risk-of-poverty threshold were overburdened with housing costs, which is less than the EU average (35.4%). 

In 2019, 3.9% of the population in Slovenia faced severe housing deprivation (SHD). The overcrowding rate, which is taken into account in addition to at least one of the deprivation elements in measuring the severe housing deprivation, was below the EU average. The SHD rate has been declining since 2011, but it is still twice as likely for people below the at-risk-of-poverty threshold. Research by international institutions has shown that during the COVID-19 epidemic, people deprived of housing are among the most at risk (in terms of health), so the importance of adequate housing is one of the key health factors (FEANTSA et al., 2020; OECD, 2020f; UN, 2020).

16. Material and income deprivation

In the last five years, the level of material deprivation in Slovenia has halved and in 2019 it continued to be significantly lower than the EU average. In 2010–2019, it decreased in all Member States except Greece, most notably in Latvia (by 30.2 p.p.) and also by more than 20 p.p. in Bulgaria, Hungary and Romania. In Slovenia, it decreased by 7.3 p.p., which is more than the EU average (6.5 p.p.). According to gender, the level of material deprivation in 2019 was six p.p. higher among women (EU: 0.5 p.p.). In terms of age, the most disadvantaged persons in Slovenia were those aged 65 and over (by 0.3 p.p. above the EU average); in the EU, the most pressing material disadvantage was among children under the age of 18 (12.7%; in Slovenia 6.4%). In 2014–2019, the gap between the Vzhodna Slovenija (11.1%) and Zahodna Slovenija (5.6%) cohesion regions widened further: the level of material deprivation remained high in the Pomurska, Koroška and Zasavska regions and decreased the most in Podravska region (by 12.1 p.p.). Provisional EU-SILC 2020 data (with income from 2019) show that the material situation of households has not deteriorated due to the COVID-19 epidemic compared to most indicators, but that the level of serious material deprivation in 2020 increased by 0.4 p.p. or 8,000 persons (Inglič, Intihar and Stare, 2021; Eurostat, 2021).

The poorest households in Slovenia (the first quartile), as in the majority of EU Member States, were better prepared for unexpected expenditures in 2009–2011 than during the first wave of the COVID-19 epidemic. Based on longer time series and different databases, the OECD (2020d) and the ECB (2020) calculated that before the outbreak, the first quartile class of households in Slovenia had, on average, less current funds in their bank accounts than in other Member States and that households from the lower two quartiles during the first wave of the epidemic could withstand less than a month without additional measures. Provisional EU-SILC 2020 data (with incomes from 2019) show that the share of households that had difficulty coping with their incomes in 2020 remained the same as in the previous year (at 20%) (Inglič, Intihar and Stare, 2021).

17. Employment rate

After several years of growth, the employment rate (20–64 years) in 2018 and 2019 reached the SDS target, but due to the COVID-19 epidemic it declined in 2020 and dropped below the target value. Along with economic growth and increased demand for labour, demographic trends also contributed to the increase in employment activity until 2019. Further increase in employment in 2020 was halted, especially among young people (20–29 years), by the COVID-19 epidemic. Young people, already severely affected during the global financial crisis (2008–2013), are more exposed to temporary employment and student work, which has been greatly reduced by the COVID-19 epidemic and its containment measures. The employment rate among older working-age adults (55–64 years) increased slightly in 2020, despite the crisis, but remains among the lowest in the EU and lags behind its average by 7.7 p.p. 

The COVID-19 epidemic has significantly reduced the employment rate of the low- and middle-educated. After the low-educated were the most affected by the global financial crisis (a markedly larger decrease compared to the EU average), in 2014 and 2015 their employment increased the most. With the COVID-19 crisis, the work activity of the less educated fell sharply again. This was due, among other things, to the high proportion of employees with low education in the activities that were among the most affected by the restrictive measures. The markedly deteriorating economic situation also reduced the employment rate of the middle-educated in the second quarter of 2020, while the rate of the highly educated fell by only 0.3 p.p. year-on-year and remains among the highest among EU Member States. 
Also in the regions, employment activity, following a significant excess over the pre-crisis level in 2019, fell back, mainly due to the COVID-19 epidemic, in 2020. The largest year-on-year decline in the second quarter of 2020 was in the Obalno-kraška region (it lagged behind the Slovenian average by 7 index points), as in 2019 it generated 40% of total value added in accommodation and food service activities and tourism, the most among all regions. Employment also fell sharply in the Goriška and Pomurska regions, both with a high share of manufacturing in the structure of value added and low education among employees.

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

In Slovenia, the rate of in-work at-risk-of-poverty fell sharply in 2019 and was the lowest in 20 years. The in-work at-risk-of-poverty rate for people over the age of 18 was 4.5% in 2019, which is similar to the years before the global financial crisis, thus achieving the SDS 2030 target. The in-work at-risk-of-poverty rate for women is lower in Slovenia than for men. Like in other EU Member States, the at-risk-of-poverty rate in Slovenia is much higher among young people (up to 29 years of age) than among older people (55–64 years). The larger difference between the in-work at-risk-of-poverty of young people and older people in Slovenia compared to the EU average can be attributed mainly to the legalisation of length-of-service allowances and lower exposure of older people to precarious forms of work. 

The in-work at-risk-of-poverty decreased in 2017–2019 in all forms of employment, mostly among the self-employed. The at-risk-of-poverty rate of temporary workers is higher than in the case of permanent employment contracts, but in 2017–2019 it decreased more than in the case of permanent employees.  Wage growth due to labour shortages is also likely to have contributed to reducing the at-risk-of-poverty rate among part-time employees, which fell sharply in 2017–2019, but it remains higher than for full-time employees. The significant improvement in the situation of the self-employed in 2017–2019 was indicated by the at-risk-of-poverty rate of the self-employed, which almost halved and no longer exceeded the EU average. With the COVID-19 epidemic in 2020, the positive trends were probably already interrupted in both Slovenia and the EU, as measures to retain jobs were not equally accessible to all groups of people in employment.

19. Unemployment and long-term unemployment rates

With the COVID-19 epidemic, the unemployment rate rose after a multi-year decline in the second quarter of 2020. The decline until 2019 was associated with several years of high growth in economic activity and, consequently, stronger employment. In 2020, however, with the epidemic and containment measures, the unemployment rate increased, though significantly less than it would have without employment retention measures. In 2013–2019, the unemployment rates for men and women decreased with a similar dynamic, but in 2020, unemployment increased more for women (by 1.2 p.p.; for men by 0.7 p.p.). After the global financial crisis, unemployment fell the most among the middle- and low-educated, which was in line with the structure of the economic activity recovery. With the COVID-19 crisis, however, it increased the most among the low-educated, as the epidemic disproportionately affected activities that employ the low-educated workforce. The focus of active labour market policy for young people and the increased volume of student work by 2019 contributed to a rapid decline in youth unemployment (15–24 years). The COVID-19 epidemic and the associated sharp decline in economic activity affected young people (15–24 years) the most in the labour market: in the second quarter of 2020, the youth unemployment rate in Slovenia increased by 9.1 p.p., mainly due to a significant decline in student work. 

The long-term unemployment rate was below the EU average until 2019, but it equalled it in the second quarter of 2020. In 2009–2014, long-term unemployment increased significantly with modest labour demand.  During the period of economic growth, the situation initially improved only for the unemployed with shorter unemployment duration, but since 2015, in the context of labour shortage, the number of the long-term unemployed has also been declining. With the new crisis in 2020, the long-term unemployment rate in Slovenia has risen slightly, while the EU average fell markedly despite the epidemic. 

20. Temporary and precarious employment

Following a reduction in 2018, the share of precarious employment continued to decline sharply in 2019. In 2019 (latest data), the share in Slovenia was 2.6%, which is the lowest since 2000, while in the EU in the last ten years it ranged between 2.1 and 2.5%. The higher share in Slovenia can be related to the existence of student work and to more frequent use of precarious (i.e. short-term) employment in trade, transport and catering activities, where the share of precarious employment is the highest among all activities. The decrease in the prevalence of precarious employment in recent years is mainly related to labour shortages, which has forced employers to enter into more indefinite contracts and reduce the volume of work through the student recruitment service. An analysis by the European Commission (2017) found that precarious employment, defined as low-wage temporary employment, is most common among women, young people and the low-skilled. 

The prevalence of temporary employment in Slovenia has been on the decline since 2017, with the share falling below the EU average. In addition to demographic factors that reduce the supply of labour, in 2020 this was mainly due to the economic crisis related to the COVID-19 epidemic, which was most pronounced in the second quarter. During the first wave of the epidemic, employers first adjusted by not renewing temporary contracts (fixed-term employment contracts) and reducing the volume of student work, which in the second quarter of 2020 was as much as 50% lower than in the same period in 2019. The share of temporary employment in Slovenia in the second quarter of 2020 amounted to 9.3% and fell below the EU average in the second quarter of 2019. The share of temporary employment among young people (15–24 years) decreased to 51.9% in the second quarter of 2020, which is 9.9% p.p. less than in the same period in 2019 and meant the second largest reduction among EU Member States. Nevertheless, it remains among the highest among EU Member States.

21. Absence from work due to illness

In 2014–2019, absence from work due to illness in Slovenia increased rapidly from year to year, but in 2020, according to data from the Health Insurance Institute of Slovenia (HIIS), it decreased slightly due to measures related to the COVID-19 epidemic. The rapid growth of absence from work in 2014–2019 can be linked to employment growth, later retirement, longer waiting times in healthcare and the ageing of the working population. Absence from work was significantly higher among women than among 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 poorly functioning system of long-term care to care for parents (informal caregivers being mostly women). According to National Institute for Public Health (NIJZ) data, in 2019, employed persons were on average absent from work for 17.7 calendar days, the share of absence from work due to illness averaging 4.9%, which is the highest so far (NIJZ, 2021d). According to HIIS financial data, in 2020 the number of working days lost at the expense of employers decreased by 8.1% due to the COVID-19 epidemic, while at the expense of the HIIS it increased by 4.6% or decreased by 1.2% on average: in the first half of 2020, there were fewer absences due to the cessation of public life and public transport and the closure of schools, kindergartens and many businesses; in the second wave, the number of lost working days increased sharply due to the number of COVID-19 patients and the isolation of positive individuals (HIIS, 2021a).

In terms of working days lost, Slovenia exceeds the EU average. In recent years, 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 increased. In 2018, the average number of compensated work days lost per year due to illness already totalled 13.5 in Slovenia, while in the 23 EU Member States for which comparable data are available it was 11.9. However, it should be noted that the international comparability of this indicator is limited due to methodological differences in data capture and differences in the health and social care systems and in eligibility criteria for sickness benefits. 

1. Emission productivity

Emission productivity continued to rise even in the period of economic growth, although at around the same pace as in the EU, so that until 2018 the gap with the EU remained almost unchanged. The growth of productivity measured by the ratio of GDP to greenhouse gas (GHG) emissions accelerated again after stalling during the global financial crisis in 2008–2014. It also rose more steeply in 2019, when economic growth was achieved with lower emissions again, according to preliminary estimates. However, the gap with the EU average did not narrow significantly in the last years analysed: in 2018, around 13% less GDP was generated per unit of GHG emissions than in the EU overall, which meant a 1 p.p. larger gap than in 2014. 

In 2019, GHG emissions declined slightly for the second consecutive year but remained higher than in 2014, when they were the lowest in the last two decades. After dropping during the global financial crisis, as expected, they had risen slightly and remained roughly unchanged until 2018. In 2019, they dropped somewhat more again, by 2.6% to 17.1 million tonnes of CO2 equivalent, but this was 2.9% higher than in 2014. The most (around 60% of total emissions) derive from the transportation and energy sectors, and one tenth each from fuel consumption in industry and agriculture. Transport is the only activity where emissions were rising relatively rapidly in the long term, but after 2016 their growth came to a halt. GHG emissions in the EU as a whole declined faster. In 2005–2018, i.e. after the EU Emissions Trading Scheme had been launched, emissions from the ETS sectors, i.e. the sectors included in the Emissions Trading System (EU ETS), declined by around a quarter (in the EU whole somewhat more) and emissions from the non-ETS sectors by around 6% (in the EU by around 9%). In 2020, emissions fell further according to preliminary estimates, reflecting the containment measures related to the COVID-19 epidemic.

2. Energy efficiency

While in the years after the global financial crisis, primary energy consumption declined mainly as a result of reduced coal consumption, its decline during the COVID-19 crisis reflected lower 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 Krško nuclear power plant). In 2019, total primary energy consumption declined more strongly again, including under the impact of the slowing economic activity (with lower consumption of solid and liquid fuels). In 2020, it fell even more, given the containment measures taken during the epidemic. With consumption in transport falling by more than a tenth, primary energy consumption declined by more than 3% in 2020 according to our estimates. Energy efficiency movements were thus also relatively favourable in terms of meeting the Europe 2020 Strategy target (in both primary and final energy consumption)  due to lower activity in both above-mentioned crises (in 2009 and 2020). 

Over the long term, energy productivity increased at roughly the same pace as in the EU as a whole. The growth of energy productivity (defined as the ratio of generated GDP to total energy consumption) came to a halt only in the first years of the financial crisis. In 2011, it was thus almost a fifth lower than the EU average. In 2019, it increased more than in the EU amid higher growth in GDP. Slovenia’s gap in this comparison thus decreased to around a tenth and was the smallest since 2000. 

Since 2005, final energy consumption has also decreased at roughly the same pace as in the EU. Final energy consumption, which declined particularly after 2008, has risen since 2014. In the industry sector it fell particularly due to the modernisation of aluminium production, but in recent years it has again been rising due to economic growth. In the transport sector, it rose owing to increased transit following EU enlargements and then fluctuated for several years. Household energy consumption, on the other hand, has declined as a consequence of occasionally higher temperatures during the heating season, installation of heat cost allocators, more efficient heating appliances and the energy renovation of buildings. In 2019 and particularly in 2020, the main reason for lower final energy consumption was lower consumption in transport.



3. Share of renewable energy sources

The share of renewable energy sources (RES) in final energy consumption increased only modestly in the last fifteen-year period analysed. It rose more strongly in 2009, amid a fall in final energy consumption during the global financial crisis and a concurrent increase in RES consumption. It was the highest in 2013–2015. Between the years it fluctuated with regard to RES consumption for heating (the impact of milder winters) and the use of hydropower (the impact of annual river flows). Total RES consumption in Slovenia rose the least among all EU Member States in 2005–2019, by 6% (in the EU, by 83% on average). Slovenia is one of the six EU Member States whose shares were the farthest from the 2020 target (which is 25%) in 2019. Its share was also quite far from the SDS 2030 target (which is 27%). We estimate that in 2020 the share of RES increased by one to two percentage points amid lower consumption of liquid fuels and slightly higher use of RES. 

Slovenia has a high share of traditional and a low share of other renewable sources in total RES consumption. Traditional RES (solid biomass and hydropower) still account for well above 80% of total RES consumption in Slovenia, compared with well below 60% in the EU overall. The extensive use of biomass for heating is generally desirable, but if biomass is not properly managed, it can also be unfavourable from the aspect of particle pollution. 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 has predominated after 2010. Support for solar power plants accounted for 64%, support for biomass power plants for 20% and support for biogas power plants for 11% of all support in 2020. The rest was dedicated to hydropower plants. The total amount of support, which had declined in the previous two years, rose by 7% to EUR 103 million in 2020.

4. Modal split of transport

Owing to Slovenia’s transit location, road freight traffic is relatively dense, but as a lot of freight is also transported by rail, the share of road transport is lower than in the EU as a whole. Over a longer period, the share of road transport declined slightly, to less than two thirds (the EU average is around three quarters). In 2005–2018, the volume of road freight transport increased by around 30%; the volume of freight transport by rail rose almost twice as much (in the EU by less than 8% in both transport modes). From the environmental perspective, a high growth of road transport is less desirable. Road freight transport increased in Slovenia particularly due to the rising transit traffic – more than three quarters of transport in Slovenia is thus already accounted for by foreign hauliers (predominantly from Hungary, Croatia and Romania). The increased transit is a consequence of EU enlargements and the opening of competition between hauliers on the common transport market, but it is also related to Slovenia’s small size and its transit location. The volume of total freight transport per inhabitant is very high in Slovenia, being higher only in five other EU Member States. Within that, transport by road is a fifth higher and transport by rail 2.5 times higher than the EU average. With the modernisation of the Divača-Koper railway line, railway transport will strengthen further, as it is to a large extent linked to the transshipment of goods in the Port of Koper. We estimate that in 2019 the share of road freight transport increased slightly, while in 2020 it remained approximately the same.

Transport by passenger car is the predominant mode of passenger transport in all EU Member States, but in Slovenia its share is among the highest. This can in part be attributed to the diversity of its landscape and its dispersed settlements, which – in spite of subsidies – limit a greater extension of the public passenger transport network and its profitability. 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 used relatively little in comparison with transport by car), the share of transportation expenditure in total household expenditure is also higher than in the EU (in Slovenia 18%, in the EU 12%). In 2020, Slovenia faced major restrictions on public passenger transport due to the epidemic. Car travel was also limited owing to the closure of municipalities and quarantines. The already low share of public passenger transport in total transport is thus likely to have fallen further. 

5. Resource productivity

Resource productivity and material consumption per capita are approximately on par with the EU average. Resource productivity, expressed as the ratio of GDP to material consumption, increased the most in 2007–2012 amid a decline in construction activity. The decline in construction activity was related to the global financial crisis and the completion of the motorway network (most of which was built until 2009). The consumption of non-metallic minerals, which had accounted for more than two thirds of total material consumption, therefore dropped significantly. The decline in total material consumption after 2011 was, in addition to lower consumption of non-metallic minerals, also significantly influenced by changes in thermal power generation (lower coal consumption). In 2019, when growth in construction activity again slowed significantly, the consumption of non-metallic minerals fell by almost 15%, which led to a significant improvement in resource productivity (to an only few percent lag behind the EU average). In 2020, construction activity was not significantly affected by measures to contain the epidemic. A somewhat larger decline was recorded only for liquid fuel consumption, so that no major change in material productivity is to be expected. 

Slovenia’s self-sufficiency in materials is slightly above the EU average. Slovenia is well supplied with some resources. In the breakdown of domestic extracted resources, more than half is sand, gravel, limestone and gypsum. Other important domestic resources are agricultural products, lignite and wood. Net imports account for around 13% of total material consumption. In 2019, the bulk of net imports were petroleum products, gas, metal ores and agricultural products. Since the ice glaze damage in 2014, only net exports of wood, particularly sawlogs and veneer logs, have been relatively high, but in 2019 they were already lower, the lowest in the last five-year period. High net exports of raw material otherwise decrease domestic material consumption in the calculation, but from the point of view of efficient use of domestic resources, they mean untapped potential for creating higher value added in the domestic manufacturing industry.

6. Waste

The quantity of generated waste, having declined during the global financial crisis, has again been rising following it. Around 8.4 million tonnes of waste was created in 2019, which is roughly the same as one year earlier, but 88% more than in 2012 when their quantity was the lowest in the analysed period (since 2000). Around nine tenths of waste was generated in production and service activities. After 2012, the amount of waste increased due to a significant rise in mineral, i.e. construction, waste, which accounts for the majority of waste due to its high specific weight (the quantity of this waste almost tripled in the period analysed). Municipal waste has increased by 43% since 2012, its quantity per person already exceeding the EU average. Especially problematic for the environment is hazardous waste. This is however also increasing in the long term and accounts for around 2% of the total weight of waste.

With more waste recovered, the share of landfilled waste has been successfully reduced, but storing the increasing amount of waste in landfills remains a significant problem. In total, around 9.4 million tonnes of waste was recovered in 2019. In the total amount of recovered waste, which is also increasing with rising quantities of generated waste, recycling (a very desirable form of recovery from an environmental perspective) is increasing more slowly, while backfilling is increasing faster. Landfilling, the least favoured option in the waste-management hierarchy, has been successfully reduced in recent years. Within that, landfilling also decreased in municipal waste, around three quarters of which was already collected separately, while recycling increased significantly. The main problem is the growing amount of packaging waste, which needs to be addressed by more radical measures, including the promotion of reduced use of packaging materials. 



7. Environmental taxes

After rapid growth in previous years, revenues from environmentally related taxes have remained roughly unchanged in nominal terms since 2017. In 2019, nominal revenues were slightly lower year on year for the first time since 2011 (-0.3%) due to a decline in revenues from energy taxes and taxes on pollution. Long-term revenue growth before 2018 was underpinned mainly by growth in fuel consumption in transport and excise duties on motor fuels, which moderated significantly in 2018–2019. The moderation of growth is linked to lower excise duties on unleaded petrol and diesel, introduced in May 2018 to neutralise the pressure from high crude oil prices, and the slowdown in economic growth. In 2020, excise duties declined slightly further, particularly on petrol, while excise duties on diesel approached 2019 levels towards the end of the year after a decline in the first half. According to preliminary state budget data, in 2020 the decline in revenue from excise duties deepened due to both lower excised duties and lower traffic (freight and passenger) as a consequence of the containment measures related to the epidemic. 

Revenue from environmental taxes as a share of GDP are among the highest in the EU, despite the decline. In 2005–2016, they increased relative to GDP due to a rise in taxes on energy, then fell notably in the following three years, in 2019 to 3.3% of GDP. Compared with the EU average, their share in GDP was significantly higher. However, since 2013, when the gap was the widest, it has been narrowing and was less than 1 p.p. in 2019. The gap arises from energy taxes, which accounted for 84% of all environmental taxes in Slovenia in 2019. The high figure in Slovenia is a consequence of relatively high purchases and consumption of energy, which is related not only to extensive transit traffic and the strong transport sector in Slovenia, but also to dispersed settlement and the insufficiently developed public transport infrastructure.

8. Ecological footprint

Slovenia’s ecological footprint, a composite indicator of environmental development, remained unchanged in 2015–2017 and close to the EU average, which indicates a significant environmental burden. It is expressed in global hectares (gha), a standardised unit of biologically productive area. A 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 waste 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). Slovenia’s ecological footprint declined during the global financial crisis, then – unlike the EU average – increased slightly. In 2015–2017 it amounted to 4.9 gha/person (4.90 in 2017 and 4.87 in 2015 and 2016). In 2017, the last year of the calculation, it was 3% higher than the EU average and also higher than in most neighbouring countries. This indicates economic development with a relatively high level of natural resource use and environmental pollution, meaning that Slovenia is not on track to achieve the SDS target. 

With its relatively high ecological footprint, the ecological deficit, i.e. the negative difference between the ecological footprint and biological capacity, was also high. Biological capacity or biocapacity refers to the 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. Biocapacity is fairly stable and does not change significantly from year to year. The bulk of Slovenia’s biocapacity is accounted for by forests, which despite their large surface area cannot sufficiently absorb carbon dioxide emissions. The share of other areas, particularly cropland and fishing grounds, is relatively modest compared to the EU average. The results of the latest calculations show that Slovenia’s ecological footprint is more than twice as high as the capacity of its nature to regenerate. Most EU Member States have an ecological deficit – only some Northern countries with sustainable economies and relatively extensive fishing grounds have an ecological reserve. The ecological deficit in Slovenia is higher than the EU average and the global average. 

9. Utilised agricultural area

Utilised agricultural area in Slovenia accounts for a significantly lower share of total land than in the EU as a whole, but after a long-term decline, this relatively modest share has stabilised. In 2019, utilised agricultural area (UAA) covered around 480,000 hectares. Mainly due to the abandonment of agriculture and overgrowth of land by trees and shrubs, but also its conversion to built-up land, this is 15% less than when Slovenia became independent, but the same as in 2012. 

In light of ensuring conditions for local food production, the modest share of arable land is particularly worrying. In terms of arable land per person, which is the most important type of land from a food security point of view, Slovenia is one of the last four countries in the EU. In 2019, arable land per person amounted to around 8.4 ares (the EU average: 22.2 ares) or 174,000 hectares in total. Only around 3% of this land was dedicated to growing vegetables, as a large share of fields is used to grow fodder crops. These are also produced on permanent grassland, which covered the most, or around six tenths of utilised arable land. Around 6% of agricultural area was accounted for by permanent cropland, where vineyards and orchards predominated. 

Organic farming, the most desirable form of agricultural production from an environmental perspective, is more widespread in Slovenia than in the EU as a whole and is increasing. One tenth of all agricultural holdings were included in controlled organic farming in 2019. Also here, permanent meadows and pastures dedicated to the production of fodder account for the largest share, the shares of other types of land being relatively small. This is, however, not in line with demand, which is greatest for ecologically produced fresh fruit and vegetables and vegetarian processed foods. There is still considerable scope for further development of organic farming in Slovenia, given the natural conditions, i.e. the high share of farms in mountainous and other remote areas where intensive conventional farming is not possible. 

10. Agricultural intensity

Given its moderate average crop and animal production, Slovenia is not among the countries with high farming intensity. The development of Slovenian agriculture has for some time been marked by dualism: 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 an environmental perspective. 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 is usually higher. Under the impact of weather conditions, the yields of all crops fluctuate significantly from year to year, but in the long term they are rising with improvements in technology. As long as they are not too high, this means an improvement in the exploitation of natural resources. The environmental burden of livestock production, as measured by the number of animals per unit of agricultural area, is not among the lowest given the natural conditions, but the average milk yield per animal is below the EU average. From the point of view of the burden on animals, this is favourable, but from the point of view of the environmental impact per unit of production, it could be somewhat higher. 

As to the consumption of main agricultural inputs, the decline in the consumption of mineral fertilisers achieved in the previous decade stopped, while the consumption of pesticides has increased again in the last few years. Following a decline in the consumption of main macronutrients from mineral fertilisers (nitrogen, phosphorus and potassium, i.e. NPK fertilisers) per unit of utilised agricultural area until the end of the previous decade, no major progress has been made in subsequent years amid significant annual fluctuations. The use of pesticides, measured in terms of the total quantity of active ingredients sold, has also been falling in the long term. Pesticide sales, however, depend on weather conditions and the consequent outbreaks of plant diseases and pests, but since 2013 they have been rising – in 2018, they were at approximately the same level as a decade earlier. The consumption of both agricultural inputs is above the EU average, but it is difficult to measure particularly for pesticides, because it is the sum of active ingredients with different toxicity levels. 

11. Intensity of tree felling

In 2014–2019, the intensity of tree felling increased as a result of sanitary felling after major natural disasters. The severe tree damage caused by the glaze ice in 2014 was, as expected, exacerbated by a rapid spread of the spruce bark beetle in subsequent years, while in 2017 and 2018 forests were additionally damaged by strong windthrow. In the six-year period following the glaze ice, approximately half more wood mass was cut per year than one year earlier. 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 wood increment, rose to around 60% in 2019, thus coming somewhat closer to the goal determined in the action plan (Action Plan to Increase the Competitiveness of the Forest–Wood Chain in Slovenia by 2020) 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, declined, while the scope of sanitary felling increased, to around two thirds of total felling. 

Increased removal has been reflected in increased raw wood production, but the possibilities for further development of the forest-wood chain (given the high share of land covered by forest and a high and rising wood supply) remain poorly exploited. After the glaze ice damage, production has increased for all wood categories, particularly pulpwood, but also sawlogs and veneer logs, i.e. the highest-quality wood, which generates the highest value added. However, external trade in unprocessed wood has increased more than total production. With annual imports dropping by around a tenth, total exports have increased by around 70% annually in the period after the ice damage, exports of coniferous logs alone by 120%. 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. 

12. Quality of watercourses

The quality of Slovenian watercourses is high, but the further improvement as determined in the SDS came to a halt after 2016. River quality, as measured by biochemical oxygen demand, which was close to the EU average at the beginning of the previous decade, has improved significantly since 2005. For several years it has been among the highest among the EU Member States for which data are available. The concentrations of nitrates in groundwater and phosphates in rivers, which in excessive quantities degrade water quality, have also fallen in the long term and are below the EU average. 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 abandonment of certain economic activities, which were polluting watercourses with wastewaters in previous years.

Four fifths of abstracted water is from surface water sources and used primarily in industry; 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, 944 million m3 of water in total was abstracted in 2019, 4% less than five years before. Most of it was abstracted from surface waters and used in industry. Only one fifth was abstracted from groundwater resources and intended primarily for the public water supply system. A total of 997 million m3 of wastewater was discharged into the environment. After 2015, the share of water treated before discharge doubled, to around one fifth. The remaining majority of waste water remained untreated, but it was mostly polluted only by heat, mainly as it was used as a coolant in hydropower plants. 

13. Ambient air quality

Poor quality of ambient air in Slovenia is highly related to excessive particulate matter (PM) pollution, which is mainly a consequence of inappropriate burning of wood biomass and poor ventilation of some areas. The majority of particle (PM10) pollution, around 60%, is due to emissions from small combustion sources, to a great extent 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. With pronounced temperature inversions, even a relatively low emission density can cause excessive air pollution. As there are no such problems in the warm season, data on the average annual values show a better picture than data on the number of days with exceeded the daily limit value, which are typical of the cold months of the year. Another major source of particle emissions is energy use in industrial processes and fuel combustion in industry, followed by road transport emissions. In recent years, the general average exposure of the urban population to particle pollution has been declining, partly as a result of milder winters, but exposure to the smallest particles is still significantly 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. In Slovenia, the ambient concentration of ozone is significantly affected by transboundary air pollution and is highly dependent on winds from the west. It is highest in the Primorska region, although it is also high in most other areas, even in rural areas and at higher altitudes (ARSO, 2021b). As ozone concentrations are strongly dependent on weather conditions, the multi-annual series of data does not indicate a clear trend, but according to the most recent data, the exposure of the urban population to ozone was higher than the EU average.

14. Functionally derelict areas

Since 2017, the total functionally derelict area (FDA) has increased, but a revival of some areas has also been observed. Overall 1,167 FDAs (with a total area of 3,747 ha) were identified in the survey,  their average size amounting to 3.2 ha. Between the surveys in 2017 and 2020, the number of FDAs increased by 86 and their total area by 324 ha, which means an increase of 8% and 9%, respectively. The majority are sites degraded by former industrial and commercial activities. These are also relatively large (around 5 ha). The changes after 2017 include newly created FDAs (mostly FDAs of infrastructures and service activities) and revived areas deleted from FDA records. The majority of the latter were FDAs degraded by industrial and craft activities. 

In the analysed period of 2017–2020, 8% of FDAs were regenerated successfully; however, as a consequence of the COVID-19 epidemic, new ones are expected to be created in the areas of more affected activities. The following developments were identified by the survey: (I) some FDAs experienced no changes, (ii) some experienced major changes, (iii) new FDAs were created, (iv) some FDAs were back in operation. On more than half of FDAs, no changes occurred in the time between the surveys, mainly because of ownership problems, lack of owners’ interest for change, financial problems or the refusal to locate an unsuitable project to the site. The number of such FDAs was the largest in the Primorsko-notranjska and the smallest in the Obalno-kraška region. Major changes (on around a quarter of FDAs) occurred for two reasons – a beginning of regeneration processes and a revival of some FDAs, particularly on abandoned construction sites and some areas of industrial and service activities. Elsewhere, major changes meant further degradation or change in ownership and development plans, usually as a result of stranded investments, lengthy bankruptcy proceedings or illegal land use changes. In the structure of changes, the most changes in FDAs were in the Posavska and the least in the Pomurska region. Overall, 193 new FDAs were identified after 2017 (around 15% of all). They were mostly FDAs of infrastructure, service activities and transitional use. The number of new FDAs was the largest in the Obalno-kraška and the smallest in the Primorsko-notranjska and Zasavska regions. Around 8% of FDAs were rehabilitated successfully and a new function of the area was established (they were mostly FDAs of former industrial activities). The number of successful regenerations was the largest in the Savinjska and Podravska regions (more than a tenth of all). However, in activities related to the revitalisation and establishment of new activities in functionally derelict areas, which were successfully underway before the COVID-19 epidemic, changes can already be seen. In the areas of the more affected sectors (e.g. services, tourism and recreation), we expect the abandonment of activity; where legal and financial conditions allow, the return of degraded areas to operation will accelerate.


1. Trust in institutions

After several years of improvement, trust in most institutions decreased in 2020. It was the highest and above the EU average in 2006, but has dropped significantly since then. Trust in most institutions was the lowest at the end of the global financial crisis, while it improved in 2013–2019. Trust in political parties increased slightly only in 2017. Compared to the previous year, trust in the government, parliament and political parties decreased in 2020, which can be attributed to the deterioration of macroeconomic indicators due to the spread of the COVID-19 epidemic and, consequently, to the increased dissatisfaction of respondents with the economic and general situation in Slovenia. Satisfaction with democracy also declined. In Slovenia, the share of those who believe that the restrictions on human rights and freedoms introduced to contain the epidemic were unjustified was among the highest in the EU (30%). However, trust in local authorities has increased and this is still the institution people trust the most, while political parties are the least trusted institution. Trust in all institutions remained below the EU average in 2020 as well.

Trust in the EU and its institutions has increased since 2015. It was the highest in 2006 and the lowest in 2015, and has been rising again since then. In 2020, trust in the EU increased slightly compared to the previous year, as did trust in European institutions. In Slovenia, 47% of respondents trusted the EU, which is more than the EU average; 46% of respondents trusted the European Parliament and slightly fewer trusted the European Commission and the European Central Bank (44%), with all these shares also being around the EU average.

2. Executive capacity

The executive capacity indicator, which measures the strategic governance of public institutions, is gradually improving in Slovenia, but remains low compared to other EU Member States. 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, the implementation of set measures, adaptability, and the capacity for reforming the public administration. Since 2017, the indicator value and Slovenia’s rank among the EU Member States have improved, but Slovenia continues to lag significantly behind the EU average in all indicator dimensions. 

A low executive capacity score points to the relatively low values of the government and institutional performance indicators. In the SGI survey (Bertelsmann, 2020), the main weaknesses identified were in effective strategic planning and organisational reforms, where only limited progress has been made in recent years. The implementation of policy measures at various levels of government (both central and local) is also assessed as significantly worse than in other EU Member States. One of the issues is political interference in recruiting in the state administration, even at expert levels. Despite the progress made over the past year, Slovenia also lags behind other countries in producing a comprehensive assessment of the impact of proposed regulations (RIA) on public finances, the economy, the environment and society as a whole.

Executive capacity indicator by dimension, 2020 

3. The Rule of Law Index

Slovenia ranks in the lower half of EU Member States according to data for 2019 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 the 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 Member States on the Rule of Law Index, Slovenia lags behind the SDS target. Its ranking points to weaknesses in 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 to the EU average is fundamental rights, where it scores well on the right to life and security and labour rights indicators. On the other hand, it lags well behind the EU average in criminal justice, with indicators in this area reflecting mistrust in the justice system, particularly its independence. The weaknesses in adherence to the rule of law are also indicated by the low indicator values in the areas of constraints on government powers (e.g. the sanctions for official misconduct indicator) and the absence of corruption (e.g. the risk of corruption in the executive branch and in the legislature).

Rule of Law Index by sub-component, 2019

4. The expected time needed to resolve litigious civil and commercial cases

The expected time needed to resolve litigious civil and commercial cases shortened significantly in 2008–2018, but remains longer than in the EU. In 2008–2014, Slovenia shortened the expected time needed to resolve litigious civil and commercial cases by more than 40%, in large part due to the project to eliminate court backlogs and other structural reforms (e.g. insolvency legislation). Since 2014, the time needed to resolve these cases has increased slightly (to 283 days in 2018), mainly due to new competences given to the courts and the higher number of major cases. The gap with the EU has also widened, with court proceedings related to money laundering taking the longest compared to other countries. Meanwhile, the expected length of second- and third-instance proceedings – where Slovenia performs better than the EU average – has shortened. However, owing to the different data and methodology 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 over the past five years, and in 2020 the COVID-19 epidemic had a significant impact on the functioning of the courts. 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, but this amount of time has not changed significantly since 2016. This can be attributed to the increasing number of more complex proceedings and new competences given to the courts by legislative amendments. The clearance rate for major cases exceeded 100% in 2016–2019, meaning that the courts resolved more cases than came in. With the COVID-19 epidemic, the number of all cases received (including major cases) decreased, as did the number of cases resolved. The courts were unable to resolve all cases brought before them due to the operating restrictions, thus resolving 5% fewer major cases than came in (there were 0.2% fewer cases overall). The share of pending major cases in the total number of unresolved cases has thus increased (by 46.9% in 2016 and 60.9 % in 2020). The average time needed to resolve a case has shortened significantly over the past five years, to 1.1 months in 2020.

5. The Corruption Perception Index

The perception of corruption has not changed significantly in the last nine 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. Slovenia has made no significant progress in the corruption perception ranking since 2012, receiving the same score (60 out of the highest possible score of 100) for the third year in a row. This means that it continues to lag behind the EU average, but still ranks better than most countries that joined the EU after 2003. According to Eurobarometer (Eurobarometer 2020b), 87% of respondents 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. The Commission for the Prevention of Corruption meanwhile finds that the greatest amount of 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 year 2020 was strongly marked by the COVID-19 epidemic and the ensuing crisis, which exposed a number of corruption risks, particularly in relation to the purchase of medical equipment. In 2020, some systemic changes were adopted in Slovenia (the adoption of an amendment to the Integrity and Prevention of Corruption Act), which are intended to provide tools enabling more efficient work of the Commission for the Prevention of Corruption and to delimit the power to prosecute criminal offences (ZIntPK-C, 2020).

6. 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 did not change in 2019 compared to the previous two years and is in line with the SDS target. It was 8% and remained below the EU average, but Slovenia's ranking among EU Member States deteriorated for the fourth year in a row. This shows that some other European countries have been more successful in reducing crime at the local level. The incidence of crime is affected by socio-economic factors, and crime is also more common in urban environments. In 2019, Jugovzhodna Slovenija stood out on this indicator. In this region, the share of households reporting problems with crime, vandalism or violence in the local area doubled over a ten-year period. The Posavska region also recorded a high and growing share of such households. Over a ten-year period, the share of such households fell the most in the Osrednjeslovenska region (by 10 percentage points), but remained above average in 2019 (12%). The Osrednjeslovenska region has the most urbanised areas in Slovenia, which increases the potential for crime. Important factors that contribute to a reduction in crime are a better quality of life for families in the community (the prevention and reduction of poverty and social exclusion), high quality implementation of educational work in schools, and more comprehensive organisation of social life and surveillance in the local community (Meško and Sotlar, 2012).

The 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 Slovenia. In 2017, the majority of Slovenian respondents (97%) considered their immediate neighbourhood to be a secure place to live in (Eurobarometer, 2017). According to a Slovenian Public Opinion Poll conducted during the first wave of the COVID-19 epidemic, 95% of respondents in Slovenia felt safe when walking alone in their neighbourhood at night, which is slightly more than in previous years and may also be partly due to the restrictive measures to contain the spread of the virus.

7. The Global Peace Index

According to the Global Peace Index, Slovenia ranked among the most peaceful countries in the world again in 2020. In 2016–2019, it was one of the ten most peaceful countries in the world, and in 2020 it ranked 11th out of 163 countries in the world and 5th among the EU Member States. While Slovenia is once again among the ten best performing countries in the area of militarisation (4th) and ranks 12th in the area of societal safety and security, it scores lower in the area of domestic and international conflict (52nd), which is mainly due to the still slightly worse assessment of relations with neighbouring countries and the intensity of organised internal conflicts. While Slovenia has made progress in the area of domestic and international conflict (up eight places) compared with the previous year, its ranking has deteriorated (by four places) especially in the area of societal safety and security. In this area, it has also scored slightly lower over the past decade with regard to 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, but these scores indicate certain shortcomings that do not significantly affect the assessment of peace in the country. According to the Global Peace Index for 2020, Europe remains the most peaceful region in the world and is home to six of the ten most peaceful countries in the world (four of which are EU Member States). The Middle East and North Africa remain the least peaceful regions. Iceland remains the most peaceful country in the world, and Afghanistan the least. The Global Peace Index has deteriorated over the past decade, mainly due to the intensification of conflicts in the Middle East, terrorism, rising regional tensions in Eastern Europe and Northeast Asia, migration trends, and heightened political tensions in Europe and the United States, while new tensions and uncertainties have already been arising from the COVID-19 pandemic (IEP, 2020b).

8. Expenditure on official development assistance

In 2019, expenditure on official development assistance remained significantly lower than international commitments. Official development assistance is defined as aid provided by advanced countries in support of sustainable development in developing countries. In 2019, Slovenia allocated EUR 77.44 million for development assistance, 9% more than in 2018, thus maintaining the share of GNI dedicated for this purpose, which remained significantly below the EU average. 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. 

Funds for paying the tuition fees of and scholarships for citizens from partner countries studying in Slovenia, as well as assistance focused on specific projects, made the greatest contribution to the increase in funds for official development assistance in 2019. In recent years, the level of aid has been strongly influenced by migration trends, especially in relation to the situation in the Middle East, which, with the exception of 2017, is reflected in the increased costs of caring for refugees and migrants in Slovenia. These decreased slightly in 2019, as did the dedicated contributions for specific programmes of international organisations, but both types of assistance still remain relatively high in terms of funding. Development assistance is the sum of multilateral assistance (funding provided for the regular development activities of international organisations) and bilateral assistance. In 2019, Slovenia again dedicated most of its bilateral aid  to Western Balkan countries, 68% in total, which is the same as in 2018 and more than the average over the last five years (63%). Most of this aid was allocated to quality education projects (funds for paying tuition fees and scholarships). In 2019, expenditure on multilateral assistance also increased, of which the largest share (83%) was dedicated to EU development cooperation programmes.