No Time to Waste
Slovenia has been lagging the EU in terms of development over the past few years, the government’s economic think-tank, IMAD, announced after publishing the Spring Report that predicts a very slow recovery of the Slovenian economy in the next few years. Structural deficiencies in the Slovenian economy are critically blocking the country’s recovery from the crisis.
Continuously sliding backward
While Slovenia’s GDP per capita reached 91% of the EU average in 2008, it slipped to 85% in 2010.
Head of IMAD, Boštjan Vasle, explained that last year’s data showed further deterioration, while forecasts for 2012 are also not very optimistic. Slovenia has fallen back to 2005 and 2006 levels. IMAD moreover noted that the deterioration of economic and social factors during the crisis had not been brought about only by the global financial and economic crisis, but mainly by structural deficiencies in the Slovenian economy which were laid bare by the crisis. Subsequently, growth of Slovenia’s economy plunged from 3.5% and 4.5% before the crisis to less than 1%. Vasle reiterated that the consolidation of public finances, stabilising the banking sector and the financial restructuring of the indebted economy are key to improving the situation. In order to become competitive again, Slovenia must raise the economy’s capability for innovation and entering foreign markets. In terms of entering new markets, during the crisis Slovenia has fallen to 2002 levels.
Critical level of added value and FDI´s
The renovation and adaptation of social systems to demographic trends are crucial for the long-term recovery and growth of the Slovenian economy. Without this, recovery will not be possible despite measures aimed at consolidating public finances. Another reason why the domestic economy is lagging behind the EU average is, according to IMAD, low productivity which was around 20% below the EU average in 2010. Moreover,the added value of Slovenian companies was some 40% below the average despite the fact that the share of mid and high-tech companies in GDP are almost at the EU average.The country has boosted R&D investment which is, together with the education level of citizens, comparable to the EU average. The low level of direct foreign investment in the country is also a major issue, only Greece, Italy and Germany ranked lower than Slovenia in terms of FDI.
Still a good social situation and quality of life
The level of employment however was still 5% above EU average. The situation in the labour market has deteriorated over the past few years. Last year, the employment level was 5.6% lower than Slovenia’s target of 70% employment. The level of long-term unemployment doubled and reached 3.5% in 2011, while Slovenia had the highest share (72.5%) of youth in temporary employment in the bloc. In the 2009-2011 period, distributable income decreased for the first time since Slovenia’s independence, falling 2.3%. IMAD forecasts that it will edge down a further 0.3 % this year. Despite all the negative trends, quality of life indices remain favourable in Slovenia, IMAD said, explaining that access to public services, the education structure and life expectancy are improving, while Slovenians felt safe.
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