On 30 January 2024 the IMF issued a report following discussions with Slovenia under Article IV of the IMF’s articles of agreement.

The Slovenian economy has recovered from the pandemic but has been affected by the war in Ukraine. Following a recovery in 2021, economic growth slowed in 2022 and is estimated to have fallen further in 2023 to less than 1.5% owing to reduced consumption and weaker growth of trading partner countries. Severe floods in August 2023 caused damage estimated at almost 5% of GDP, with additional costs of upgrading infrastructure to be more climate resilient.

In 2024 economic growth is expected to recover to around 2%, driven by domestic demand, higher flood-related investment, and higher consumption. The IMF expects growth to return to around 2.5% to 2.75% in the medium term as private consumption and trading partners strengthen. To rebuild fiscal space and reduce debt a tighter fiscal stance is needed. Slovenia has age-related spending pressures, and relatively high public debt. Structural reforms are needed to support public debt sustainability.

Recent revenue measures to temporarily increase corporate and bank taxes can help to finance post-flood reconstruction. The bank tax includes the use of bank assets as a taxation base, which is not the optimal design. The cap on the tax, set at 30% of pre-tax profits of the bank, will act as a safeguard. EU grants can also support the rebuilding and upgrading of infrastructure.

The IMF considers that the important structural fiscal reforms should be implemented faster. The reform of the pension system should be prioritised owing to the higher expected pension spending over the medium and long term. Also, reforms to the retirement age, the required number of years of contributions and indexation could help to contain pension costs. Retirement savings could be increased by stronger second and third pension pillars.

Slovenia should consider reducing labour taxes while broadening the corporate and income tax bases and increasing the property tax. Although the contribution of labour to growth has been strong in recent years, owing to increased labour force participation and positive net inward migration, the focus should now be on productivity growth. Higher overall investment and further structural reforms to address skill shortages and improve regulatory quality would promote the growth of productivity.

The recent floods have increased the urgency of continuing to adapt to climate change. Slovenia needs to focus on flood risk management. Climate mitigation can be improved by continuing to promote investment in renewables and reducing carbon price exemptions in the polluting industries.