Slovenia and EU Accession - Economy

Slovenia has a robust economy that has been experiencing significant positive growth since 1993. It’s most distinguishing feature is its strength compared to the other economies in its region (the former Yugoslavia) and relative the other EU candidate states.

Slovenia By The Numbers
Slovenia has a few economic indicators to boast about, a few that are about average in the EU, and a few that need concentration to ensure future economic stability.¹

Other Numbers of Note:

• Population: 1,935,677
• Work Force: 857, 400
• GDP (2002): USD $36 billion
• Gini Index: 28.4
• Primary Import Countries: Germany, Italy, France, Austria, Croatia
• Primary Export Countries: Germany, Italy, Croatia, Austria, France
• Import activity with current EU members: 84%
• Export activity with current EU members:74%
• Composition of Sectors: Agriculture – 3.2%, Industry – 36.3%, Services – 60.5%

Strong Aspects of the Slovenian Economy
A key to Slovenia’s strong economy is its emphasis on exports. It has important trading partners both to the East and the West. While it still has a small net trade deficit, it exports nearly a third of its GDP.

The economic growth in Slovenia has been steady over the past ten years, staying within the range of 3-5% real growth of GDP.

Foreign Direct Investment has recently risen from 1% to 3% of GDP and connotes a positive environment for investment, despite the current general European slump. Although Slovenia’s level of FDI is increasing and is seen as a positive aspect of the economy, it could also potentially be a weak area because Slovenians see it as a mark of their economic independence. One economist projected that this cavalier mindset could stagnate potential growth if it prevented Slovenia from pursuing optimal FDI in the future.

Current Economic Concerns
Slovenia’s current inflation rate and history are the primary economic concern, though it is projected that the inflation rate will continue to fall and could be as low as 6% by the end of 2003. Unemployment is the other most noteworthy problem. While unemployment also has a decreasing trend on the whole, certain regional and demographic slices are being more notably affected than others. Unskilled and older workers are the most affected. The Slovenian government has addressed this concern in the National program for the labour market development and employment by 2006. This program will seek to create new jobs, facilitate employers and job searchers in the job-hunting process, and eliminate bureaucratic red-tape in the hiring process.

EU Accession and Goals for the Future
When looking at the Copenhagen Criteria in the area of the economy, Slovenia finds itself poised to make a successful entry into the EU on May 1st, 2004.

The existence of a functioning market economy
“Slovenia continues to implement structural and institutional reforms providing conditions for a functioning market economy. The legal framework has been provided and implemented to a large degree. A functioning market economy and a stable macroeconomic environment should provide a solid foundation for Slovenia’s economy to be able to cope with competitive pressure in the single EU market.”²

The capacity to cope with competitive pressure and EU market forces
“A functioning market economy, sustainable growth, a stable macroeconomic environment, and the accelerated building of institutions of a market economy lay a rather solid foundation for Slovenia’s economy to cope with competitive pressure in the EU single market. Budgetary controls have been properly established, the current account position shows a surplus, external debt is still relatively low, while the economy’s integration into international environment is high. Inflation, which was maintained at a relatively high level in the past three years, has been dropping in 2003. Labour force is well-qualified and records high productivity compared to other candidate countries. Despite some pending market and structural reforms, Slovenia may be assessed as a functioning market economy capable of coping with competitive pressure in the single EU market in the near future.”³

The outlook is optimistic for Slovenia’s economy. A recent study has released some forecasts for the near future.⁴ A gradual acceleration of economic growth is expected through 2007, reaching as high as 4.5% annually. Productivity growth as a leading variable to labor wage will raise the wage and probably increase consumption by as much as 3.5%. Investment growth is expected to raise the economy’s competitiveness and maintain high export growth rates, so the increased domestic demand should not significantly reduce the current account surplus.

¹ All figures 2002 unless otherwise noted.
² “Report on Slovenia’s Progress Towards Accession to the European Union,” The Republic of Slovenia, July 2003
³ “Report on Slovenia’s Progress Towards Accession to the European Union,” The Republic of Slovenia, July 2003
⁴ From the 2003 Spring Report (IMAD, May 2003)

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