Slovenia Economy

Slovenia Economy

Subchapters:

  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

According to GDP per capita, Slovenia is the 27th strongest economy in the world and 13th within the EU27. After a significant drop in GDP in 2020 (-4.2%) due to the COVID-19 pandemic, there was an unprecedented economic growth of 8.1% in 2021, which is a record value in the history of independent Slovenia. The positive trend is mainly the result of faster growth in private consumption, investments in fixed capital and exports, as well as more favorable conditions on the labor market. Following the continuing uncertainty in connection with the epidemiological situation and, in particular, the disruption of supply and production chains, high prices of energy products and raw materials, the further rise in prices of which may be triggered by the ongoing war conflict in Ukraine and the sanctions imposed against the Russian Federation, a reduction in economic activity can be expected in the next period. The labor market situation has stabilized quickly thanks to anti-crisis measures, the average unemployment rate for 2021 has decreased and is expected to decrease further, which will bring challenges to employers in finding qualified labor and pressure on wages. However, real wage growth will be hampered by the high rate of inflation. After deflation in 2020, there was a gradual increase in prices in 2021, initially mainly for energy products and food, this year also for services and non-energy industrial goods, which will lead to a strengthening of inflation up to 6.4%, after which it will gradually reduce, but it will only approach the 2% limit in 2024. Slovenian national debt increased from 66.1% to 79.8% of GDP in 2020, and decreased to 74.9% of GDP at the end of 2021 and its further reduction is assumed. In 2020, a high state budget deficit of 7 was also created,

According to cheeroutdoor.com, Slovenia is a significantly export-oriented economy. Traditionally, the strongest export sectors are the automotive and pharmaceutical industries, as well as the chemical, electrotechnical, woodworking, furniture, transport and logistics industries. Until the COVID-19 pandemic, tourism played a significant role, accounting for more than 40% of service exports and 12% of the country’s GDP, however, it is currently, together with congress tourism and air transport, one of the most exposed sectors, the recovery of which will be long-term. In addition to exports, the driving force of the Slovenian economy is also domestic consumption and investment. Economic policy and investment are oriented towards high added sectors and focus on infrastructure, ecology, energy, ICT, artificial intelligence and science and research.

More information:

  • The Institute of Macroeconomic Analysis and Development of the Republic of Slovenia
  • Statistical Office of the Republic of Slovenia
Pointer 2020 2021 2022 2023 2024
GDP growth (%) -4.2 8.1 4.2 3.0 2.8
GDP/population (USD/PPP) 39,478.40 43,520.00 47,210.00 49,200.0 51,860.0
Inflation (%) -0.3 1.9 6.4 3.2 2.4
Unemployment (%) 8.7 7.6 6.2 6.0 5.7
Export of goods (billion USD) 40.3 57 62.5 68.6 67.8
Import of goods (billion USD) 37.7 55.9 62.6 69.5 68.8
Trade Balance (Billion USD) 2.7 1.7 0.9 0.4 0.4
Industrial production (% change) -5.2 11.9 6,7 3.7 3.6
Population (millions) 2.1 2.1 2.1 2.1 2.1
Competitiveness 35/63 40/64 ON ON ON
OECD export risk ON ON ON ON ON

Source: EIU, OECD, IMD, IMAD, CCIS

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) 3.2
Public debt (% of GDP) 74.9
Current account balance (billion EUR) 1.7
Taxes 2022
AFTER 19%
F.O progressive 16 – 50%
VAT 22% general rate, 9.5% reduced, 5% special

In 2018 and 2019, Slovenia operated with surplus budgets and with a view to increasing the positive budget balance with the aim of reducing the national debt, but this trend was interrupted by the COVID-19 pandemic. In order to mitigate its impact, the government has so far approved a total of 10 packages of anti-crisis measures, and according to data from the Fiscal Council, a total of EUR billion has been spent to combat the crisis (April 2022). Among the key measures in the area of ​​the economy are in particular the mechanism of waiting for work (the employee “waits” in readiness at home and receives compensation of up to 80-100% of the salary) and subsidies for reduced working hours (kurzarbeit). Other measures include, for example, a universal monthly income for self-employed people, moratoriums on loans, a state guarantee scheme for bridging loans, financial compensation for fixed operating costs,

Pandemic-related expenses and lower tax revenues led to the creation of a high state budget deficit of 7.7% of GDP in 2020, it decreased to 5.2% of GDP in 2021, it should decrease further in the following years, and in in 2024, it is already expected to be realized in accordance with the Maastricht criteria (i.e. up to 3% of GDP). State debt increased from 66.1% to 79.8% of GDP in 2020, decreased to 74.9% of GDP at the end of 2021, and is expected to decrease further.

However, according to the Ministry of Finance, Slovenian public finances are stable, which is also proven by the current evaluations of foreign rating agencies: Standard & Poor’s: AA-, stable outlook; Moody’s: A3 with stable outlook; Fitch: A, stable outlook; DBRS: A high, stable outlook.

More information:

  • Fiscal Council
  • Ministry of Finance

Banking system

The main regulator of the banking sector is the Central Slovenian Bank ( Banka Slovenije ), which has been a public entity since 1991, independently managing its assets. In connection with the introduction of the euro, it is governed by the provisions of the ECB and the European System of Central Banks (ESCB).

Currently, there are 14 commercial banks and savings banks operating in Slovenia, with a total balance sheet total of EUR 47.4 billion in 2021 and a return on equity (ROE) of 9.85%. Despite the COVID-19 pandemic, the banking sector is stable and relatively concentrated, dominated by two banking houses: Nová Ljublánská banka ( NLB ) and Nová kreditní banka Maribor ( NKBM ), which together will manage over 58% of all of banking assets in the country . Both banks were exclusively owned by the state for a long time and were sold only recently:

  • NKBM was privatized in 2015, and merged with Abanka in 2020. In 2021, the bank was bought by the Hungarian group OTP, which already owns SKB bank on the Slovenian market, the newly established banking group will thus have a 28.5% market share .
  • The government decided to sell a 59.1% stake in NLB to several minority owners in the form of a public offer of shares in 2018. The largest shareholder is the Bank of New York Mellon, the state retained only a controlling stake of 25% + 1 share in NLB. As a result of Russian aggression in Ukraine and sanctions against Russia, NLB took over the Slovenian branch of the Russian Sberbank in a flash in 2022, the newly created banking group will thus have a 29.6% market share.

Further consolidation of the banking system is also expected, with economists estimating that there will be only 6-7 banking institutions on the Slovenian market in the future.

During 2021, several banks (namely NLB, NKBM, SKB, Delavska hranilnica, Unicredit) introduced negative interest rates for the first time on deposits and balances on savings or personal accounts of natural persons. They currently apply to amounts above EUR 100,000 and amount to 0.04% of the amount in question.

More information:

  • The Bank Association of Slovenia

Tax system

DIRECT TAXES

Corporate income tax is levied on the taxable profit of private companies at the rate of 19% in accordance with the Law on Corporate Income Tax ( Zakon o davku od dohodkov príjne oseb ). The withholding tax rate is 15%. Capital gains are also considered ordinary income of the PO and are therefore also taxed at a rate of 19%.

Personal income tax is progressive according to the amount of income in accordance with the FO Income Tax Act ( Zakon o dohodnini ), the amount of taxation is as follows (tax class/annual income): 16% (<€8500), 26% (<25000 ) €), 33% (<€50000), 39% (<€72000) and 45% (>€72000). FO capital gains (dividends, interest, real estate rental, securities) are taxed at a rate of 25% .

Direct property taxes:

  • Inheritance and gift tax
  • Property tax
  • Watercraft tax
  • Road tax
  • Tax on bank assets

Other direct taxes:

  • Tax on dividends
  • Tax on interest and royalties
  • Tonnage tax
  • Tax on derivatives
  • Labor tax for work
  • Social security contributions
  • Tax on lottery winnings
  • Tax on gambling profits

INDIRECT TAXES

Value added tax

The basic VAT rate is 22% in accordance with the law ( Zakon o davku na dodano vrednost ). The turnover threshold for VAT payers is EUR 50,000/year. The reduced rates are:

  • 9.5% food (except alcoholic beverages), medical devices and medicines, construction work, transport of people, accommodation services, tickets to cultural and sports institutions, babysitting, hairdressing services, small repairs of bicycles, shoes, leather products and clothes, hygiene means for women etc.
  • 5% printed and electronic books, newspapers, magazines, maps, musical works

Other indirect taxes:

  • Consumption tax
  • Insurance policy tax
  • Real estate transfer tax
  • Motor vehicle tax
  • Financial services tax
  • Tax on winning lottery tickets

More information:

  • Portal Slovenia Business Point – Taxes
  • Financial Administration of the Republic of Slovenia

Slovenia Economy