Quality of life in Slovenia – Development Report 2025

In the area of social development, the gap between Slovenia and the EU in terms of the population's material well-being has narrowed in recent years, alongside positive developments on the labour market. Income, wealth and wage inequality remain among the lowest in the EU, as do the AROPE rate and the at-risk-of-poverty rate, despite increases in the period 2022–2024. The Slovenian population is relatively well educated. Although youth literacy has declined, it remains above the EU average, while youth creativity continues to rank among the lowest in the EU. The number of healthy life years is well above the EU average, and several other health indicators have also improved. However, significant unmet needs for healthcare and long-term care persist. The environmental impact of production processes and lifestyles, as measured by the ecological footprint, is comparable to the EU average. The conservation of natural resources is relatively good: watercourses are of the highest quality in the EU, soil quality is satisfactory, while air quality is somewhat impacted, mainly by particulate matter. Slovenia’s diverse and varied landscape supports a high quality of life, but certain changes, such as intensive infrastructure and building construction in rapidly developing areas and the abandonment of land use in remote rural areas, are not conducive to balanced spatial development.
Following the pandemic and energy crisis, Slovenia has maintained economic stability. It has successfully curbed inflation, improved public finances, and kept unemployment at historically low levels. The pace of convergence in GDP per capita in PPS (a measure of economic development) with the EU average accelerated slightly in 2022 and 2023 (following a slowdown during the pandemic), but stalled in 2024. The main driver of this gap remains below-average labour productivity, which reached 85% of the EU average in 2023 and 2024. Given the already high employment rate, further productivity growth is essential to narrowing the economic development gap with more advanced countries and thus also to improving overall quality of life. 

The Institute of Macroeconomic Analysis and Development of the Republic of Slovenia (IMAD) is responsible for monitoring the implementation of Slovenia’s overarching development strategy. In its role as the national productivity board, it also conducts in-depth analyses and makes recommendations to enhance productivity. In previous years, IMAD published two separate but closely related reports: The Development Report and the Productivity Report. This year, for the first time, the content of both has been integrated into a single publication: Quality of Life in Slovenia – Development Report 2025. The new, consolidated report addresses both development and productivity, the latter being one of the key long-term drivers of improved quality of life. By merging the two reports, the upgraded format enables more comprehensive analysis and supports the formulation of more holistic, well-balanced and mutually reinforcing recommendations. The key findings and recommendations are presented below, alongside the main development drivers and challenges.  

Creative and long-lived society

Like other EU countries, Slovenia is facing the challenges of demographic change and evolving demand for knowledge, skills and competences amid the transition to a smart and green economy. While access to education, culture, and the arts remains strong, the quality of education is declining and increasingly misaligned with current societal needs. Some vulnerable groups have been facing a higher risk of poverty than their counterparts in the EU average for several years. In healthcare and long-term care, various reforms are underway to improve accessibility; however, staff shortages and unmet needs remain the key challenges.

Recommendations

- Place creativity at the core of educational and social processes, and recognize the culture of lifelong learning as a pathway to a long-lived society, whose quality will also depend on strategic human resource management, successful inclusion and activation of available human resources (both domestic and foreign), human capital development to meet future needs and challenges and, not least, the automation of business and other processes.
- Ensure an adequate level of social transfers to individuals unable to support themselves due to various reasons, as these transfers are essential for preventing absolute poverty and maintaining human dignity.
- Reduce the number patients waiting beyond the maximum established waiting times and take a systemic approach to reducing health inequalities (particularly for the economically vulnerable groups) amid growing pressures from population ageing, the rise in chronic diseases and shortages of healthcare professionals; strengthen long-term home care to help older adults maintain their independence and dignity. 

Transition to innovation-driven growth

The slowdown in productivity growth over the past decade is largely attributable to persistently low investment activity and the slow pace of restructuring within the business sector. To a significant extent, the sector continues to rely on incremental improvements to existing products and technologies, and is transitioning too slowly towards the introduction of more radical innovations, supported by the modernisation of business operations and organisational structures.

Recommendations

- Significantly increase investments, particularly from the corporate sector, in intangible assets (high-risk research, development and innovation, ICT, training and organisation), which requires (i) a more predictable business environment (taxes), (ii) the acceleration and simplification of administrative procedures (permitting), and (iii) a more strategic use of traditional government interventions by shifting to more systemic and targeted support towards the transition to innovation-driven growth.
- Support start-ups, scale-ups, niche and high-tech companies with global growth potential by (i) accelerating procedures for hiring foreign workers, (ii) adapting legal structures for their operations and reward schemes (lean public limited companies, stock options), (iii) improving access to venture capital (and simplifying capital acquisition procedures), (iv) providing support for global market penetration and (v) enabling the development of new solutions and early deployments based on innovative public procurement.
- Support the transition of backbone companies to innovation-driven growth by: (i) providing more substantial and predictable support for more complex and high-risk RDI projects, (ii) facilitating access to specialised research infrastructures, (iii) supporting the integration of cutting-edge technologies in line with Industry 4.0 principles and optimising corporate management and organisation (lean, agile and innovation-driven business models), (iv) supporting the development of new (sustainable) business models based on product differentiation (design, branding), and (v) creating a supportive environment for accelerating innovation and collaboration (SRIPs, demo centres). Small, traditional and craft companies also require access to simple support instruments (vouchers), especially in areas like transitioning from informatisation to digitalisation, and collaboration with knowledge institutions. 

Transition to a low-carbon circular economy

Slovenia has made progress in decoupling energy use and greenhouse gas emissions from economic growth, but still lags behind the EU average in emissions and energy productivity. Over the past decade, material consumption has grown more rapidly than in the EU and the country’s low circular material use rate highlights a significant untapped potential in this context.

Recommendations

- Recognise opportunities and foster innovations to introduce new clean technologies, improve energy efficiency and accelerate the adoption of renewable energy sources. Reduce road transport based on fossil fuels and replace it with more sustainable forms of mobility. Consistently monitor development progress, ensure inter-ministerial coordination and adapt policies accordingly. 
- Systematically develop new business and consumer models to reduce resource consumption and increase the efficiency of their use. Strengthen sustainable circular practises, by adding value to local resources, promoting high-quality material processing and the use of recyclable raw materials. This can be achieved by connecting stakeholders and providing implementation support for innovative projects.
- Promote sustainable investment and ensure the efficient and targeted use of funds. In this context, strive for greater inclusion of private capital: reduce financial risks and capital costs through various financial mechanisms and strengthen investor collaboration and trust in green investment opportunities.

An accountable and efficient institutional environment

In recent years, Slovenia has made notable progress in state governance. However, it continues to lag behind the EU average on several indicators of institutional competitiveness. Trust in state institutions and the judiciary remains below the EU average. Between 2019 and 2023, general government expenditure with a stronger impact on economic growth (expenditure on transport, communications and health) increased significantly. In contrast, expenditure more directly linked to productivity growth (expenditure on R&D and education) recorded only modest growth. Over the long term, the tax structure has not shifted toward increasing taxes with relatively more favourable effects on economic potential, nor toward strengthening incentives for more sustainable development.

Recommendations

- Restore trust in state institutions and public authorities by (i) ensuring inclusive and strategic policy development, including at the regional level, (ii) strengthening inter-institutional cooperation and enhancing collaboration with key stakeholders (particularly the business sector) in the adoption, implementation and monitoring of policies and regulations, (iii) increasing transparency in decision-making and improve evidence-based policy-making, and (iv) taking further measures to enhance integrity, ensure detection, prosecution and final conviction of corruption cases. 
- Improve the business environment by supporting enterprises to enhance economic competitiveness through (i) a high-quality and stable legislative framework, (ii) a predictable tax system and (iii) reducing excessive state regulation.
- Within public finance constraints, prioritise expenditures with a positive impact on productivity and gradually shape a more fiscally sustainable revenue structure that strengthens economic potential (e.g., consumption and real estate taxes). To increase work incentives (or reduce inactivity traps and low-wage traps), the combined impact of labour taxes and social transfers on household incomes should be taken into account.

Source: Institute of Macroeconomic Analysis and Development