Slovenia’s economy is in a relatively favourable position to face the Covid-19 crisis. The past three years were marked by robust growth, fiscal surpluses and the gradual clean-up of bank balance sheets. Yet as a small, open economy closely tied to the European Union, Slovenia could be significantly impacted by the crisis. European fiscal and monetary support as well as healthy public finances should soften the impact of the crisis on public finances and growth prospects.
Slovenia is a small and export-oriented economy. It is a member of the Eurozone. Its main export market is the European Union (3/4 of total exports) primarily in equipment and the automotive sector. Public debt is fairly high (a legacy of the global financial crisis). It is expected to remain at a fairly high level in the medium and long term considering the rising cost of the healthcare and pension systems. The public sector’s weight in the economy remains significant, and privatisation of state assets has been underway for several years. Nevertheless, this process is likely to remain slow given political constraints.
Despite elements of economic strength (high per capita income, competitive export-oriented sector and prudent fiscal policy), the Slovenian economy is vulnerable to economic conditions in the eurozone, and the unfavourable demographic trend (rapidly aging population) creates medium-term challenges for the pension and health systems.
Exports to EU and tourism activity (around 10% of GDP) have been hard hit by the pandemic. Nevertheless, European fiscal and monetary support, as well as healthy public finances, should soften the impact of the crisis on public finances and growth prospects.
