Washington, DC – November 18, 2025: An International Monetary Fund team, led by Huidan Lin and comprising Hassan Adan, Kue-Peng Chuah, and Dmitriy Kovtun, visited Ljubljana during November 5–18, 2025, to conduct discussions on the 2025 Article IV consultation. The team met with Minister of Finance Klemen Boštjančič, Deputy Governor Primož Dolenc and Members of Board of Bank of Slovenia, other senior officials, the Committee on Finance of the National Assembly, representatives from the private sector, banks, and labor unions, and other stakeholders. At the end of the visit, the team issued the following statement:
- Outlook: Growth slowed in 2025, but is projected to rise on the back of improved investor confidence and increased export demand.
- Fiscal policy: The 2026 budget appropriately supports growth but there is room to reduce recent increases in current spending. In the medium term, fiscal consolidation is necessary to reduce public debt, preserve Slovenia’s ability to respond to shocks, and manage spending pressures, including those from an aging population.
- Financial sector policies: Slovenia’s banking system remains robust. However, financial stability risks have slightly increased since 2024, making continued close monitoring of asset quality essential. The macroprudential policy stance remains appropriate.
- Structural reforms: Boosting growth requires alleviating labor shortages, reducing regulatory burdens, strengthening the innovation ecosystem, and expanding access to finance for young and innovative firms.
Outlook and Risks
Growth is projected to strengthen in 2026–27 before moderating to its potential over the medium term, alongside a gradual decline in inflation. Following a contraction in the first quarter of this year, the economy expanded in the second and third quarters, supporting a growth forecast of 0.8 percent for 2025. Looking ahead, the economy is projected to strengthen further from improved investor confidence and increased export demand, while public investment would remain strong and rising incomes would continue to support private consumption. Still, elevated global uncertainty would weigh on sentiment and investment decisions. Growth is projected at 2.2 percent in 2026 and 2.3 percent in 2027, stabilizing at 2.1 percent over the medium term. Inflation is expected to gradually decline to around 2 percent by 2030, as food and energy prices stabilize.
Risks to the outlook are tilted to the downside, amid elevated global uncertainty. Escalating trade measures and prolonged uncertainty could weaken demand for exports, erode confidence, and lower investment and growth. Higher import prices could slow disinflation and reduce real incomes. Domestically, delays in key investment projects or structural reforms, as well as wages rising faster than labor productivity, could hamper competitiveness and slow income convergence with European peers. On the upside, faster progress with deepening the EU single market could lift Slovenia’s potential growth through a bigger market and wider access to talent and capital.
Building Fiscal Room
The 2026 budget appropriately supports growth, but there is room to rein in some of the recent increases in current spending. The 2026 budget targets a deficit of 2.8 percent of GDP for the general government, implying a moderately expansionary stance. This will support growth given that the real GDP remains below its full potential. Still, staff advises aiming for a smaller deficit by implementing measures to limit current spending. This would help ensure that the government has enough fiscal space to address future spending needs (see below).
In the medium term, Slovenia is facing spending pressures. On top of growing costs for pension and healthcare as the population ages, the public sector will face new spending needs, including for defense and possibly also for the green and digital transitions. Incorporating the most acute pressures suggests the deficit for the general government would stay at around 2.8 percent of GDP by 2030, with public debt at about 65 percent of GDP.
To preserve Slovenia’s ability to respond to shocks, fiscal consolidation is needed, as recognized by the authorities in their medium-term fiscal structural plan. Staff recommends a gradual reduction in the deficit to about 0.5 percent of GDP by 2030. This would help put the public debt-to-GDP ratio firmly on a downward path. Any additional defense spending should be accommodated within the recommended path, while spending in areas that foster growth should continue to be supported. Measures of about 2 percent of GDP would be required to support the consolidation and could include:
- On the revenue side, simplifying the value added tax structure and reducing personal income tax exemptions can broaden these taxes’ bases and enhance the efficiency of the tax system. There is also further scope to improve revenue administration. This, together with a reform of the property tax, could yield sizable revenue gains. At the same time, reducing the high labor tax wedge would make the tax system more conducive to growth and some of the above measures could be used to offset the associated revenue loss.
- On the expenditure side, efforts should focus on reducing inefficiencies. This could be done by leveraging digital tools, further outsourcing non-core functions that can be provided by the private sector at lower costs, and using various analytical tools to conduct spending reviews, especially in areas where they have not been carried out recently, to identify potential savings. The recent public sector wage reform and the new winter holiday allowance have raised the wage bill significantly, and regular reviews and adjustments will be crucial to contain it.
The Slovenian authorities have embarked on important reforms to address challenges from population aging; these efforts should continue. Implementing the 2025 reform will be critical to public pension sustainability. The pension reform appropriately raises the retirement age, increases the weight of inflation in indexation, and extends contribution years, thus stabilizing long-term pension costs. If demographic pressures were to intensify, further reforms—such as linking the retirement age to life expectancy and lowering the replacement rate—might be needed. Health and long-term care reforms should focus on diversifying financing sources, improving efficiency, and promoting active aging, while addressing health sector labor shortage is critical for providing quality services.
Preserving Financial Stability
Slovenia’s banking system remains resilient, but financial stability risks have edged up since the 2024 Article IV consultation and warrant close monitoring. Credit risks have risen for some export-focused manufacturers, though they are mitigated by strong bank capital and profits. Stress tests conducted by the Bank of Slovenia indicate that the banking system could weather adverse scenarios, yet a weaker economy could hurt corporate profits and increase strain on highly indebted borrowers. Continued monitoring of asset quality is thus essential, especially for exposed banks and portfolio segments.
The macroprudential policy stance is appropriate, supporting higher releasable buffers and sound lending standards. In 2023, the Bank of Slovenia increased the countercyclical capital buffer (CCyB) requirement and, against the background of receding real estate risks, reduced the sectoral buffer for retail real estate loans, both effective January 2025. These measures appropriately balance financial stability with credit provision. Borrower-based measures have been maintained, supporting sound lending standards throughout the financial cycle. Letting the bank asset tax expire as planned will help preserve capital buffers.
Boosting Longer-term Growth
Boosting longer-term growth requires comprehensive structural reforms aimed for stronger investment and higher productivity. Persistent shortages of skilled labor, burdensome administrative and regulatory processes, a fragmented innovation ecosystem, and limited financing for young and innovative firms encumber investment—particularly investment in intangible assets, a key driver of innovation and productivity growth.
- Developing labor and skill availability. Continued efforts are needed to align education with market needs, expand vocational training and life-long learning, and integrate immigrants. Addressing housing constraints—through streamlining spatial planning and fostering the long-term rental market with standardized rental contracts—could promote labor mobility, especially for young workers.
- Improving the business environment. The government’s plans to overhaul the administrative procedures, integrating new technologies and AI, are welcome. Streamlining processes for obtaining construction permits can boost private and public project implementation. Further deregulating professional services would increase competition and reduce service costs. Removing remaining barriers to the free flow of goods, services, and production factors within the EU single market would further enhance Slovenia’s growth prospects.
- Strengthening the innovation ecosystem. This can be achieved by increasing collaborative R&D funding within the ecosystem and deepening innovation clusters that connect academia, multinational enterprises, and small-and-medium-sized enterprises (SMEs). A stronger and deeper innovation ecosystem for all, including startups and scaleups, can help speed up technology adoption, knowledge sharing, and overall innovation.
- Expanding access to finance for young and innovative firms. The authorities’ efforts to improve the regulatory environment to establish an SME market platform and promote financial literacy will help. Launching individual investment accounts in March 2026 will help provide more capital, which is critical for innovation and scaling up. Public support for venture capital and other risky capital should complement and crowd-in private investors and generally be done on commercial terms.
The team thanks the Slovenian authorities and other counterparts in Slovenia for the constructive policy dialogue and their warm hospitality.
Important Information
A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.
The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
