Members Countries

Economy

• Real GDP growth: Economic growth in Slovenia started to pick up at the end 2003 and has been robust since then. In 2004 the real GDP growth was 4,4 % and in 2005 it was 4,0 %. Due to broad-based economic upswing and favourable trends in global trade, the economic growth in 2006 accelerated. Preliminary estimated GDP growth for 2006 is 5,2 %. This strengthening was higher than expected and largely generated by the high growth of exports, in construction and capital investments. GDP per capita in current prices rose in 2006 up to 14.800 EUR.
• Inflation rate: Despite of fast economic growth, the inflation rate in 2006 remain at the level of the previous year. Annual inflation rate was 2,5 %. Slovenia managed to lower the inflation rate and met all convergence criteria for entering the Euro Zone on 1 January, 2007. The inflationary dynamics, seen at the beginning of 2007, confirmed that rather than causing a general increase in prices, the Euro changeover only gave rise to individual increases in certain price groups, notably in services (together with rounding-up effect). Therefore it is estimated that the introduction of Euro could contribute to the overall increase in prices up to 0,24 p.p. (at most).
• Trends: It is expected and estimated that the economic growth will continue in the next period of two to three years (with the potential of GDP growth around 4 % at least), having further positive effects on employment. It is estimated that the employment growth will remain high, over 1 %. Unemployment is expected to decrease, at the same time the structural unemployment will aggravate, widening labour market imbalances.
  

Politics

• Party in power: Since the elections in late autumn 2004, the current Government coalition consists of the following political parties:
• Social Democratic Party (SDS) as the leader of the coalition,
• New Slovenia – Christian People’s Party (N.Si)
• Slovenian People’s Party (SLS)
• Democratic Party of Pensioners of Slovenia (Desus)
• Major issues on the agenda: Taxation system, Labour market regulations, Public administration and E-government, Health insurance system, Education system, SME sector, Second phase of privatisation in economy, Regionalisation of state and regional development, EU Presidency

Labour market

• Employment rate : In 2005, the employment rate according to ILO criteria (Labour Force Survey) was 55,4 %. During 2006 it was the highest in the second and third quarters (56,4 %) and fall to 55,3 % in the last quarter. Although the overall employment rate remained high, the employment rate of elderly population (55-64 years) stayed at moderate level, below 33 %.
• Unemployment rate: The declining trend in the number of unemployed and unemployment rates that had come to a halt in 2005 continued in 2006. On average, 85.836 persons were registered as unemployed in 2006, 6,6 % fewer than in 2005. The registered unemployment rate, which was 10,2 % in 2005, decreased to an average of 9,4 % in 2006 and to 8,6 % at the end of the year. The survey unemployment rate (ILO definition), which remained the same in the third and fourth quarters of 2006 (at 5,6 %), decreased from 6,5 % in 2005 to 6,0 %, according to the preliminary estimations.
• Job growth: In 2006, the increase in employment was higher than estimated at the end of 2005. The average number of formally employed persons in 2006 (824.839) was 1,4 % higher than in 2005, whereas the average number of persons in employment according to Labour Force Survey (961.000) was 1,3 % higher than the year before. The growth of formal employment was the highest since 1999. Employment rose especially in construction (7,5 %) and business services (6,7 %). The decrease in manufacturing totalled -1,7 % and was most notable in the textile (-11,8 %), food-processing (-6,9 %) and leather (-5,4 %) industries. The biggest increase (by 4 %) was registered in the metal industry.
• Skills shortages: The structure of notified job vacancies, compared to the educational structure of unemployed shows that the greatest unmet demand exist in respect of building labourers and building craftsmen, workers with occupations in the filed of metalworking, electricians, electrical fitters, truck drivers, cooks and waiters. In addition, labour demand exceeds labour supply in occupations, requiring high and university levels of education, like IT experts, pharmacists, technical engineers, medical doctors and nurses. Apart of these major discrepancies between demand and supply, it has to be emphasized that more refined aspects of labour mismatch is being recorded, mostly referring to specific skills and competences (like good command in foreign languages, computer programmes, project leadership, etc.).
• Rate of pay increases: In 2006, the average gross wage rose by 4,8 % in nominal and by 2,2 % in real terms. Within the total growth the gross wage in the private sector rose by a nominal 5,4 % and by a real 2,8 %, while the gross wage in the public sector rose by 3,5 % and 1,0 % respectively. With the higher level of labour productivity, the lagging of wage growth behind productivity growth thus widening again. This trend is in the course of wage policy agreed between the social partners, and is of great importance for improvement of competitive position of Slovenian companies in the global economy.

HR issues

• New employment legislation: In the mid of 2006 amendments on Low on Employment and Unemployment Insurance were adopted. Among minor changes which were related to the definition of registered unemployed and provisions of subsidised employment programmes, the amendments abolished unemployment assistance which was previously part of unemployment insurance scheme as an income-tested right, after the period of unemployment benefit run out.
  The structure of PES Administrative Board was changed, given a greater number of members to the Government representatives. At the same time PES will no longer be responsible for carrying-out national scholarship scheme, a provision which is coming in force in 2008.
• New government initiatives: Soon after the appointment, the government opened a debate on labour market reforms, as well as on reforms in other fields. The agreement with social partners on changes in Labour Law hasn’t been reached yet, as representatives of Trade Unions oppose the lowering of the existent level of workers’ rights (redundancy notice period, servant payments, supplements for years in employment, etc). The government and employers’ organisations on the other hand claim that existent level of employees’ rights generate labour marker rigidity. Apart of these efforts, aimed at greater labour market flexibility a new taxation legislative was adopted. Among others, it is foreseen that a special tax on wage list will be gradually abolished. In the field of personal income tax, previously five tax brackets were replaced by three, substantially lowering the tax rate for the highest incomes. It is expected that tax reform will lower the labour costs, stimulate capital investments and simplify the tax procedures. To overcome the labour market shortages as well as foreseen population ageing problems, the Government has started with the preparation of new immigration policy. A debate on pension reform has also been announced.
• Trends to notice: Despite of steady decrease in unemployment, its structural problems remained notable. Significant rose in numbers was in 2006 recorded among unemployed with post-secondary education. Their share in total unemployment at the end of 2006 was 6,7 % (5,6 % in 2005). The share of women (54 %) and long-term unemployed (49 %) remained high as well. The active labour market policy (adopted for the period 2007-2013) is targeting at above mentioned groups, including first job-seekers, elderly persons and low qualified persons. Regional labour market specifics and differences in unemployment rate will continue to be one of criteria in delivery of labour market programmes, some of them co-financed by European Social Fund.

Taxation and social insurance law

• Social security contribution: Compulsory social insurance schemes are mainly financed by Social security contributions and to smaller extent they are funded by the state budget. Current social contributions (related to wages) are paid by employers at rate 16,10 % and by employees at rate 22,10 %.
• Tax rate: In 2005 the total tax burden amounted 25,7 % of GDP, whiles social contributions amounted 15,1 % of GDP. Total fiscal burden with taxes and social contributions was 0,8 p.p. higher than in 2004.

Updated: March, 2007
Internet Sources:

• Institute of Macroeconomic Analysis and Development, http://www.sigov.si/zmar/
• Statistical Office of the Republic of Slovenia, http://www.stat.si/
• Government of the Republic of Slovenia, http://www.vlada.si/
• Employment Service of Slovenia, http://www.ess.gov.si/