Slovenia

Growth supported by consumption and European funds

After a marked slowdown in 2025 amid a turbulent international trade environment, Slovenia’s growth is expected to accelerate in 2026 and remain robust in 2027, at a pace well above that of the euro area. Private consumption (50% of GDP) will remain the main driver of activity, supported by a labour market that continues to be tight. The unemployment rate is low (4.6% in March 2026), while nominal wages in both the public and private sectors continue to grow at a strong pace (+7.3% year-on-year in March 2026), particularly in agriculture and real estate (+12% in both sectors). However, the resurgence of inflation (3.6% year-on-year in May 2026), mainly driven by a sharp increase in fuel prices (+19.2% in May 2026 compared with +3.4% in January), is expected to gradually erode household purchasing power. In this context, the return to a more restrictive monetary policy by the ECB—materialised by a first 25-basis-point rate hike in June 2026 after two years of easing—as well as the possibility of further increases if inflationary pressures persist in the euro area, could also dampen domestic demand dynamics.

Investment will remain the other pillar of growth, supported by the continuation of projects financed by the European Union and by reconstruction efforts following the severe floods of 2023. Slovenia benefits from a EUR 2.7 billion package under the Recovery and Resilience Facility (RRF), of which a fifth tranche of EUR 230 million was recently disbursed (April 2026). These funds (EUR 370 million by the end of September 2026) will continue to support investment in the energy transition, digitalisation, infrastructure, healthcare and education, with more than 1,390 projects already financed. High value-added sectors are also expected to benefit from significant investment, particularly the pharmaceutical industry, following the decision by a Swiss group in July 2025 to create a new biosimilars production unit, as well as the automotive sector, with the planned production of the electric Renault Twingo at the Novo Mesto site, accompanied by an investment estimated at between EUR 120 million and EUR 400 million for 2026. At the same time, tourism (10% of GDP) will continue to support activity after a 6.2% increase in arrivals recorded in 2025 compared with 2024, driven by the country’s proximity to its main European source markets—especially Germany, Austria, and Italy—as well as by continued investment in transport and hospitality infrastructure.

Sound but gradually weakening public finances

After widening in 2025, the public deficit is expected to continue deteriorating in 2026 and 2027 to approach the European recommended ceiling of 3% of GDP. Expenditure will remain elevated, driven by increases in public sector wages, pensions, social benefits, as well as rising defence needs. The new tax-exempt winter bonus for public sector employees will also contribute to higher public spending. Revenue growth will be more moderate, as the new contribution aimed at financing long-term care will only partially offset the cuts in VAT and in corporate and household taxation imposed in May, as well as reductions in certain energy taxes. Despite an ongoing expansionary fiscal stance, the public debt-to-GDP ratio is expected to maintain its downward trajectory, supported by robust nominal growth and relatively contained financing needs.

Slovenia is expected to continue posting a current account surplus in 2026 and 2027, although slightly lower than in 2025. Strong domestic demand will support imports, while the increase in energy costs—at least in 2026—will contribute to widening the trade deficit. The persistent weakness of the German automotive industry, a key trading partner, is likely to continue weighing on certain manufacturing exports, namely automotive, machinery and industrial equipment, metals, and intermediate goods. By contrast, the pharmaceutical sector will remain a source of support. Service exports, particularly in tourism and transport, will continue to underpin the surplus in the external accounts.

A highly fragile new coalition

The March 2026 parliamentary elections significantly reshuffled the political landscape without producing a clear majority. The Freedom Movement (GS), a left-wing party led by the incumbent Prime Minister Robert Golob, secured a lead of 29 out of 90 seats, ahead of the Slovenian Democratic Party (SDS), a conservative right-wing party led by Janez Janša (28 seats). Despite his narrow victory, Robert Golob was unable to form a viable coalition, which paved the way for the return of Janez Janša as Prime Minister for a fourth term in May 2026. The new government is thus based on a minority coalition of the right and centre-right, bringing together the SDS, the conservative parties NSi, SLS, and Fokus (9 seats), as well as Demokrati (centre-right, 6 seats), supported by the right-wing populist party Resni.ca (5 seats), along with the two representatives of the Italian and Hungarian minorities and one independent MP. While this configuration allows the prime minister to secure an operational majority, its reliance on a broad range of partners with diverse political orientations increases the risk of fragmentation and may complicate the implementation of certain reforms.

From an external standpoint, the country remains firmly anchored in the European Union, the euro area, and NATO, and supports Ukraine. Relations with Croatia are marked by their border dispute over the Bay of Piran, while migration issues along the Western Balkans route will continue to spark occasional tension.

Last updated: June 2026