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Slovenia today is a developed country that enjoys prosperity and stability as well as a GDP per capita at 88% of the EU27 average. Due to its excellent infrastructure and well-educated work force, Slovenia has one of the highest per Capita GDP in Central Europe. It was the first new member of the European Union to adopt the euro as a currency in January 2007 and it has been a member of the Organisation for Economic Co-operation and Development since 2010. In 2007, Slovenia also become the first transition country to graduate from borrower status to donor partner at the World Bank. In 2007, Slovenia was invited to begin the process for joining the OECD; it became a member in 2012. However, long-delayed privatizations, particularly within Slovenia’s largely state-owned and increasingly indebted banking sector, have fueled investor concerns since 2012 that the country would need EU-IMF financial assistance. In 2013, the European Commission granted Slovenia permission to begin recapitalizing ailing lenders and transferring their nonperforming assets into a “bad bank” established to restore bank balance sheets. Yield-seeking bond investors’ strong demand for Slovenian debt helped the government in 2013 to continue to finance itself independently on international markets. The government has embarked on a program of state asset sales intended to bolster investor confidence in the economy, which in 2014 is poised to contract 1%, its third-year of recession.

Slovenia has a highly educated workforce, well-developed infrastructure, and is situated at a major transport crossroad. On the other hand, the level of foreign direct investment is one of the lowest and the Slovenian economy has been severely hurt by the European economic crisis, which started in late 2000s. Almost two thirds of the working population are employed in services.

Slovenia’s economic freedom score is 62.7, making its economy the 74th freest in the 2014 Index. Its score has increased by 1.0 point since last year, with substantial improvements in labor and business freedom, and freedom from corruption. Slovenia is ranked 34th out of 43 countries in the Europe region, with an overall score that is above the world average.

Slovenia was first graded in the 1996 Index, and its economic freedom score has advanced since then by 12.3 points. The best improvement is among advanced economies, with an overall increase that has been broad-based in seven of the 10 economic freedoms. This has included investment freedom, trade freedom, property rights, and freedom from corruption, all of which have improved by about 30 points or more over the years. These substantial gains have been partially offset by deteriorations in the management of public finance and financial freedom.

Despite several setbacks over its 19-year history in the Index, Slovenia’s economy has been largely rated “moderately free.” Further growth in economic freedom in Slovenia calls for strengthened management of public finance as well as implementation of deeper institutional reform to advance the rule of law. The judicial system remains inefficient and vulnerable to political interference, and corruption remains a cause for concern.

Background History
Although it comprised only about one-eleventh of Yugoslavia's total population, it was the most productive of the Yugoslav republics, accounting for one-fifth of its GDP and one-third of its exports. It thus gained independence in 1991 with an already relatively prosperous economy and strong market ties to the West.

Since that time it has vigorously pursued diversification of its trade with the West and integration into Western and transatlantic institutions. Slovenia is a founding member of the World Trade Organization, joined CEFTA in 1996, and joined the European Union on 1 May 2004. In June 2004 it joined the European Exchange Rate Mechanism. The euro was introduced at the beginning of 2007 and circulated alongside the tolar until 14 January 2007. Slovenia also participates in SECI (Southeast European Cooperation Initiative), as well as in the Central European Initiative, the Royaumont Process, and the Black Sea Economic Council.

In the late 2000s economic crisis, the Slovenian economy suffered a severe setback. In 2009 the Slovenian GDP per capita shrunk by −7.9 %, which was the biggest fall in the European Union. After a slow recovery from the 2009 recession thanks to exports, the economy of Slovenia again slid into recession in the last quarter of 2011. This has been attributed to the fall in domestic consumption and the slowdown in growth of exports. Slovenia mainly exports to countries of the eurozone. The reasons for the decrease in domestic consumption have been multiple: fiscal austerity, the freeze on budget expenditure in the final months of 2011, a failure in the efforts to implement economic reforms, inappropriate financing, and the decrease in exports. In addition the construction industry was severely hit in 2010 and 2011.

In March 2013, Prime Minister Alenka Bratušek formed a new center-left coalition government consisting of her Positive Slovenia Party and the Social Democrats, Civic List, and Democratic Party of Pensioners of Slovenia. Bratušek seeks to sell state-owned companies and restructure banks. Her government has opted to raise taxes rather than cut spending.

Market and Trade
Slovenia's trade is orientated towards other EU countries, mainly Germany, Austria, Italy, and France. This is the result of a wholesale reorientation of trade toward the West and the growing markets of central and eastern Europe in the face of the collapse of its Yugoslav markets. Slovenia's economy is highly dependent on foreign trade. This high level of openness makes it extremely sensitive to economic conditions in its main trading partners and changes in its international price competitiveness. However, despite the economic slowdown in Europe in 2001-03, Slovenia maintained a 3% GDP growth. Keeping labour costs in line with productivity is thus a key challenge for Slovenia's economic well-being, and Slovenian firms have responded by specializing in mid- to high-tech manufacturing. Industry and construction comprise about one quarter of GDP. As in most industrial economies, services make up an increasing share of output (57.1 percent), notably in financial services.

The business environment is generally conducive to entrepreneurial activity, with the process for incorporating a business taking less than a week, but completing licensing requirements still takes over 150 days. Despite some progress, rigid labor regulations hamper dynamic employment growth. The small agricultural sector is highly subsidized, but the government plans to sell 15 state-owned companies, including the largest telecommunications operator.

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. State-owned enterprises remain prevalent in several sectors of the economy. The financial sector remains dominated by banks. Despite some progress, privatization of state-owned financial institutions has been uneven. Equity financing remains difficult for start-ups and smaller companies. Capital markets are relatively small.

Economic performance
The traditional primary industries of agriculture, forestry, and fishing comprise a comparatively low 2.5 percent of GDP and engage only 6 percent of the population. The average farm is only 5.5 hectares. Part of Slovenia lies in the Alpe-Adria bioregion, which is currently involved in a major initiative in organic farming. Between 1998 and 2003, the organic sector grew from less than 0.1% of Slovenian agriculture to roughly the European Union average of 3.3%.

The top individual income tax rate has risen to 50 percent, and the top corporate tax rate has fallen to 16 percent as the government deals with fallout from the eurozone crisis. Other taxes include a value-added tax (VAT) and a property transfer tax. The overall tax burden equals 36.8 percent of gross domestic income. Public expenditures equal 51 percent of GDP. Public debt is equivalent to about 50 percent of gross domestic income.

Public finances have shown a deficit in recent years. This averaged around $650 million per annum between 1999 and 2007, however this amounted to less than 23 percent of GDP. There was a slight surplus in 2008 with revenues totalling $23.16 billion and expenditures $22.93 billion. ., the total national debt of Slovenia was unknown. The Statistical Office of the Republic of Slovenia (SURS) reported it to be (not counting state-guaranteed loans) 19.5 billion euros or 54.2% of GDP at the end of September 2010. According to the data provided by the Slovenian Ministry of Finance in January 2011, it was just below 15 billion euros or 41,6% of the 2009 GDP. However, the Slovenian financial newspaper Finance calculated in January 2011 that it is actually 22.4 billion euros or almost 63% of GDP, surpassing the limit of 60% allowed by the European Union. On 12 January 2011, the Slovenian Court of Audit rejected the data reported by the ministry as incorrect and demanded the dismissal of the finance minister Franc Križanič.

Slovenia's traditional anti-inflation policy relied heavily on capital inflow restrictions. Its privatization process favoured insider purchasers and prescribed long lag time on share trading, complicated by a cultural wariness of being "bought up" by foreigners. As such, Slovenia has had a number of impediments to foreign participation in its economy. Slovenia has garnered some notable foreign investments, including the investment of $125 million by Goodyear in 1997. At the end of 2008 there was around $11.5 billion of foreign capital in Slovenia. Slovenians had invested $7.5 billion abroad. As of 31 December 2007, the value of shares listed on the Ljubljana Stock Exchange was $29 billion.

The recession had affected Slovenia's economy severely, the deepest in the Euro area. In 2013, it could not be more different. Five years into the Great Recession, Slovenia’s economy is in a shambles. GDP in 2009 fell by 7.9%, a recovery failed to materialise, and in 2012 the country entered a double dip recession. The economy is forecast to shrink a further 2% this year. Public finances are in disarray, with a large deficit and a public debt that has doubled since the crisis began. After the construction sector collapsed and numerous labour-intensive manufacturing firms closed down, the unemployment rate climbed from just above 4% in 2008 to more than 10%. As Slovenian financial institutions struggle with bad loans worth some 22.5% of GDP, an international bailout may become inevitable. Since 2009, Slovenia has been stuck in an inextricable credit crunch. The cheap credit available for management buyouts was used for ownership consolidation and not for restructuring or technological upgrades. This led to widespread bankruptcies and the need to refinance most Slovenian financial institutions (state-owned Nova Ljubljanska Banka alone lent some €5.8 billion).

Of course, Euro-area dynamics did the rest. As banks have to be saved by individual member states, Slovenia found itself in a catch-22. It needed to raise more money but due to soaring costs of debt refinancing, the country found its access to international financial markets barred at a time it was most needed. Investments from neighboring Croatia have begun in Slovenia. On 1 July 2010, Droga Kolinska was purchased by Atlantic Group of Croatia for 382 million euros. Croatia's Agrocor has intentions of buying Mercator, however since the middle of 2013 and up until now the purchase was unsuccessful. Due to Croatia's decreasing economic health, further investments are not likely, but as reforms continue to be implemented across the banking and corporate sectors the economy could soon show signs of improvement.