Page 123 - bne IntelliNews Southeastern Europe Outlook 2025

efforts. From 2024 onwards, these efforts will primarily be funded through the Reconstruction Budget Fund.
The European Commission forecasts Slovenia's government deficit to narrow to 2.1% of GDP in 2025, down from the projected 2.4% in 2024. This improvement is attributed to the introduction of a new long-term care contribution, to be implemented from July 2025, alongside increased revenue from CO2 emissions. Additionally, the withdrawal of remaining subsidies designed to mitigate high energy prices will further reduce public expenditure.
However, spending is expected to rise due to higher long-term care costs and the financial impact of public sector wage reform.
In 2026, the general government deficit is projected to remain at 2.1% of GDP. While the new long-term care contribution is set to bolster revenue, expenditures on social transfers and employee compensation are expected to grow, driven by the same reforms. The fiscal stance is anticipated to remain contractionary in 2024 and 2025 before shifting to an expansionary position in 2026.
Slovenia’s debt-to-GDP ratio is expected to decline steadily, falling from 68.4% in 2023 to 63.1% in 2026. This reduction will be supported by a favourable interest-growth-rate differential and a reduction in cash reserves, although primary deficits are likely to continue influencing debt dynamics.
The OECD said that in order to restore fiscal buffers and fund post-flood reconstruction without hindering disinflation, the implementation of fiscal consolidation, as outlined in Slovenia’s medium-term fiscal plan, will be essential. Reforms to the pension system are also crucial to address the dual challenges of ageing-related costs and labour shortages.
Key measures include extending the contribution period required for a full pension and providing stronger incentives for older workers to remain in the workforce beyond the statutory retirement age. Targeted training subsidies for older jobseekers with high assistance needs would further support their labour market participation.
These initiatives should be paired with growth-friendly tax reforms aimed at reducing the labour tax burden. This could be offset by increased taxation on consumption, environmental impact, and recurrent property holdings.
Slovenia's state budget deficit stood at €396mn for the first 11 months of 2024, with expenditures totalling €13.3bn and revenues reaching €12.9bn, according to preliminary data from the Finance Ministry.
Despite an expected rise in investment spending in December, the ministry projects the deficit will remain below initial forecasts.
Revenues grew by 11.1% y/y, while expenditures rose by 2.9%
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