Slovenia’s Demographic Future: First past the post to a market economy

Slovenia’s Demographic Future: First past the post to a market economy

In 1991, Slovenia was the first state to declare its independence from the former Yugoslavia, whereupon it quickly developed into a model country. Its sound economy, its historical ties to Western Europe and its stable democracy have helped the country negotiate the transition from a planned economy to a market one. Slovenia is the wealthiest post-socialist country. Its population is well educated and its infrastructure is considered outstanding. In 2004, Slovenia became the first country in transition to switch from being a World Bank recipient country to a donor one. And of the eight central and East European countries that joined the EU in 2004, Slovenia was the first to introduce the euro (in 2007).

All of these achievements were founded on an economic upturn that between 2000 and 2008 resulted in annual average growth rates of four percent. During this period, unemployment was less than six percent and thus below the EU average. However, the upswing also had its drawbacks. Like in many other states, a property and credit bubble emerged in Slovenia. As a result, companies and banks were particularly vulnerable when the financial crisis broke out. In 2008, economic growth slowed down; the following year, GDP shrank by almost eight percent – only the Baltic states and Finland were harder hit, as was – with some delay – Greece. After recovering for a short period, the recession returned with a vengeance in 2012 and many banks – including the large state-owned Nova Ljubljanska banka – were pushed to the verge of insolvency. In some quarters, it was already expected that Slovenia would be the next candidate for being rescued by the other eurozone countries. However, it turned out rather differently. Through enormous efforts estimated to have cost more than three billion euros, Slovenia succeeded in saving its banks on its own. Many observers criticised the government for involving shareholders and creditors in the bank recovery; but three years later, the European Court of Justice declared this approach to have been legitimate.

Since 2014, things have been looking up for the country with a population of two million. The economy is growing at more than two percent annually and the situation on the labour market has improved. Above all, strong exports – for example, of machinery, chemicals and food – have contributed to the recovery. Even private consumption is growing slowly once again. Here, the country benefits from low energy prices and one of the lowest ratios of household debt in the EU.

Aging puts pressure on public finances Meanwhile, Slovenia’s public debt grew continuously up to 2015. Currently, it stands at 80 percent of GDP, which compared with other EU countries is still moderate. But the debt has more than doubled since 2010, and it is likely to become even more difficult in future to keep the budget deficit in check. This is because the population of the country is aging faster than in other EU countries: while currently there are still 30 people aged 65 or over (EU average = 32 people) for every 100 people aged 20-64, by 2050 there are likely to be just under 61 (EU average = 55). As a result of this development, age-related state expenditures are likely to soar.

To contain the cost increase, the Slovene government approved a pension reform in 2013 that allows the official retirement age to rise to 65 by 2020. But many consider this measure to be insufficient in itself. The OECD, for example, recommends further raising the age threshold and linking it to the future development of life expectancy. Furthermore, the size of pensions should be more closely tied to the level of personal contributions. In Slovenia, the calculation of SLOVENIA Population size in million (2016) 2.1 Projected population size in million (2030) 2.1  Projected population size in million (2050) 2.0 Total fertility rate (2015) 1.57 Annual net migration per 1,000 inhabitants (2011-2015) 0.3 Median age (2016) 43.2 Life expectancy (2015) 80.9 GDP per capita in euros (2016) 19,300 GDP per capita at PPP (2016) 24,100 Unemployment rate (2016) 8.0 First past the post to a market economy Berlin Institute 109 pension payments is based solely on the 24 years in which the recipient had the highest earnings, not the average value of earnings for all years.

Moreover, Slovenia’s population will not only age but also shrink. Thus, it will follow its neighbours Hungary and Croatia, whose populations are already declining. While on average women in Slovenia have more children than women in other post-socialist EU states, the total fertility rate of 1.57 will by no means suffice to ensure the size of the population remains stable in the long term. This notwithstanding, the country’s family policy is rather children-friendly. Back in 1986, Slovenia had already introduced parental leave that lasted for one year and came with generous benefits. Child day-care exists and is strongly subsidised by the state.

The main problem as regards the number of children appears to be that Slovene women are having their first child increasingly later in life and thus fewer children are being born overall. If families and especially women, for many of whom children currently represent a double burden, are to increasingly opt for children, new social norms are needed – starting with men and women sharing domestic tasks.

Foreigners come, Slovenes go

The population growth of recent years is due mainly to the fact that more people are still being born than are dying. Net migration, however, has remained close to zero since the beginning of the economic crisis. Gone are the early years of the 21st century, when the booming economy on the Adriatic was an attractive immigration destination not least for citizens of other Balkan states – primarily Bosnia-Herzegovina. While every year there are still more foreigners coming to Slovenia than leaving, this gain is cancelled out by Slovene emigration. Even well-qualified Slovenes with jobs are frequently moving abroad in the hope of finding better paid employment there. This is a thorn in the flesh of the government, which is seeking – in line with its migration strategy – to be more in touch with the needs of Slovene emigrants alongside trying to attract highly qualified immigrants. While Slovenia, as a Balkan state, was directly affected by the influx of asylum seekers into Europe, there was no noteworthy increase in the number of immigrants to that country. This is because those seeking refuge regarded Slovenia mainly as a transit country en route to Western Europe. Thus in 2015, the authorities registered just 275 asylum seekers, although in the winter of 2015–2016 alone, some 480,000 refugees poured into the country after Hungary had closed its border. Even then, the number of asylum seekers was just 1,310 in 2016. Nevertheless, the Slovene government has repeatedly tightened the entry regulations for refugees. Currently, only those who want to apply for asylum in Slovenia or for whom special humanitarian grounds apply are allowed to enter the country. Moreover, at the beginning of 2017, the government approved a law under which the border can be closed completely in the event of another wave of mass refugee immigration./IBNA

Source: Berlin Institute for Population and Development