A Dive into Slovenia’s Economy | Manufacturing Sector of Slovenia in 2024

Slovenia is a prime destination for foreign direct investment due to its modern infrastructure, access to EU transportation corridors, a major Adriatic Sea port, educated workforce, proximity to markets, and EU membership. With a small domestic market of over two million, Slovenia's economy heavily relies on foreign trade, but its recent economic growth rate has outpaced most EU member states, resulting in rising incomes, consumption, and low inflation.

Slovenia's economy experienced a GDP growth rate of 8.1% in 2021, surpassing the eurozone average. However, inflation and energy prices, exacerbated by the Russian invasion of Ukraine, led to slower growth of 5.4% in 2022. The country is expecting modest growth of 1.8-2.6 percent until 2025. Despite the privatisation of the banking sector, around 25% of Slovenia's economy remains state-owned or controlled.

Despite the importance of foreign direct investment (FDI) in Slovenia, there is widespread scepticism due to challenges such as lack of transparency, bureaucratic procedures, opaque public tender processes, regulatory red tape, and heavy tax burden for high earners. FDI in Slovenia increased by 10.4% in 2021, totalling EUR 18.4 billion.

Slovenia - share of economic sectors in the Gross Domestic Product 2022 | Statista

In summary, while the manufacturing sector is essential to Slovenia's economy, it's crucial to consider the broader context of domestic consumption, investment, and external trade for a comprehensive understanding of GDP growth trends.

Listen To This Podcast: Is Slovenia the Emerging Logistics Goldmine in 2024? Insights from Natasa Pogacnik

Contribution of the Manufacturing Sector to GDP Growth

The manufacturing industry plays a significant role in Slovenia's economy.

Slovenia SI: GDP: % of Manufacturing: Medium and High Tech Industry data was reported at 37.330 % in 2021. This records an increase from the previous number of 37.238 % for 2020. 

Slovenia SI: GDP: % of Manufacturing: Medium and High Tech Industry data is updated yearly, averaging 37.284 % from Dec 1990 to 2021, with 32 observations.

After the 4.2% decline in 2020, Slovenian GDP in 2021 increased by 8.1% in real terms. Nominal growth of GDP was 10.9%. GDP in current prices amounted to EUR 52,020 million.

Gross domestic product, 4th quarter 2021 (stat.si)

Growth of labour productivity in manufacturing- Slovenia

Indices of Industrial Production in Slovenia 

Here's an overview of the indices of industrial production in Slovenia based on the data from September 2021:

Monthly Industrial Production Value: In September 2021, industrial production increased by 0.2% compared to August, with manufacturing experiencing a 0.2% increase. However, supply and mining and quarrying industries experienced decreases. Consumer goods industries saw a 4.1% monthly increase, while capital goods and intermediate goods industries experienced decreases. The monthly value of industrial production also increased in consumer goods industries.

In September 2021, the total value of industrial production increased by 7.8% compared to September 2020, while it was higher by 4.5% compared to September 2019. The first three quarters of 2021 saw an 11.9% increase in industrial production, with manufacturing experiencing a 13.4% increase, while mining and quarrying experienced a decrease.

Monthly Turnover in Industry: In September 2021, total industry turnover decreased by 0.4%, with manufacturing, mining and quarrying experiencing a decrease. In non-domestic markets, it was 1.0% lower, while domestic markets saw a 0.3% increase. Compared to September 2020, turnover was 14.2% higher, while in September 2019, it was 8.7% higher. The total value of industrial production stocks also increased by 2.0% compared to August 2021.

The stock value increased by 9.6% annually and 9.9% in the first three quarters of 2021, compared to the same period in 2020 and 2019. This increase is also 5.3% higher compared to the same period in 2019.

Small and Medium Enterprises

In Slovenia, small and medium-sized enterprises (SMEs) play a crucial role in the economy. Here are some key facts about SMEs in Slovenia:

Significant Proportion: Small and Medium Enterprises (SMEs) make up 99.8% of all companies in the country and are often considered the backbone of the national economy due to their significant impact.

Employment and Revenue: These enterprises collectively employ nearly 70% of the workforce and generate around 65% of the total revenue across all companies.

Definition of SMEs: In Slovenia, SMEs are defined as enterprises that meet the following criteria:

• Average number of employees: Not exceeding 250.
• Net turnover: Less than EUR 40,000,000.
• Value of assets: Not exceeding EUR 20,000,000.

Government Support: The Slovenian state supports SMEs' growth through financial incentives from the Ministry of Economy, Tourism and Sport and corporate financing institutions like the Slovenian Enterprise Fund and (Slovenska izvozna in razvojna banka, d.d., (SID Bank). These incentives focus on creating a conducive business environment, funding innovation projects, promoting digitalisation, and facilitating foreign market access.

Vouchers for SMEs: Slovenia's SMEs can access vouchers for co-financing individual services, covering up to 60% of costs and up to EUR 30,000 annually. These vouchers are crucial for economic vitality, innovation, and employment, making them a vital force in the country's business landscape.

Major Sectors Where SMEs Operate in Slovenia

Major sectors where SMEs operate in Slovenia are:

Manufacturing of Coke and Petroleum: Interestingly, this sector is composed solely of SMEs. They play a significant role in the production and distribution of coke and petroleum products.

Service Sector: SMEs dominate the service sector in terms of employment. Within this broad category, various sub-sectors contribute to Slovenia’s economic landscape. Here are some notable ones:

Services: With a staggering 59,276 registered companies, the services sector encompasses a wide range of activities, including professional services, hospitality, and more.

ICT (Information and Communication Technology): Relative to the OECD average, Slovenia has a significantly higher share of SMEs in the ICT sector. These businesses drive innovation, digitalisation, and technological advancements.

Machinery Manufacturing: SMEs also play a substantial role in the manufacture of machinery. Their contributions are crucial for industrial production and technological progress

Key Strengths

Data Reuse: Slovenian companies rank well in reusing public sector data, which can boost the country’s big data economy.

Internationalisation: A remarkable 41% of Slovenian SMEs export to other EU countries, surpassing the EU average of 23%.

Start-up Ecosystem: Slovenia’s start-up ecosystem is continually improving, positioning the country favourably on the global stage.

Insolvency Resolution: Resolving insolvencies is faster and relatively less expensive in Slovenia compared to the EU average.

Early Warning Program: The free-of-charge ‘Early Warning Slovenia’ mentoring program assists SMEs facing initial business challenges.

Key Challenges

Administrative Burden: Despite gradual decreases, administrative burden remains a major obstacle to a more business-friendly environment.

Digitalisation: Slovenia’s digitalisation performance, though improving, still lags behind the EU average.

Innovation: A smaller proportion of Slovenian SMEs (47%) innovate compared to the EU average (58%).

Equity Financing: Enhancing equity financing, especially through venture capital, is crucial due to the underdeveloped equity market in Slovenia.

Factors Influencing Industrial Production 

Several factors influence industrial production in Slovenia. Let's explore some of them:

Economic Conditions and Demand: The economic health of a country significantly impacts industrial production, with growth causing increased demand, while downturns or recessions may decrease demand and impact production levels.

Investment in Technology and Innovation: Modern technology, automation, and innovation are crucial for companies to enhance production processes, leading to increased productivity, cost reduction, and improved quality.

Labour Force Skills and Training: A skilled and trained workforce is crucial for efficient production, ensuring machinery operation, safety protocols, and quality standards, while labour shortages or skill gaps can hinder production.

Infrastructure and Logistics: Industrial production relies on efficient transportation, energy, and communication infrastructure, as well as reliable logistics networks, to facilitate the movement of raw materials, intermediate goods, and finished products.

Government Policies and Regulations: Policies, tax incentives, and supportive regulations can stimulate industrial growth, while excessive bureaucracy, high taxes, or restrictive regulations can hinder production.

Availability of Raw Materials: Industries heavily reliant on specific raw materials like mining, steel, and chemicals require a stable supply to ensure production capacity and reduce costs.

Market Demand and Export Opportunities: The production of companies in domestic markets is fueled by strong domestic demand and export markets, while those entering international markets benefit from increased sales and economies of scale.

Business Confidence and Investment Climate: Positive business sentiment and stable political environments with investor-friendly policies attract both domestic and foreign investments in production facilities.

Sector-Specific Factors: Industries like manufacturing, mining, and energy production face unique challenges due to consumer demand, technological advancements, supply chains, resource availability, extraction methods, energy policies, renewable sources, and grid stability.

Global Economic Trends and Trade Relations: Export-oriented industries are impacted by global economic shifts, international trade agreements, tariffs, geopolitical relations, and supply chain disruptions like the COVID-19 pandemic.

In summary, a combination of economic, technological, regulatory, and market-related factors collectively influence industrial production in Slovenia. 

Industrial Production in Slovenia 

Let's delve into the industrial production trends in Slovenia:

Monthly Trends (June 2021): In June 2021, Slovenia's industrial production increased by 1.6% compared to May 2021, with a significant increase in mining, quarrying, and manufacturing. However, electricity, gas, steam, and air conditioning supply decreased by 0.5%. The value of industrial production also increased monthly in capital goods, intermediate goods, and consumer goods industries, with a 3.5% increase in capital goods, 0.7% in intermediate goods, and 0.3% in consumer goods.

Yearly Trends (June 2021 vs. June 2020): In June 2021, industrial production increased by 18.9% compared to June 2020, with a 20.6% increase in manufacturing and a 19.2% increase in mining and quarrying. However, the decrease was 0.8% in electricity, gas, steam, and air conditioning supply.

First Half of 2021: In the first half of 2021, industrial production increased by 13.7% compared to the previous year, with a 15.0% increase in manufacturing. However, mining and quarrying and electricity, gas, steam, and air conditioning supply experienced decreases. Despite this, the value of production was higher by 2.0% compared to the first half of 2019.

Turnover and Stocks: In June 2021, industry turnover increased by 2.2% monthly, with manufacturing experiencing a 2.3% increase, while mining and quarrying experienced an 11.1% decrease. The value of stocks in industrial production rose by 1.0% compared to May 2021, and the annual value of stocks increased by 1.8% and 4.2% compared to June 2020 and 2019.

Overall, Slovenia's industrial production has shown positive growth trends, especially in manufacturing, contributing to the country's economic resilience. 

Key Sectors Driving Industrial Growth

Let's explore the key sectors driving industrial growth in Slovenia:

Manufacturing Sector: Slovenia's economy is heavily reliant on manufacturing, with key sub-sectors including automotive, pharmaceuticals, and engineering, and the country boasts numerous successful companies in these sectors.

Automotive Industry: The automotive sector significantly contributes to industrial growth through companies involved in vehicle production, parts manufacturing, and research and development.

Chemicals and Pharmaceuticals: Slovenia's chemical and pharmaceuticals sector is highly successful, with notable contributions to exports and innovation.

Non-metallic Mineral Sector: This sector encompasses activities related to construction materials like cement, concrete, and ceramics, supporting infrastructure development and construction projects.

Iron and Steel Sector: Slovenia's iron and steel production industry is robust, with companies contributing to both domestic and international markets.

Technology and Engineering: SMEs operate in various technology-related fields such as engineering, information technology, and innovation-driven industries.

Services and Technology: The services sector, including technology services, is a vital component of Slovenia's economy, enhancing overall growth and supporting other industries.

In summary, Slovenia's diverse economy benefits from a mix of manufacturing, services, and technology-driven sectors, fostering economic resilience and innovation. 

Success Stories in Slovenian Manufacturing

Slovenia boasts several remarkable success stories in its manufacturing sector. Let's explore some of these outstanding achievements:

Pipistrel: Slovenian company produced the world's first serially produced electric airplane, demonstrating their innovative approach to sustainable aviation and gaining global recognition.

Dewesoft: Dewesoft, renowned for its advanced software products, has significantly contributed to space exploration, with NASA utilising their solutions for various scientific and research purposes.

Adria Mobil: Adria Mobil is renowned for its innovative mobile homes, which are designed to offer comfort, functionality, and aesthetics, making them a popular choice for travellers and adventure enthusiasts.

Krka Pharmaceuticals: Krka, a prominent pharmaceutical company based in Novo Mesto, Slovenia, is renowned for its dedication to research, development, and quality.

Akrapovič: Akrapovič is renowned for its high-end exhaust systems for motorcycles and performance cars, known for precision engineering and superior craftsmanship, attracting a global customer base.

Ekoart: Ekoart is a Slovenian company known for producing high-quality, sustainable, and visually appealing solid wood houses.

These success stories exemplify Slovenia's innovation, craftsmanship, and commitment to excellence in manufacturing. 

Challenges Faced by the Manufacturing Sector in Slovenia

The Slovenian manufacturing sector faces several challenges as it strives for growth and sustainability. Let's explore some of these challenges:

Transition to a Green Economy: Slovenia is focusing on transitioning to a low-carbon and circular economy, aiming to manage natural resources sustainably, advance green economy practices, and increase green jobs, but lag behind the EU average in material, energy, and emissions productivity.

Resource Efficiency and Circular Practices: Slovenia faces challenges in material productivity, energy efficiency, and emissions reduction, with a need for improvement in monitoring circularity in resource use.

Dependency on Imported Raw Materials: Slovenia is recognising the need to transition to a low-carbon economy to reduce its vulnerability due to its reliance on imported raw materials.

Skills and Innovation Gap: SMEs face challenges in self-financing R&D activities, necessitating access to funding for sustainable technologies and innovations to ensure their continued growth and success.

Preserving Biodiversity and Sustainable Urban Development: Slovenia prioritises SDG 14 for biodiversity preservation and SDG 11 for sustainable urban development, green city systems, and healthy urban life.

Inclusive Approach and Partnerships: Slovenia's green initiatives involve local communities, NGOs, and businesses, emphasising the importance of partnerships in achieving sustainable development goals.

In summary, Slovenia's manufacturing sector faces challenges related to sustainability, resource management, and innovation. The country's commitment to green practices and partnerships will be essential for overcoming these hurdles.

Addressing Workforce Skills in Manufacturing in Slovenia

In Slovenia, addressing workforce skills in manufacturing has been a crucial focus. Let's delve into the key aspects:

Employment Outlook: Slovenia's employment is predicted to decrease in the coming years, while manufacturing is expected to experience modest growth at a modest 0.5% per annum.

Sector Developments: The economic crisis in Slovenia led to a decline in construction and manufacturing employment between 2008 and 2013 but increase in business and services. Future employment growth is expected to be primarily in business and services until 2025, with minor gains in the construction, distribution, and transport sectors. Primary sector and manufacturing employment is expected to continue falling.

Occupations and Qualifications Prospects: The aging workforce is expected to provide most job opportunities due to replacement demand. Professionals, including high-level occupations in science, engineering, healthcare, business, and teaching, will account for 33% of job opportunities, higher than the EU average. Additionally, 20% of job opportunities will be for elementary occupations.

In summary, Slovenia is navigating workforce skills challenges by emphasising professional roles, addressing replacement needs, and fostering growth in service-oriented sectors. 

Programs or policies implemented to enhance manufacturing skills

Slovenia has undertaken several initiatives to enhance manufacturing skills. Let's explore some of the key programs and policies:

Skills Forecasts and Qualifications Enhancement: Cedefop predicts a significant increase in the labour force with high-level qualifications, reaching 49% by 2025, emphasising the need for continuous learning and upskilling. The OECD collaborated with Slovenia on a National Skills Strategy to address skills challenges, improve low-skilled adults' skills, and promote inclusivity, highlighting the importance of continuous learning and upskilling in the labour market.

Sector-Specific Training and Partnerships: Slovenia has established partnerships with industry, educational institutions, and government agencies to offer vocational education and training (VET) programs, focusing on practical skills for manufacturing and other sectors.

Apprenticeship Programs: Slovenia promotes apprenticeships through a structured system that includes both classroom learning and on-the-job training, highlighting their crucial role in enhancing manufacturing skills and bridging the gap between theory and practice.

Upskilling and Reskilling Initiatives: The government encourages lifelong learning through training subsidies for employees and employers, while skills development centres offer courses and workshops to improve technical and soft skills.

Digital Literacy and Industry 4.0: Slovenia emphasises the significance of digital skills in modern manufacturing, enhancing workers' digital literacy through training programs on Industry 4.0, automation, and advanced manufacturing technologies.

Quality Assurance and Certification: Slovenia places high importance on quality assurance in training programs, ensuring that acquired skills are recognised and valued by employers through accreditation and certification.

Remember that these initiatives are part of an ongoing effort to strengthen Slovenia's manufacturing workforce. Continuous evaluation and adaptation are essential for sustainable skill development. 

Effectiveness of Government Programs in Improving Manufacturing Skills in Slovenia

The Slovenian government has taken significant steps to enhance manufacturing skills through various programs. Let's explore the effectiveness of these initiatives:

National Skills Strategy (NSS): Slovenia initiated the NSS diagnostic phase in 2015, concluding in 2017, with the aim of identifying nine skills challenges, including improving low-skilled adults' skills and ensuring effective governance of the skills system, to create a shared vision for the future.

Improving Adult Learning: Slovenia's adult population, despite academic achievements, lacks basic skills. The government, social partners, and stakeholders have a unique opportunity to improve adult learning through enhanced cooperation, participation, and cost-effectiveness of adult learning programs.

Collaboration and Coordination: The NSS promotes collaboration among ministries, municipalities, and stakeholders, enhancing collaboration conditions and addressing challenges related to promotion, financing, and outcomes for effective governance.

Skills Strategy Implementation Guidance: The OECD Skills Studies series offers strategic skills policies focusing on education quality, transitions from school to work, vocational education, and employment, which can be beneficial for Slovenia to improve its skills system.

In summary, while challenges remain, Slovenia's commitment to improving manufacturing skills through collaborative efforts and strategic planning is commendable. Continuous evaluation and adaptation are essential for long-term success.

Government Initiatives to Enhance Skills in Comparison with Other European Countries

Slovenia's efforts to enhance skills in the manufacturing sector align with broader European initiatives. Let's explore how they compare:

European Context: The European Commission emphasises the significance of skills in the twin green and digital transitions, with a skills agenda aiming to provide upskilling and reskilling opportunities by 2025, prioritising human investment in skills.

Slovenia's Initiatives: Slovenia's Industrial Strategy 2021-2030 emphasises enhancing manufacturing skills through R&D, innovation, and digitalisation, recognising the importance of skills for industrial growth.

Challenges Shared Across Europe: Slovenia and other European countries face challenges like skills shortages, green transition, and digitalisation, emphasising the importance of a highly skilled workforce for successful innovation processes.

Collaboration and Collective Action: The EU is prioritising collective action through a skills pact, emphasising the importance of public and private investments in workforce development.

Industry 4.0 and Smart Manufacturing: Europe and Slovenia are collaborating on Industry 4.0, a joint initiative focusing on digital technologies, automation, and sustainable practices.

Long-Term Vision: Europe's five-year plan and Slovenia's dedication to skills development demonstrate a long-term vision, emphasising the importance of upskilling and reskilling for economic growth.

In summary, while Slovenia's initiatives are tailored to its context, they resonate with broader European goals. Collaboration and investment in skills are essential for a competitive and resilient manufacturing sector across Europe. 

Challenges Slovenia Faces in Implementing Government Initiatives for Enhancing Manufacturing Skills

Slovenia has made commendable efforts to enhance manufacturing skills, but it also faces several challenges in implementing government initiatives. Let's explore some of these challenges:

Limited Funding for Innovation: SMEs face challenges in self-financing R&D activities due to limited resources, and securing additional funding for innovation remains a significant challenge.

Innovation Management: SMEs often lack the necessary experience and expertise to effectively manage innovation, which can hinder their ability to innovate effectively.

Transition to Industry 4.0: Slovenia is aiming for a green, smart economy, but implementing Industry 4.0 technologies presents challenges, particularly for SMEs that need support to digitalise and automate production processes.

Balancing Economic, Social, and Environmental Goals: The Slovenian Industrial Strategy prioritises sustainable development, focusing on societal, environmental, and economic aspects, emphasising the importance of achieving a balance for long-term success.

Economic Recovery Post-Covid-19 Pandemic: The pandemic has caused a global economic crisis, necessitating a robust recovery and addressing manufacturing challenges to ensure global stability.

Collaboration and Stakeholder Engagement: Stakeholder engagement is crucial for successful implementation, and continuous collaboration between industry, universities, and research organisations is necessary for successful implementation.

Skills Gap and Workforce Development: The need for bridging skills gaps and upskilling the workforce for Industry 4.0 technologies is paramount, and digital skills can be fostered through education and lifelong learning.

Environmental Sustainability: Slovenia is striving towards a green transition, requiring a balance between industrial growth and environmental protection, despite the challenge of aligning manufacturing practices with sustainability goals.

In summary, Slovenia's commitment to enhancing manufacturing skills is commendable, but addressing these challenges requires continuous effort and strategic planning. 

Strategy for Slovenia to Overcome Challenges Related to Enhance Skills in the Manufacturing Sector

Slovenia faces several challenges in implementing government initiatives to enhance manufacturing skills. However, strategic actions can help overcome these obstacles and drive positive change:

Strengthening Cooperation and Collaboration: Effective coordination among ministries, municipalities, and stakeholders is crucial for successful collaboration between industry, educational institutions, and research organisations, ensuring targeted training programs and skill development.

Investing in Lifelong Learning: The policy promotes adult learning and upskilling, offers training subsidies to employees and employers, and enhances digital skills through continuous education and learning.

Embracing Industry 4.0 Technologies: The goal is to assist SMEs in embracing digitalisation and automation while also raising awareness about Industry 4.0 concepts and their advantages.

Image source: https://secureservercdn.net/

Balancing Economic, Social, and Environmental Goals: The goal is to balance industrial growth with environmental sustainability, fostering social-economic cohesion and resilience.

Implementing the Recovery and Resilience Plan: The Slovenian Recovery and Resilience Plan aims to address the urgent needs of the economy post-COVID-19 by fostering a strong recovery and enhancing its resilience.

Prioritising Green and Creative Development: The goal is to promote a green, innovative, and intelligent industry, ensuring a balance between societal, environmental, and economic sustainability.

Monitoring and Evaluation: The task involves regularly evaluating progress and adjusting strategies, ensuring milestones and targets are met by August 2026.

By combining reforms, investments, and effective governance, Slovenia can enhance manufacturing skills and create a competitive, sustainable, and innovative industry.  

Specific Policies to Promote Innovation in the Manufacturing Sector in Slovenia

Slovenia has implemented specific policies to promote innovation in the manufacturing sector. Let's explore some of these initiatives:

Tax Relief for Research and Development (R&D): Slovenia provides 100% tax relief for R&D investments, thereby encouraging companies to allocate resources towards research and innovation.

Calls for Tenders for Co-Financing R&D Projects: The government is launching tenders to co-finance R&D projects in enterprises, promoting collaboration between industry and research institutions.

Supportive Environment for Innovative Companies: Innovation environment entities like incubators and technology parks foster a conducive environment for innovative companies by promoting networking, knowledge exchange, and resource access.

National Innovation Prizes: The Chamber of Commerce and Industry of Slovenia (GZS) annually awards national innovation prizes to recognise innovative companies and individuals contributing to research and development.

Slovenian Industrial Strategy 2021–2030: Slovenia's industrial strategy aims to transform the industry into a knowledge and innovation-driven sector, fostering a conducive environment for bringing ideas to market.

European Context: Slovenia's initiatives align with European initiatives like the Innovation Union, which focuses on transforming research into products and services that stimulate growth and job creation.

In summary, Slovenia's policies prioritise R&D investment, collaboration, and a supportive environment for innovation. These measures contribute to the growth and competitiveness of the manufacturing sector. 

Research and Development in Addressing Innovation Challenges

Research and development (R&D) plays a pivotal role in addressing innovation challenges within Slovenia's manufacturing sector. Let's explore how:

Enhancing Competitiveness: R&D promotes technological advancements and productivity, enabling manufacturers to create advanced products, enhance processes, and maintain global market competitiveness.

Innovation and Adaptation: R&D fosters innovation by promoting fresh ideas, designs, and solutions, enabling manufacturers to adapt to evolving consumer needs, environmental regulations, and industry trends.

Quality Improvement: Rigorous R&D is crucial for ensuring product quality and reliability, leading to improved manufacturing practices, reduced defects, and increased customer satisfaction.

Industry 4.0 Technologies: R&D aids in the implementation of Industry 4.0 technologies like automation, IoT, and data analytics, which enhance production efficiency, reduce costs, and optimise production.

Collaboration with Academia and Research Institutions: Manufacturers are partnering with universities and research centers for applied R&D, resulting in practical solutions and bridging the gap between theory and practice.

Skills Development: R&D activities necessitate the hiring of skilled professionals, and investing in workforce skills is crucial for effective implementation.

Sustainable Practices: R&D in Slovenia is a strategic approach that promotes green manufacturing and sustainable processes, addressing environmental challenges and aligning with the country's objectives.

Attracting Foreign Investment: The strong R&D ecosystem attracts foreign investors, as multinational companies often seek countries with robust R&D capabilities.

Policy Alignment: Government policies should encourage R&D investment through tax breaks, grants, and supportive regulations, thereby boosting private-sector R&D.

Integration with Recovery and Resilience Plans: Slovenia's Recovery and Resilience Plan prioritizes R&D, aiming to expedite the transition to a greener, more digital economy.

In summary, R&D fuels innovation, enhances competitiveness, and positions Slovenia's manufacturing sector for sustainable growth.

Best Practices from Specific Programs for Innovation in the Manufacturing Sector

Here are some success stories and best practices from specific programs in innovation within Slovenia's manufacturing sector:

EIT Manufacturing – Making Innovation Happen in Slovenia: In December 2021, EIT Manufacturing CLC East held an event to showcase best practices in education, innovation, and business creation, featuring practical examples from Slovenia and abroad, emphasizing Industry 4.0 achievements and the significance of collaboration and knowledge exchange.

Analysis of Innovation Concepts in Slovenian Manufacturing Companies: The study examined the correlation between the adoption of technical and organizational innovation concepts in Slovenian manufacturing companies and their performance indicators.

Image source:  https://www.stellantis.com/

Slovenia's High Impact Action (HIA): The HIA in Slovenia facilitated the transition to modern, efficient, and low-carbon production lines, aiming to enhance efficiency, productivity, and sustainability in the manufacturing sector.

Slovenian Digital Innovation Hub (DIH): DIH Slovenia is a national hub for knowledge, business, and technology, facilitating the Slovenian industry's development of digital competencies, innovation models, and process enhancement.

These success stories demonstrate Slovenia's commitment to innovation, digitalisation, and sustainable manufacturing practices. By leveraging these best practices, Slovenia continues to strengthen its position in the European manufacturing landscape. 

How Does Slovenia's Industrial Production Compare to Other Emerging Economies?

Slovenia's industrial production has shown resilience and growth, but it's essential to compare it with other emerging economies. Let's explore:

Recent Performance: Slovenia's industrial production increased by 12.2% in January 2024, marking the first increase after ten months of contraction, with manufacturing rebounding and mining and quarrying output accelerating.

Long-Term Trends: Slovenia's industrial production growth rate has consistently exceeded the Euro Area's average of 1.1%, demonstrating its industrial resilience.

Emerging Economies Comparison: Slovenia's performance should be evaluated alongside other emerging economies, considering factors such as productivity gains, innovation, and industrialisation.

 Image source: https://assets.entrepreneur.com/

Outperformers: Over the past 50 years, emerging economies like China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea, and Thailand have experienced remarkable growth, while recent outperformers include Azerbaijan, India, and Vietnam.

Factors Driving Outperformance: Industrialization leads to rapid productivity gains, with large companies playing a significant role in driving growth. Outperformers often exhibit consistent growth over extended periods.

Global Impact: Outperformers have lifted millions out of extreme poverty, enabling the rise of middle and affluent classes contributing to global economic dynamics.

In summary, Slovenia's industrial production growth is commendable, but understanding its context within the broader emerging economies landscape provides valuable insights. 

Role of Government Policies and Initiatives in the Slovenian Manufacturing Sector

The Slovenian Industrial Strategy 2021–2030, a strategic document of the Government of the Republic of Slovenia, outlines a vision and goals for the development of industry and the economy up to 2030. Here are key points regarding the role of government policies and initiatives in the Slovenian manufacturing sector:

Vision and Goals: Slovenia's strategy aims to make the industry green, creative, and smart, with a goal of increasing productivity to €66,000. Balancing sustainable development components ensures competitiveness and facilitates industry restructuring into a knowledge and innovation-driven sector by 2030.

Areas of Focus: The strategy outlines government incentives for business environment competitiveness, entrepreneurship and innovation, societal response, and green, creative, and digital development in the Slovenian industry, aiming to enhance competitiveness.

Challenges and Recovery: The coronavirus pandemic has significantly impacted the preparation of strategies, emphasising the need for economic, social, and general recovery for countries.

In summary, the Slovenian government's strategic approach aims to foster a dynamic, sustainable, and innovative manufacturing sector, positioning Slovenia for a prosperous future. 

Small and Medium Enterprises

In Slovenia, small and medium-sized enterprises (SMEs) play a crucial role in the economy. Here are some key facts about SMEs in Slovenia:

Number of SMEs (2022): Slovenia has a total of 153,588 SMEs, with 145,390 being micro-sized enterprises, 6,908 small businesses, and 1,290 medium-sized businesses, with the majority being micro-sized enterprises employing between 0 and nine people.

Employment by SMEs (2022): Slovenia's SMEs employed 497,054 people, with micro-sized enterprises employing 232,478, small-sized businesses employing 10 to 49, and medium-sized enterprises employing around 131,277 people. These enterprises range from zero to 49 employees.

 Image source: https://www.freshbooks.com/

Significance of SMEs: SMEs make up 99.8% of Slovenian companies, employing 70% of the workforce and generating 65% of the country's total revenue.

Manufacturing Industry: In 2020, Slovenia's manufacturing industry had around 20,090 enterprises, a stable increase from 2019, highlighting its significant role in the country's economic landscape.

SMEs are the backbone of Slovenia's economy, fostering innovation, job creation, and economic growth.

Slovenian Government Support for Small and Medium Enterprises in the Manufacturing Sector

The Slovenian Industrial Strategy 2021–2030, a strategic document by the Government of the Republic of Slovenia, outlines the vision and objectives for industry and economic development up to 2030. Here are some key points from the strategy:

Vision: Slovenia's industry aims to be green, creative, and smart, balancing sustainable development across society, environment, and economy to enhance competitiveness and transition towards knowledge and innovation-driven industries.

Main Goal: The strategy aims to boost productivity by €66,000. Productivity refers to the efficiency of transforming inputs like labour, capital, and resources into outputs like goods or services, with higher productivity indicating more goods with fewer resources.

Areas of Focus: The strategy focuses on enhancing competitiveness through state incentives, strengthening entrepreneurship and innovation, effectively addressing societal challenges, and promoting green, creative, and digital development, with activities aimed at fostering a smart, green, and creative economy.

Challenges: The coronavirus pandemic has exacerbated the challenges of economic, social, and general recovery for various countries.

In summary, government policies and initiatives play a crucial role in shaping the manufacturing landscape, fostering innovation, and driving economic growth in Slovenia.

Listen To This Podcast: Is Slovenia the Emerging Logistics Goldmine in 2024? Insights from Natasa Pogacnik

Conclusion

The Slovenian manufacturing sector has navigated a complex landscape, facing both challenges and opportunities. Let's summarise the key points:

Slovenia's economy remained resilient despite external shocks, including Ukraine war spillovers. Growth slowed in 2022 due to energy price spillovers and supply chain disruptions. Severe floods in August 2023 further impacted infrastructure and economic activity. The labour market remains tight, with unemployment at a historic low and labour shortages in certain sectors.

In December 2023, inflation dropped to 4%, while real wages are recovering. In 2024, growth is expected to recover due to domestic demand and flood-related investments, with further inflation predicted. The government's response to floods and climate resilience is crucial.

In conclusion, Slovenia's manufacturing sector faces a delicate balancing act between growth, labour dynamics, and climate resilience. Policymakers must address these challenges to ensure sustainable economic development.