Technology in the Slovenian Manufacturing Sector in 2024

In 2024, the Slovenian manufacturing sector stands at the precipice of a technological revolution, echoing the global trend witnessed in industries worldwide. Amidst rapid advancements, technology emerges as the cornerstone of innovation, propelling Slovenian manufacturers towards heightened efficiency, sustainability, and competitiveness. From embracing automation and robotics to leveraging data analytics and smart manufacturing solutions, the sector is undergoing a profound transformation. As we explore the technological landscape of the Slovenian manufacturing sector in 2024, parallels can be drawn to the Indian manufacturing sector, showcasing shared challenges, opportunities, and strategies driving progress in both regions.

Slovenian Economy

Image source: Slovenian economy

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.

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Contribution of the Manufacturing Sector to GDP Growth

In Slovenia, the manufacturing industry plays a significant role in the country'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.

Image source: Labour productivity in manufacturing- Slovenian context

Image source: Eurostat  - Growth of labour productivity in manufacturing - Slovenia

Key Industries within the Slovenian Manufacturing Sector

Certainly! Slovenia boasts a well-balanced manufacturing sector, contributing significantly to its economy. Let's delve into the key aspects:

Manufacturing Activities: In 2020, Slovenia had 21,978 industrial companies, with 92% engaged in manufacturing activities. These enterprises employed 214,694 individuals and generated €30.3 billion in sales revenues, accounting for 26.7% of the total economy. Slovenian industry contributed significantly to the economy. In Q4 2021, manufacturing companies with sales in foreign markets accounted for nearly 75% of net sales.

Diverse Manufacturing Base: Slovenia's manufacturing landscape is diverse, encompassing metal products, automotive parts, furniture, paper, shoes, sports goods, electronics, textiles, pharmaceuticals, and specialised electronics. Metal products include machinery components and specialised alloys, while automotive parts are crucial due to Slovenia's industrial prowess. Slovenian shoemakers produce functional and fashionable footwear, while sports goods manufacture equipment for recreation and electronics for various applications. Textiles continue to evolve, and Slovenia has ventured into pharmaceuticals for export.

Strategic Vision: The Slovenian Industrial Strategy 2021-2030 aims to create a green, creative, and smart Slovenian industry, with a main target of increasing labour productivity to €66,000. Key areas include government incentives, entrepreneurship, and digital development, emphasising sustainable development and transition to a green economy.

In summary, the Slovenian manufacturing sector is a dynamic force, combining tradition with innovation to drive economic growth and competitiveness. 

Impact of Automation on Manufacturing Jobs in Slovenia

Automation in the manufacturing sector has significant implications for jobs in Slovenia. Let's explore how it affects employment:

Image source: Slovenia - share of economic sectors in the gross domestic product 2022 | Statista

Image source: SURS

The impact of automation on manufacturing jobs is a topic of great significance. Let's delve into this subject, focusing on Slovenia.

Automation and Job Creation: Automation has historically created and destroyed jobs, enhancing productivity and lowering prices. However, some workers directly displaced by machines suffer job losses, while others who complement automation tasks receive increased compensation. Education and training are crucial in automation, with postsecondary credentials increasing compensation and benefiting business owners through higher profits and reduced labour needs.

The New Automation: Education and training are crucial in automation, with postsecondary credentials increasing compensation and benefiting business owners through higher profits and reduced labour needs.

Slovenia's Context: The Slovenian manufacturing sector faces challenges due to automation technologies, which can replace low-skilled jobs with high-skilled ones, increasing productivity but potentially reducing labour share. Collaboration between policymakers, businesses, and workers is crucial for a balanced transition.

Slovenia must adapt to automation's benefits by investing in education, reskilling, and innovative policies to create a workforce that thrives in the age of automation, similar to other countries.

Preparing the Workforce for Automation 

In Slovenia, as in many other countries, preparing the workforce for automation is a critical endeavour.

Since 2000, global higher education enrollment has doubled, necessitating new skills acquisition strategies. Slovenia encourages lifelong learning through programs, matching qualifications to market demand and fostering a continuous learning culture among governments and organisations.

Image source: Education in Slovenia

Slovenia can enhance its skills training by implementing apprenticeship programs and vocational training, focusing on practical skills for automation roles, and integrating soft skills like communication and adaptability into education.

Slovenia's workforce preparation is vital for navigating the automation revolution, ensuring employment security, and promoting positive economic outcomes.

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Small and Medium Enterprises

Image source: Statistical Office of the Republic of Slovenia

Image source: Statista - Number of people employed by small and medium-sized enterprises (SMEs) in Slovenia from 2008 to 2022, by enterprise size

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 153,588 SMEs, with 145,390 being micro-sized enterprises, 6,908 small businesses, and 1,290 medium-sized businesses, employing between 0 and 49 people.

Employment by SMEs (2022): Slovenia's SMEs employed 497,054 people, with micro-sized enterprises employing 232,478, small-sized businesses employing 133,299, and medium-sized enterprises employing around 131,277 people.

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. 

Automation by Small and Medium-Sized Enterprises (SMEs) 

Let's explore the landscape of small and medium-sized enterprises (SMEs) in Slovenia. These businesses play a crucial role in the country's economy. Here are some key insights:

In 2022, Slovenia had 153,588 SMEs, primarily micro-sized enterprises, with a total of 145,390, 6,908, and 1,290 medium-sized businesses. Slovenia's SMEs in 2022 employed 497,054 people, with micro-sized enterprises employing 232,478, small-sized businesses employing 133,299, and medium-sized enterprises employing 131,277.

Slovenia's Average Monthly Gross Wages in Manufacturing Compared to EU (Source: tradingeconomics.com)

Slovenia's SMEs, comprising 99.8% of all companies, are the backbone of the economy, employing 70% of the workforce and generating 65% of total revenue. In 2024, AI's impact on business operations will become more significant, necessitating SMEs to stay updated to remain competitive in a digitally-driven market.

Slovenian SMEs are adopting AI technologies like machine learning, natural language processing, automation, predictive analytics, and cybersecurity to enhance accuracy, customer service, and reduce human intervention. These diverse businesses, ranging from micro-sized to medium-sized, are recognising the importance of staying informed about emerging trends for growth and competitiveness.

Role of AI in Small Business Automation

In Slovenia, the integration of Artificial Intelligence (AI) in small businesses is gaining momentum. Let's delve into the role of AI and its impact on small businesses in this beautiful European country:

National AI Strategy: Slovenia's National Programme for AI Development and Use by 2025 aims to promote research, innovation, and international competitiveness in AI, with strategic objectives including ecosystem development, technological capacity strengthening, international cooperation, and advanced AI infrastructure.

Human Capital Development: The NpUI is enhancing AI human resources through formal education updates, professional upskilling, and raising awareness, aiming to equip future generations with AI competencies and anticipate labour market trends.

Education System Enhancement: The Slovenian Government plans to improve education by integrating digital technology, computational thinking, and AI into tertiary curricula, ensuring equal access for all social groups.

Image source: Digital Technology

Slovenia's Global Role in AI: Slovenia, the smallest founding member of UNESCO, significantly contributes to AI development and serves as the headquarters of the UNESCO International Research Centre for Artificial Intelligence.

Slovenian small businesses are embracing AI for efficiency, cost reduction, and growth, with continued investment in AI initiatives paving the way for a brighter, more innovative future.

Factors that Influence Industrial Production in Slovenia

Let's explore the factors that influence industrial production in Slovenia:

Slovenia's economy showed resilience, growing faster than the EU average between 2020 and 2022, with robust growth in 2021-2022, despite the 2020 decline.

Manufacturing is the largest sector, accounting for 90% of total production. Key segments include fabricated metal products, electrical equipment, motor vehicles, rubber and plastic products, machinery and equipment, food products, basic metals, electricity, gas, steam, and air conditioning supply, and mining and quarrying. These sectors contribute to a total output of 9%.

Image source: Manufacturing in Slovenia

In February 2024, Slovenia's industrial production increased by 2.7% YoY, primarily due to a rise in mining and quarrying output and a rebound in manufacturing. However, industrial activity slowed down to 3.3% on a seasonally adjusted monthly basis, indicating a slowdown from the previous month's growth.

In summary, Slovenia's industrial production is influenced by economic resilience, manufacturing dominance, and strategic efforts to foster sustainable growth.

Comparison of  Slovenia's Industrial Production to Other Economies

We will explore how Slovenia's industrial production compares to other economies:

Recent Performance: Slovenia's industrial production increased by 12.2% in January 2024, marking the first rise after ten months of contraction. The manufacturing sector rebounded, while mining and quarrying also experienced growth. Understanding GDP growth trends requires considering domestic consumption, investment, and external trade.

Image source: Mining and Quarrying in Slovenia

Long-Term Trends: Slovenia's industrial production growth rate reached 3.6% in the past decade, surpassing the Euro Area average of 1.1%, reaching 1.2% in 2022.

Economic Context: Slovenia's economy grew 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 expects modest growth until 2025.

Sector-Specific Insights: Slovenia's economy relies heavily on manufacturing, accounting for 90% of total production. The mining and quarrying sector also plays a significant role, but challenges include transparency issues, bureaucratic procedures, and high tax burdens.

In summary, while the Slovenian manufacturing sector is essential, it's essential to consider the broader economic context for a holistic view of its growth trends. The country's resilience and recent performance demonstrate its potential in the global industrial landscape.

Influence of Technology Adoption on Slovenian Manufacturing

Technology adoption has significantly impacted Slovenian manufacturing, enhancing efficiency, productivity, and competitiveness. Let's explore some key aspects:

Automation and Robotics: Slovenian manufacturers are utilising automation to improve production processes, reduce labour costs, and meet market demands by automating repetitive tasks and enabling faster production cycles.

Digitalization and Industry 4.0: Slovenian factories are transforming with Industry 4.0 principles, utilising smart sensors, data analytics, and interconnected systems for real-time machinery health monitoring, predictive maintenance, and data-driven decision-making.

Image source: Industry 4.0

Supply Chain Management: Slovenian manufacturers utilise technology for efficient supply chain coordination, including inventory management, demand forecasting, and logistics optimisation, thereby minimising delays and reducing excess inventory.

Customisation and Personalization: Slovenian companies are leveraging advanced technologies to efficiently customise products, enabling mass customisation through flexible production lines and digital design tools.

Collaborative Platforms and Cloud Computing: Slovenian manufacturers utilise cloud-based solutions for real-time stakeholder collaboration, enhancing data accessibility and security, and fostering global partnerships with suppliers, distributors, and partners.

Energy Efficiency and Sustainability: Slovenian manufacturers are utilising technology to reduce energy consumption, enhance brand reputation, and attract environmentally conscious consumers through smart lighting, efficient HVAC systems, and optimised processes.

Skills Development and Training: Slovenian manufacturers are investing in training programs to ensure their workforce is proficient in using and maintaining advanced machinery, emphasising the importance of digital literacy and adaptability.

In summary, technology adoption has revolutionised Slovenian manufacturing, making it more agile, competitive, and responsive to market dynamics. 

Challenges Faced by SMEs During Automation Implementation

In Slovenia, small and medium-sized enterprises (SMEs) encounter various challenges during the implementation of automation. Let's delve into some of these obstacles:

Slovenian SMEs primarily use traditional technologies like websites and teamwork platforms but are limited in adopting advanced technologies like blockchain due to perceived complexity. Financial constraints and prioritising digital competencies among employees remain challenges despite digitalisation trends. Policymakers, industry stakeholders, and SMEs must develop effective strategies and policies to tackle diverse challenges faced by different-sized companies for comprehensive digital transformation.

These insights shed light on the complexities SMEs encounter during automation implementation, emphasising the importance of tailored support and holistic progress in the digital age.

Examples of AI Implementation in Small Businesses

 Let's explore how Slovenia is embracing artificial intelligence (AI) in small businesses:

National AI Strategy: Slovenia's government has released a draft National Programme for AI (NpUI) for public consultation, expected in 2021. The program aims to enhance Slovenia's AI research, innovation, and international competitiveness from 2020 to 2025 by establishing a supportive ecosystem and advanced data infrastructure.

Human Capital Development: The NpUI is enhancing AI human resources through educational curricula updates, AI skills acquisition support, AI awareness raising, and integration of digital and computational thinking topics to equip future generations with necessary AI competencies.

AI for Slovenia (Ai4si): Ai4si has released a guide on implementing AI in Slovenian SMEs, aiming to revolutionise operations through the use of AI.

Image source: Artificial Intelligence

Research and Building Blocks: Slovenia is a leading country in the AI ecosystem, with a strong base of top-tier researchers and top-notch technical studies.

In summary, Slovenia is actively fostering AI adoption, aiming to enhance efficiency, reduce costs, and drive growth in its small businesses. 

Employee Concerns During Automation Implementation in SMEs

In the context of small- and medium-sized enterprises (SMEs) in Slovenia, the implementation of Industry 4.0-based technologies can raise several employee concerns. Let's explore some of these concerns:

Automation can lead to job displacement, causing employees to fear their jobs may become obsolete, causing anxiety and resistance. New technologies often introduce skill gaps, leading to employees feeling unprepared or lacking the necessary skills for operation and maintenance. Training and upskilling programs are crucial to address this issue.

Automation can significantly alter job roles and responsibilities, leading to increased workloads, particularly during the transition phase. Automation could potentially decrease job satisfaction as employees value meaningful work and may be less involved in decision-making and creative tasks. Employees are concerned about privacy breaches and data security due to increased connectivity and data exchange, necessitating clear policies and safeguards.

Automation poses physical and mental risks, necessitating the creation of a safe work environment to mitigate potential health and safety issues. The absence of clear and transparent communication regarding automation plans can lead to uncertainty, which employees value and actively participate in decision-making processes.

Image source: Automation

Some employees are concerned about losing control over their work processes, and it is crucial to strike a balance between automation and maintaining job autonomy. Automation can significantly alter the organisational culture, leading to concerns among employees about potential disruptions in teamwork, collaboration, and overall work dynamics. The process of job redesign can help address potential employee resistance to changes in their job roles.

Overall, addressing these concerns through effective change management, training, and open communication is crucial for successful automation implementation in SMEs.

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Implementing AI in SMEs and Common Pitfalls to Avoid 

Implementing Artificial Intelligence (AI) in Small and Medium-sized Enterprises (SMEs) can be transformative, but it's essential to navigate potential pitfalls. Here are some considerations and challenges:

Data Availability: The challenge lies in organisations having inconsistent data quality and scattered across silos. To address this, SMEs should establish a clear strategy for organised and consistent data collection, ensuring effective AI implementation.

Lack of Talent: Identifying AI talent can be challenging, but investing in employee training and considering outsourcing can help build internal expertise.

Cost and Implementation Time: AI projects can be resource-intensive, but outsourcing implementation and maintenance can help overcome integration challenges by evaluating cost-benefit trade-offs.

Image source: Ethical concerns

Ethical Concerns: AI systems can potentially perpetuate biases or ethical issues, requiring SMEs to be aware of potential biases and actively address them during AI development.

Misidentifying Use Cases: The key to success in AI applications lies in identifying the right application for your business needs and aligning it with specific goals.

Hiring the Wrong Talent: The potential downside is relying on employees lacking the necessary AI expertise, while the potential advantage is investing in training or hiring external experts. 

Neglecting Data Care and Maintenance: The potential downside is relying on employees lacking the necessary AI expertise, and the avoidance is to invest in training or hire external experts.

Overlooking Potential Biases: AI models can inherit biases from training data, a potential pitfall. To avoid this, regular audits of AI systems are crucial for ensuring fairness and addressing biases.

In Slovenia, as in any other country, SMEs can benefit from AI adoption by addressing these challenges and leveraging AI's potential for personalised customer experiences, product tailoring, and growth opportunities. 

When implementing Artificial Intelligence (AI) in Small and Medium-sized Enterprises (SMEs) in Slovenia, it's essential to be aware of potential pitfalls and take proactive measures. Here are some common pitfalls to avoid:

Lack of Knowledge and Awareness: SMEs often lack understanding of AI technologies, requiring investment in AI education programs and continuous learning on AI trends to address this issue.

Costs and Resources: To reduce the cost of AI implementation for smaller businesses, conduct a cost-benefit analysis, explore cost-effective solutions, and consider cloud-based services.

Inadequate Infrastructure: SMEs may lack the necessary infrastructure for AI implementation, so it's recommended to assess existing infrastructure, invest in upgrades, and consider cloud-based solutions.

Image source: AI Infrastructure

Data Quality and Availability: AI models require high-quality data, which SMEs may struggle with. To address this, prioritise data quality, establish data governance practices, collect relevant data, and ensure accessibility for AI applications.

Ethical and Legal Concerns: SMEs must address ethical issues related to AI, including bias, privacy, and transparency, by ensuring transparent data collection, obtaining consent, and implementing robust security measures.

Over-Regulation: The European Commission's AI Act aims to promote ethical and safe AI solutions, but SMEs should balance regulation with innovation to ensure success.

Successful AI implementation in Slovenian SMEs requires a holistic approach, considering technology, organisational culture, talent development, and strategic planning to effectively and sustainably utilise AI.

Challenges Associated with Adopting AI for SMEs 

In the dynamic landscape of small and medium-sized enterprises (SMEs) in Slovenia, Artificial Intelligence (AI) presents both promising avenues for growth and daunting challenges. Let's delve into the intricacies:

Efficiency and Productivity Gains: SMEs are leveraging AI technologies like predictive analytics and chatbots for inventory management and customer support, according to a JumpCloud report, to boost operational efficiency and competitiveness.

Customer Insights and Personalization: AI-powered tools aid SMEs in understanding customers, personalizing marketing, anticipating market trends, and extracting actionable insights, enabling informed decision-making and targeted growth strategies.

Image source: Cybersecurity

Cybersecurity Concerns: A study revealed that  62% of admins believe AI surpasses their organisation's threat protection capabilities, highlighting network attacks, software vulnerabilities, and ransomware as significant risks for SMEs relying on digital infrastructures.

Lack of Confidence in AI Safeguards: The adoption of AI is significantly impacted by the absence of robust regulatory frameworks and ethical guidelines, as well as the lack of confidence among SMEs and consumers.

Infrastructure and Knowledge Barriers: SMEs face challenges in AI implementation due to knowledge gaps, costs, and inadequate infrastructure, which are common barriers.

Slovenia is focusing on implementing AI to boost the sustainable growth and competitiveness of SMEs by addressing challenges and leveraging its potential.

Examples of Successful High-Value Manufacturing in Slovenia

Slovenia has a vibrant manufacturing sector, and several companies have achieved success in high-value manufacturing. Here are some notable examples:

ELVEZ, d.o.o.: The company, based in Visnja Gora, specialises in cable harness manufacturing and plastic processing, boasting a strong reputation and a 4.5-star rating.

Kaiser+Kraft GmbH, podružnica Ljubljana: Kaiser+Kraft, a 5-star-rated company, offers a diverse range of products for offices, workshops, and warehouses, including office chairs and forklifts.

LES & VEHO d.o.o.:  Radovljica-based company specialises in woodworking and carpentry, boasting a 4.5-star rating and is renowned for its quality craftsmanship.

Wilo Adriatic, trgovine, servis, svetovanje d.o.o.: Wilo USA, a leading pump manufacturer, has a 5-star rating in Slovenia, offering pumps and systems for building services, water management, and the industrial sector.

Slovenia's electrical and electronics industry has experienced rapid growth and high value-added, with exports increasing by 43.7 percent between 2015 and 2019, with notable companies like Krka and Revoz contributing significantly to the country's economy.

These examples demonstrate Slovenia's commitment to high-value manufacturing and innovation. 

Role of Government Policies and Initiatives in the Slovenian Manufacturing Sector

Government policies and initiatives play a crucial role in shaping the sustainability and growth of the Slovenian manufacturing sector. Let's delve into some key strategies and actions:

Slovenian Industrial Strategy 2021–2030: Slovenia's government has set a 2030 vision for sustainable industry and economic development, aiming for a green, creative, and smart Slovenian industry, balancing societal, environmental, and economic aspects. The primary objective is to boost productivity to €66,000 per employee by 2030.

The strategy outlines state incentives for improving business competitiveness, strengthening entrepreneurship and innovation, addressing societal challenges effectively, and promoting green, creative, and digital development activities.

Image source: Digital development

Government Incentives: The Slovenian government provides incentives to support SMEs, including creating an efficient business environment, facilitating project financing, encouraging innovation through development projects, and promoting digitalisation for competitiveness.

Financial Support: Slovenia's Ministry of Economy, Tourism, and Sport provides financial incentives for SMEs' growth, while corporate financing institutions like the Slovenian Enterprise Fund and SID Bank support manufacturing growth.

In summary, Slovenia's government is actively involved in fostering a sustainable and competitive manufacturing sector through strategic planning, incentives, and financial support.

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

Let's explore how the Slovenian government supports small and medium-sized enterprises (SMEs) in the manufacturing sector:

Financial Incentives: The Slovenian Ministry of Economy, Tourism, and Sport offers financial incentives for SME growth, while corporate financing institutions like the Slovenian Enterprise Fund and SID Bank support manufacturing enterprises.

Slovenian Industrial Strategy 2021–2030: The strategic document outlines the vision and objectives for industry and economic development up to 2030. The strategy aims to achieve sustainable development across society, environment, and economy, increase productivity to €66,000 by 2030, focus on competitiveness, entrepreneurship, and innovation, and promote green, creative, and digital development activities.

Vouchers for SMEs: The government offers vouchers to enhance SME competitiveness and competencies. The vouchers offer co-financing for individual services, a simple application process, an annual spending limit of up to EUR 30,000 per enterprise, and eligibility for various costs.

In summary, the Slovenian government actively supports SMEs in the manufacturing sector through strategic planning, financial incentives, and targeted initiatives.

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Conclusion

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

Slovenia's economy demonstrated resilience despite external shocks, including Ukraine war spillovers, energy price spillovers, supply chain disruptions, and severe floods in August 2023, impacting infrastructure. The labour market remains tight despite slower growth, with unemployment at a historic low and labour shortages persisting in certain sectors, partially alleviated by net inward migration.

In December 2023, inflation dropped to 4%, while real wages are recovering, with nominal wage growth outpacing inflation. 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.
The Slovenian manufacturing sector is grappling with a delicate balance between growth, labour dynamics, and climate resilience, necessitating policymakers' attention to sustainable economic growth.