The report, published as part of the European Semester review mechanism on 22 February and presented today at the European Commission Representation Office, finds that Slovenia made progress in implementing last year's recommendations.

"The Slovenian economy is doing well, but some work still needs to be done," said Istvan P. Szekely, who is in charge of Slovenia in the European Commission's Directorate General for Economic and Financial Affairs.

The report says that Slovenia recorded a solid economic growth in 2016, which was powered by private consumption and exports, noting that Slovenia is entering the so-called healthy half of Europe.

"Slovenia is just one step away from the countries which exited all corrective measures," said Szekely, adding that the growth of Slovenia's economy was not only relatively high, but also healthy.

While Szekely warned that while Slovenia reduced general government deficit, structural deficit was still increasing, Slovenian Finance Minister Mateja Vraničar Erman said that the methodology used for determining structural deficit had shortcomings.

"Assessments show that the Slovenian economy is expected to strongly overheat in 2017 and 2018, while data shows that this is not the case," she said.

Turning to general government debt, Szekely noted that before the economic crisis, Slovenia was among the least indebted countries. Slovenia's debt then strongly increased above the regional average.

Although Slovenia's indebtedness is below the eurozone average, Szekely warned that this was still not good enough. "You are much more vulnerable on financial markets than the eurozone," he said, calling for a policy that would further reduce debt as soon as possible.

While the report says that the share of bad loans is still relatively high, Szekely noted that the share was decreasing and that the system encouraged banks to deal with such loans.

Labour market in Slovenia is still facing big challenges, as long-term unemployment is high. On the other hand, the trend of growing unemployment rate has reversed, the report says.

Director-General for Employment, Social Affairs and Inclusion Michel Servoz added that the unemployment rate in Slovenia decreasing at a higher pace than elsewhere in the EU was good news.

"This is certainly connected with the dynamic economic growth in the last few years, but there are still possibilities for improvements," he said, adding that Slovenia could make progress when it came to employment rate.

Servoz also pointed to the problem of long-term unemployment and called for active policies of employment, especially of hard-to-employ people. He also emphasised the importance of lifelong learning.

The report notes that the population ageing is putting pressure on long-term sustainability of the pension system, which is still facing risks despite the recent pension reform.

Szekely said that further steps had to be taken to prevent an increase in spending for pensions relative to GDP, because this would represent huge pressure on public finances.