Ljubljana - Measures designed to help the economy recover should be combined with structural reforms to make the Slovenian economy and society more resilient to future shocks, the government's macroeconomic think-tank says in its 2021 Development Report, which the government discussed yesterday.

The Covid pandemic-induced crisis suspended the multi-year economic growth and favourable labour market trends, while government measures significantly cushioned the negative impact on the economy and households, the Institute of Macroeconomic Analysis and Development (IMAD) says.

In the period after the financial crisis and before the epidemic, Slovenia started closing a development gap, posting historic employment levels and favourable inclusion indicators. It gradually also increased efficient use of renewables.

However, the country entered 2020 with some unresolved development challenges that only deepened with the epidemic, IMAD says in the report it compiles annually to monitor the implementation of the 2030 Development Strategy.

As a result of insufficient investments, the development drive in recent years has not been strongly rooted in higher productivity, which is the reason why investment will have to be increased during recovery to bring in know-how and skills of the future.

In the area of the environment, IMAD identified as problematic the too slow introduction of changes leading towards a carbon-low circular economy, high levels of greenhouse gas emissions in transport and years-long stagnation of renewables.

It identified as Slovenia's key long-term development challenges enhancing productivity growth, inclusive social development and inter-generational solidarity, faster transition to a low-carbon circular economy, and strengthening the state and its agencies' development role.

To enhance productivity, R&D and digital transition should be intensified, new business models, servicisation, smart factories and other most progressive technologies introduced. More investment in human resources and development of staff of the future will also be needed.

To achieve inclusive social development and intergenerational solidarity, financing should be adequately addressed, long-term care and healthcare capacities increased, and the pension system overhauled to make it sustainable and provide for decent pensions, among others.

To transition to a low-carbon circular economy, sustainable mobility will have to be encouraged, including by expanding and modernising infrastructure and introducing new technological solutions.

New low-carbon circular business models will have to be introduced, including in the area of waste management, the capacity to use renewable sources of energy will have to be significantly increased, foremost by siting relevant infrastructure.

To enhance the state's development role, it will take improving strategic management of public institutions to recognise and address development challenges on time. Legislation and business environment will also have to be improved, and public revenue and expenditure restructured to prioritise development.

IMAD believes the EU's recovery funds should be largely spent on achieving these goals, foremost to boost R&D and innovation, digital transition and transition to a low carbon-circular economy. "Only in this manner will we resolve Slovenia's key development challenges in a targeted and effective manner."