The interest of German companies in Slovenia as an investment destination is still high, but there is a downward trend, shows a survey conducted by the Slovenian-German Chamber of Commerce which identified the tax wedge and shortage of workers as the main challenges.

The two countries remained important trading partners, having increased the volume of trade by almost 12% last year to €15 billion.

"This is why the results of the annual survey on the economic situation in Central and Eastern Europe are all the more surprising," said president of the Slovenian-German Chamber of Commerce Dagmar von Bohnstein.

She noted that only 75% of the German companies in Slovenia participating in the survey replied that they would invest in this area again, down ten percentage points compared to last year.

German companies like good infrastructure the most, and they are also very satisfied with the high level of payment culture and the quality and availability of local suppliers.

The 68 companies surveyed from 13 February and 17 March assessed the conditions for research and development in Slovenia as satisfactory or good.

On the other hand, the assessed quality of the public administration declined significantly, said von Bohnstein, noting that 83% of the respondents were dissatisfied or very dissatisfied with the tax wedge, the tax system and the tax administration.

In terms of the predictability of economic policy, Slovenia ranked last among the countries of Central and Eastern Europe.

Labour costs and the flexibility of Slovenian labour legislation were highlighted as a notable disadvantage by 73% and 65% of the respondents, respectively.

"Despite the small size of the market, many German companies utilise the knowledge and experience of Slovenian companies and benefit from highly qualified experts and excellent cooperation, especially in the automotive and industrial sectors," she said.

But Slovenia still needs reforms in order to take advantage of the existing potential for foreign direct investment and higher economic growth.

"Companies suffer due to high prices of raw materials and energy, a growing shortage of skilled workers, especially in manufacturing, lack of flexibility of labour legislation and excessive taxation of the middle class," she said.

Katja Stadler, the director of the chamber, said the lack of incentives in the Slovenian administrative environment for foreign companies to invest in the country was another sticking point.

In providing assistance to German companies in the Slovenian market, the chamber encounters a fairly strong initial interest from state institutions, which then withers away considerably.

"We would like to see investors treated in a more holistic manner, which would include the support of state institutions from the beginning to the end of the procedures," she said.