Slovenia is making headway in a number of areas, preserving a good position for rapid development. But in productivity, the results are still too modest, a report by the government's economic think tank has shown.

The fifth annual productivity report, released by the Institute of Macroeconomic Development and Analysis (IMAD) on 6 December, urges urges more ambition, courage and speed in ushering in change in the future.

Slovenia has been lagging behind the EU average in development for years, both in terms of GDP per capita at purchasing power parity, as well as productivity. Not only has the country failed to close the gap, the gap is now even slightly wider than it was in 2008, the report finds.

Slovenia reached 89% of the EU average in terms of GDP per capita last year, and 82% of the average by productivity per employee. However, in comparison to the best innovators in the EU, the gap widens to around 30 percentage points.

GDP growth was mainly driven by increased labour participation, while real productivity growth remained modest. This is a cause for concern because demographic change will no longer allow Slovenia to continue closing the gap in this manner, IMAD director Mojca Bednaš said in presenting the report.

Nevertheless, IMAD finds that Slovenia remains in a good position for rapid development in a number of fields. Not only has the country preserved its competitive edge in its strong segments, it has also been making headway in some other areas that have so far not been in the forefront, such as marketing and soft innovation.

IMAD believes that the challenge ahead for Slovenia is not to change course but to be faster and more decisive in introducing change, especially in comparison to the leading innovators, countries in northern and northwestern Europe.

Slovenia is on the right track in terms of labour, with people working even longer hours than in the northern and northwestern Europe. But workers in northern and northwestern Europe generate much more value. "Our job is to increase productivity," report editor Peter Wostner said.

Slovenia made visible progress in a number of fields between 2010 and 2022. Moreover, the economy is in good shape and is increasingly integrated in global value chains. The business environment has been improving as well, but this is also the case for other countries and Slovenia remains near the average.

"We need to get it out of our heads that we are happy with the average," Wostner said, underlining the need for an environment that would allow companies to be agile and very flexible.

The report puts special emphasis on human resources, showing the country has achieved extraordinary results since 2010 in terms of employment, above EU average and on par with the best innovators in Europe.

Workforce skills have also improved significantly and by this measure Slovenia has come close to innovating countries, which Wostner believes is very good for productivity.

However, Slovenia is running out of workers due to demographic change, as the number of people in employment is decreasing at a rate of about 5,000 a year. It will be key how the country responds to this.