Slovenia has a high-income developed economy which enjoys the second highest (after Cyprus) GDP per capita ($28,010.76 estimate for 2008) of the new EU countries which is 93% of the EU average. Although the country's relatively high inflation declined to 2.3% in 2006 (prior to adoption of the euro), in October 2007 it reached 5.1% year-on-year, exceeding the average in the euro-zone. Slovenia's economy has started to grow more strongly in the last few years 4.3% in 2004 and 2005, 5.9% in 2006 and 6.8% in 2007, after relatively slow growth in 2003 (2.8%). in the first three quarters of 2008, the economy expanded at a 5% annual rate.
Agriculture, forestry and fishing is a comparatively low 2.5% of GDP and engages only 6% of the population. The average farm is only 5.5 hectares. Part of Slovenia lies in the Alpe-Adria bioregion, which is currently involved in a major initiative in organic farming. Between 1998 and 2003, the organic sector grew from less than 0.1% of Slovenian agriculture to roughly the European Union average of 3.3%.
Slovenia's trade is orientated towards other EU countries, mainly Germany, Austria, Italy and France. This is the result of a wholesale reorientation of trade toward the West and the growing markets of central and eastern Europe in the face of the collapse of its Yugoslav markets. Slovenia's economy is highly dependent on foreign trade. Trade equals about 120% of GDP (exports and imports combined). About two-thirds of Slovenia's trade is with EU members, a primary motivation for seeking EU membership.
This high level of openness makes it extremely sensitive to economic conditions in its main trading partners and changes in its international price competitiveness. However, despite the economic slowdown in Europe in 2001-03, Slovenia maintained 3% GDP growth. Keeping labour costs in line with productivity is thus a key challenge for Slovenia's economic well-being, and Slovenian firms have responded by specialising in mid- to high-tech manufacturing. Industry and construction comprise over one-third of GDP. As in most industrial economies, services make up an increasing share of output (57.1%), notably in financial services.
Despite economic success, Slovenia faces some challenges. A big portion of the economy remains in state hands and foreign direct investment (FDI) in Slovenia is one of the lowest in the EU per capita. Taxes are relatively high, the labour market is seen as inflexible, and industries are losing sales to China, India and elsewhere.
During the 2000s, privatisations were seen in the banking, telecommunications and public utility sectors. Restrictions on foreign investment are being dismantled, and foreign direct investment (FDI) is expected to increase. Slovenia is the economic front-runner of the countries that joined the European Union in 2004 and was the first new member which adopted the euro on 1 January 2007.
Economy - overview
Slovenia, which on 1 January 2007 became the first 2004 European Union entrant to adopt the euro, is a model of economic success and stability for the region. With the highest per capita GDP in Central Europe, Slovenia has excellent infrastructure, a well-educated work force, and a strategic location between the Balkans and Western Europe. Privatisation has lagged since 2002, and the economy has one of highest levels of state control in the EU. Structural reforms to improve the business environment have allowed for somewhat greater foreign participation in Slovenia's economy and have helped to lower unemployment. In March 2004, Slovenia became the first transition country to graduate from borrower status to donor partner at the World Bank. In December 2007, Slovenia was invited to begin the accession process for joining the OECD. Despite its economic success, foreign direct investment (FDI) in Slovenia has lagged behind the region average, and taxes remain relatively high. Furthermore, the labour market is often seen as inflexible, and legacy industries are losing sales to more competitive firms in China, India and elsewhere.
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