The climate-fiscal timebomb: Slovenia

Fiscal outlook

Slovenia recorded a 0.9% deficit and a debt-to-GDP ratio of 66.6% in 2024.

Deficit measures the level of borrowing in a given year. Debt-to-GDP compares the total public debt to the size of the economy. Both are currently used to determine how much borrowing a member state is allowed to undertake. However, neither measure in itself determines a government’s capacity to sustain higher levels of public investment. Fiscal sustainability depends on growth, the multiplier effects of investment, interest rates, inflation, the structure of the economy and external risks such as climate change. NEF advocates moving away from strict numerical debt targets.

Rising climate costs

Slovenia has the highest rate of extreme weather event damage per capita and per square kilometre in Europe. It is particularly vulnerable to flooding, as was painfully evident in 2023 when catastrophic floods hit two-thirds of the country. Thousands of people lost their livelihoods, and 2,000km of roads and 13,000 buildings were damaged, with total actual damage amounting to around €10bn. At the same time, summers are getting hotter, and the country faced severe drought and critical water shortage in 2025. This has led to failing crops and sinking river levels, severely reducing hydroelectric power generation.

What NEF’s modelling shows

Organisation for Economic Co-operation and Development (OECD) projections show Slovenia’s GDP declining by 10% by 2050 and 15% by 2070 under current policies. Our modelling shows the following:

• Under current policies (BAU – business as usual), Slovenia’s debt is 80 pps higher than the climate-agnostic baseline in 2050 and 294 pps higher in 2070.

• With early EU mitigation and sufficient adaptation spending, debt is 60 pps higher in 2050 and 124 pps in 2070.

• Delayed EU investments and insufficient adaptation results in higher debt levels of 67 pps in 2050 and 145 pps in 2070.

• EU early action combined with global cooperation results in 8 pps higher debt levels than the climate-agnostic baseline in 2050 and 2 pps lower levels in 2070.

• Progressive taxation, such as a wealth tax, combined with EU early action would increase debt by 34 pps in 2050 and by 70 pps in 2070 compared to the climate-agnostic baseline.

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