Before its independence, Slovenia was the most highly developed and wealthiest republic of the former Yugoslav SFR, with a per capita income more than double that of the Yugoslav average, and nearly comparable to levels in neighboring Austria and Italy. The painful transition to a market-based economy was exacerbated by the disruption of intra-Yugoslav trade. However, Slovenia's economy has not suffered as much as was predicted during the breakup of the Yugoslav SFR, due to strong ties with Western Europe. Whereas GDP fell by 9% in 1991 and 6% in 1992, the 1993 GDP grew by 1.3%. Since then real GDP growth has averaged 4% a year. In 2001 and 2002, a weak external environment slowed growth to 3% and 2.9% (est.). Until 1991 to 1999, Slovenia's budget deficit rarely exceeded 1% of GDP. In 2000 and 2001, the general government debt increased to 1.4% of GDP, and was projected to reach 2.9% in 2002. The unemployment rate (ILO definition) has fallen from 7.6% in 1999 to 6.4% in 2001 and an estimated 6.3% in 2002. Inflation as measured by consumer prices (end of period) rose from 8% in 1998 and 1999 to 8.9% in 2000, but then fell to 7% in 2001 and 7.2%(est.) in 2002.
Under the Communists, large parts of the economy were nationalized, with most restructuring involving the infrastructure, electricity, telecommunications, utilities, major banks, insurers, and the steel industry. Subsequent reforms enabled managers and workers to purchase up to 60% of their companies. As a result, nearly 70% of manufacturing firms in Slovenia are owned by their employees.
Slovenia freed prices and implemented a privatization law in November 1992, which has enabled private businesses to expand. The Slovene privatization program began in 1993 and involved 1,500 companies, 1,000 of which had completed privatization by mid-1997, including most small and medium-sized enterprises. In 2001, an estimated 55% of the economy had been privatized.
The outlook for Slovenia's economy is good, as both inflation and unemployment are expected to continue edging down. By 2002 the country's real GDP per capita had risen to about 70% the EU average. Slovenia is now scheduled to accede to the European Union in May 2004.