As large parts Central Europe and Romania are inundated with flood waters in the worst inundations in the region to date, Slovenia is still rebuilding after the catastrophic flooding that affected around one third of the country just over a year ago. 

The floods in Slovenia claimed six lives and caused billions of euros in damage, as well as having reverberations across European supply chains. 

In October 2023, the Slovenian government announced that the direct consequences of the August flooding amounted to €9.9bn. The floods were the most severe in Slovenia's history as an independent country, affecting 183 out of 212 municipalities, with 104 experiencing severe consequences.

The floods wrought havoc on Slovenia’s economy, with implications for European supply chains, as disruptions to production within Slovenia held up manufacturing in other European factories, especially in the automotive industry. 

Every car produced in Europe includes at least one component from Slovenia. By September 2023, full and partial closures of factories operated by companies such as battery supplier Tab d.d. and manufacturer of engine parts KLS Ljubno resulted in part shortages across the automotive industry. Volkswagen was among the companies affected, announcing production slowdowns. 

The Slovenian government responded by adopting a programme to address the extensive damage caused by the floods, with the total estimated funds needed until 2028 amounting to €2.33bn. The programme is intended to secure resources and implement reconstruction measures, including the rehabilitation of water infrastructure, restoration of municipal and public facilities, and the preservation of cultural heritage and natural values.

Slovenia's national budget for 2023 recorded a deficit of €2.3bn, influenced by various factors, including aid payments following the floods. In the first eight months of this year Slovenia recorded a budget deficit of €431mn.

In response to the massive reconstruction needs, the Slovenian government introduced a temporary tax on banks and increased the corporate income tax to finance post-flooding efforts. A dedicated budget fund was established, separate from other allocations, to collect funds for flood and landslide-related initiatives. This fund will includes income from a 0.2% tax on the balance sheets of banks and a three-percentage-point increase in corporate tax. 

Additionally, a guarantee scheme for loans with a subsidised interest rate has been implemented to aid businesses in recovery.

Incentives for investments in flood-affected areas have also been introduced, offering co-financing opportunities for companies until December 2024. Support for individuals includes a guarantee scheme for restoring damaged buildings and constructing replacements, with a quota of €200mn designated for guarantees.

The International Monetary Fund (IMF) praised Slovenia for its prompt and effective response to the floods, acknowledging the importance of fiscal consolidation and structural reforms to ensure long-term economic sustainability.

However, the need to respond to the floods put pressure on Prime Minister Robert Golob’s government, contributing to a string of resignations in late 2024, a situation that the right-wing opposition Slovenian Democratic Party (SDS) sought to exploit. 

Despite the severe floods, Slovenia's GDP growth in 2023 remained positive at 1.6%, with reconstruction efforts positively influencing investment. 

Projections for 2024 indicate modest growth, with flood recovery-related investment an important factor, alongside revived consumption. 

In the latest forecast from the Institute of Macroeconomic Analysis and Development (UMAR) on September 13, the institute projected growth of just 1.5% down from 2.4% forecasted in the spring. However UMAR forecast that growth will rebound to 2.4% in 2025. It anticipates investments in construction, particularly for flood recovery and resilience projects, will play a key role. 

In August, the European Commission proposed an additional €328.4mn in financial aid from the EU Solidarity Fund to support Slovenia's recovery, totalling €428.4mn. The proposal was part of a broader package of over €1bn in aid aimed at assisting countries affected by the severe floods that ravaged parts of Europe last year. 

With the increasing frequency of extreme weather events linked to climate change, the aid is seen as crucial in helping affected regions not only recover but also strengthen their resilience against future disasters.