Slovenia has been deeply affected by the global crisis, but is now recovering gradually along with the rest of the OECD area. As Slovenia is a small open economy within the euro area, it is crucial for it to rapidly rebalance its economy and restore competitiveness. The proposed pension reform is a first step in the right direction to improve fiscal sustainability and boost labour supply. However, a further comprehensive pension reform is needed. To get closer to the technology and efficiency frontiers, reforms of the education system and policies to promote innovation, labour market flexibility and a friendlier environment for foreign direct investment (FDI) would be helpful.