Slovenia achieved strong economic growth leading to a marked catch-up with the EU15 during the last decade. This dynamic growth has been interrupted by the global recession, adversely affecting Slovenian exports and banks’ refinancing possibilities. Government policies to counter the downturn have been appropriate: most measures to support banks are well-designed and, given the relatively favourable fiscal position, there was room for the discretionary fiscal stimulus adopted by the government. However, the government should ensure that the fiscal stimulus remains temporary and pro-growth oriented. Looking forward, fiscal policy needs to pay greater attention to the monetary conditions (now set at the euro area level) to avoid overheating. As the economy recovers, efforts to achieve real convergence need to be renewed. Labour productivity gains that had been driving growth per capita need to be sustained through higher total factor productivity growth and better labour utilisation. Competitiveness within the euro area should be maintained by ensuring that wage growth does not exceed that of productivity. Overall, the speed of real convergence will largely depend upon implementation of structural policies to promote fiscal sustainability, make employment more attractive and enhance the business environment.