OECD ECONOMIC SURVEY OF SLOVENIA 2017

Boosting investment through better skills and regulation Ljubljana, 5 September 2017

http://www.oecd.org/eco/surveys/economic-survey-slovenia.htm

@OECDeconomy @OECD

The economy is rebounding after a long recession

2

Growth is strengthening

3 Source: OECD Analytical Database.

-10

-8

-6

-4

-2

0

2

4

6

8

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Contribution of domestic demand (percentage points) Real GDP growth (%)

Quarterly GDP (Y-o-Y changes)

Income convergence has resumed

4 Source: OECD Analytical Database.

- 70

- 60

- 50

- 40

- 30

2006 2008 2010 2012 2014 2016

SVN CZE HUN POL SVK

%

Income/capita gap to the upper half of OECD countries

The unemployment rate is declining

5

Source: OECD Employment and Labour Market Statistics (database)

0

3

6

9

12

15

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% of labour force aged 15-64

Well-being is high

6

OECD Better Life Index (higher is better)

0

2

4

6

8

10Income and wealth

Jobs and earnings

Housing

Work and life balance

Health status

Education and skillsSocial connections

Civic engagement andgovernance

Environmental quality

Personal security

Subjective well-being

Slovenia OECD

Source: OECD (2016), Better Life Index database

Income inequality is low

7 Source: Calculations based on the OECD Income Distribution Database

Income redistribution (90/10 ratio of the average income of the top decile to that of the bottom decile), latest available data

0

10

20

30

40

50

60

ISL

CZE

SVN

FIN

DNK

BEL

LUX

CHE

SVK

AUT

FRA

NOR

SWE

DEU

KOR

NLD

POL

IRL

CAN

GBR

LTU

PRT

LVA

TUR ITA

GRC

EST

ESP

ISR

USA

CHL

90/10, before redistribution 90/10, after redistribution

Ratio

Bolstering investment is key for higher

productivity

9

Source: OECD, Analytical database

15

20

25

30

35

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Slovenia Hungary Czech Republic Poland Slovak Republic

Total investment, as a percentage of GDP

Firms are facing increasing labour shortages

10

Source: Eurostat, Industry database.

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016 2017

SVN EU28 Euro area

% of firms reporting labour shortages

Businesses face a heavy regulatory burden

11

Product market regulation indicator, index scale of 0 – 6 from least to most restrictive, latest available data

Source: OECD PMR indicators database.

0.0

0.5

1.0

1.5

2.0

2.5

NLD

GBR

AUT

DNK

NZL

ITA

SVK

AUS

EST

FIN

DEU

PRT

HUN

BEL

CZE

JPN

CAN

ESP

IRL

LUX

NOR

OECD FR

A ISL

CHE

CHL

SWE

POL

SVN

GRC

KOR

MEX

ISR

TUR

Index

Securing fiscal sustainability

12

Gross public debt is now declining

13

Source: OECD

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

% of GDP

The fiscal deficit is still falling

14

Source: OECD

-16.0

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.02007 2008 2009 2010 2011 2012 2013 2014 2015 2016% of GDP

Ageing endangers fiscal sustainability

15

General government gross debt, % of GDP

Source: OECD calculations based on OECD (2017), OECD Economic Outlook: Statistics and Projections (database), December; OECD (2017), Main Economic Indicators.

0

20

40

60

80

100

120

140

160

180

200

2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060

Balanced budget scenario 1 % of GDP deficit Without offsetting ageing-related costs

16

Key fiscal and spending recommendations

The government should pursue its 2020 fiscal balance objective, and preferably frontload consolidation to avoid overheating.

It should also maintain spending ceilings, pursue efficiency improvement and adjust the structure of public spending to avoid a renewed increase in public debt.

Faster, well thought-out privatisation would reduce public debt and the high level

of contingent liabilities.

Pension system: Raise the effective and statutory retirement ages. Cover shortfalls through additional contributions and lower pension

indexation. Increase incentives to work longer.

Health-care system:

Allow hospitals to adjust their health services to changing demand, by including multi-year investments and allowing them to keep cost savings.

Raising wages and living standards by investing in capital

and skills

17

Long-term unemployment remains high

18

Source: OECD, Labor Force Survey - Sex and Age composition database

Share of long-term unemployed (over one year) in total unemployment

0

10

20

30

40

50

60

70

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

SVN OECD EU28

%

Older workers retire early, undermining inclusiveness

19

Source: OECD, Labor Force Survey - Sex and Age composition database

Employment rate for older workers (aged 55-64), 2016

0

10

20

30

40

50

60

70

80

90

TUR

GRC

SVN

LUX

BEL

POL

SVK

ESP

AUT

HUN

FRA

ITA

PRT

MEX

IRL

CZE

OECD LV

AFI

NCA

NUS

AAU

SNL

DGB

RCH

LES

TKO

RIS

RDN

KDE

UJP

NCH

ENO

RSW

ENZ

LIS

L

%

Older workers have low literacy skills

20 IT

A

0

50

100

150

200

250

300

CHL

TUR

ESP

ISR ITA

SVN

FRA

KOR

GRC

POL

AUT

OECD IR

LDN

KDE

UBE

LUK

2FI

NCA

NES

TNL

DNO

RSW

ECZ

EAU

SUS

AUK

1SV

KNZ

LJP

N

Literacy NumeracyScore

Mean literacy and numeracy proficiency scores for 55 – 65 year-olds, 2015

Source: OECD, Survey of Adult skills(PIAAC), Table A3.2 (L) and (N)

22

Better tertiary educational outcomes will boost investment in skill-intensive sectors

Mean literacy and numeracy proficiency scores for adults with tertiary education, 2015

Source: OECD, Survey of Adult skills(PIAAC), Table A3.2 (l) and (N).

0

50

100

150

200

250

300

350

CHL

TUR

GRC

ISR ITA

ESP

SVN

EST

CAN

KOR IRL

OECD DN

KDE

UFR

ASV

KUK

2UK

1AU

TPO

LUS

ANZ

LNO

RBE

LCZ

EAU

SSW

EFI

NNL

DJP

N

Literacy NumeracyScore

23

Key recommendations in the labour market and skills development

Improve general skills of vocational students through use of problem-based

learning, combined with retraining of teachers. Raise the work-experience content of technical programmes.

Increase training to help long-term unemployed to re-enter the labour market.

Improve life-long learning by using adult training vouchers or tax credits to increase training opportunities.

Eliminate the legal requirement that wages increase automatically with age. Harmonise the maximum duration of unemployment benefit across age

groups.

Link university funding to students' labour market outcomes.

Equalise tuition fees for full- and part-time students on a per course basis, coupled with grants and loans for those from poor families.

Fostering productivity by improving regulation and enhancing competition

24

Regulatory quality could be improved

25

Source: 2014 Regulatory Indicators Survey results

0

0.5

1

1.5

2

2.5

3

3.5

4GR

CTU

R IRL

SVK

USA

FIN

CZE

JPN

ESP

FRA

PRT

CHL

SVN

NOR

HUN ISL

ITA

NLD

LUX

DNK

POL

ISR

KOR

NZL

AUT

EST

SWE

CHE

CAN

BEL EU DEU

MEX

GBR

AUS

Transparency of ex post evaluation

Systematic adoption of ex post evaluation

Oversight of ex post evaluation

Methodology of ex post evaluation

Worst

Best

Entry barriers hinder investment in new technologies

26

Real gross value added per worker in professional services is low, PPP, 2014

Source: Eurostat, "Structural business Statistics - Services", Eurostat Database.

Engineering Architecture

0

20

40

60

80

100

120

GRC

LVA

PRT

HUN

EST

POL

SVK

SVN ITA

FIN

ESP

SWE

DNK

AUT

EU28

FRA

NLD

DEU

LUX

BEL

GBR

NOR

EUR thousand

0

20

40

60

80

100

120

GRC

LVA

PRT

HUN

SVN

ESP

ITA

POL

SVK

BEL

IRL

NLD

EU28 FIN

AUT

DNK

SWE

DEU

FRA

LUX

NOR

GBR

EUR thousand

The competition authority has had few successful cases

27

Source: The Slovenian Competition Protection Agency

Enforcement outcomes, 2014

40%

47%

5%

8%

CPA decisions partially upheld bycourtCases remanded back to CPA forreconsiderationCases dismissed by the Court

CPA decisions fully upheld by Court

State owned enterprises are still present in many sectors

28

Source: Slovenian Sovereign Holding (http://www.sdh.si/sl-si/upravljanje-nalozb/seznam-nalozb# - February 2017); ORBIS data base.

0

10

20

30

40

50

60

70

A - A

gricu

lture

, fore

stry a

nd fis

hing

B - M

ining

and q

uarry

ing

C - M

anufa

cturin

g

D - E

lectric

ity, g

as, s

team

and a

ir con

dition

ingsu

pply

E - W

ater s

upply

; sew

erag

e, wa

stema

nage

ment

and r

emed

iation

activ

ities

F - C

onstr

uctio

n

G - W

holes

ale an

d reta

il tra

de; r

epair

ofmo

tor ve

hicles

and m

otorcy

cles

H - T

rans

porta

tion a

nd st

orag

e

I - A

ccom

moda

tion a

nd fo

od se

rvice

activ

ities

J - In

forma

tion a

nd co

mmun

icatio

n

K - F

inanc

ial an

d ins

uran

ce ac

tivitie

s

L - R

eal e

state

activ

ities

M - P

rofes

siona

l, scie

ntific

and t

echn

ical

activ

ities

N - A

dmini

strati

ve an

d sup

port

servi

ceac

tivitie

s

O - P

ublic

admi

nistra

tion a

nd de

fence

;co

mpuls

ory s

ocial

secu

rity

P - E

duca

tion

Q - H

uman

healt

h and

socia

l wor

k acti

vities

R - A

rts, e

nterta

inmen

t and

recre

ation

S - O

ther s

ervic

e acti

vities

Number of SOEs

29

Key recommendations for improving regulation and enhancing competition

Apply consistently a common RIA framework:

including effective quality control, and training to carry out ex ante and ex post regulatory evaluations.

Simplify judicial proceedings.

Increase the competition authority’s resources and staff expertise.

Shrink the list of regulated professions, and, where regulation is

retained, move to less restrictive forms. Develop a common approach to cost-benefit analysis for project

selection.

30

Key recommendations for improving regulation and enhancing competition (continued)

Strengthen SOE governance:

by directing them to focus on core activities, allowing more management pay flexibility and strengthening supervisory boards.

Follow through with privatisation, and narrow the group of SOEs that are

considered strategic.

Implement effective separation of activities and non-discriminatory third-party access to networks. Privatise competitive activities, except in sensitive sectors.

Avoid technology biases in renewable-energy subsidies.

Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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