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 Quarterly GDP (Y-o-Y changes) 10
Contribution of domestic demand (percentage points)
8
Real GDP growth (%)
6 4 2 0 -2 -4 -6 -8 -10
2000
2001
2002
2003
2004
Source: OECD Analytical Database.
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 3
Income convergence has resumed Income/capita gap to the upper half of OECD countries % - 30
- 40
- 50
- 60 SVN - 70
2006
Source: OECD Analytical Database.
CZE 2008
HUN 2010
POL 2012
SVK 2014
2016
4
The unemployment rate is declining % of labour force aged 15-64 15 12 9 6 3 0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: OECD Employment and Labour Market Statistics (database)
5
Well-being is high OECD Better Life Index (higher is better) Slovenia
OECD Subjective well-being
Income and wealth 10 8
Jobs and earnings
6 Personal security
4
Housing
2 0
Environmental quality
Civic engagement and governance Social connections
Work and life balance
Health status Education and skills
Source: OECD (2016), Better Life Index database 6
Income inequality is low Income redistribution (90/10 ratio of the average income of the top decile to that of the bottom decile), latest available data
Ratio 60
90/10, before redistribution
90/10, after redistribution
50 40 30 20
Source: Calculations based on the OECD Income Distribution Database
CHL
USA
ISR
ESP
EST
GRC
ITA
TUR
LVA
PRT
LTU
GBR
CAN
IRL
POL
NLD
KOR
DEU
SWE
NOR
FRA
AUT
SVK
CHE
LUX
BEL
DNK
FIN
SVN
CZE
0
ISL
10
7
Bolstering investment is key for higher productivity Total investment, as a percentage of GDP 35 Slovenia
Hungary
Czech Republic
Poland
Slovak Republic
30
25
20
15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: OECD, Analytical database 9
Firms are facing increasing labour shortages % of firms reporting labour shortages 40
SVN
EU28
Euro area
35 30 25 20 15 10 5 0
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: Eurostat, Industry database. 10
Businesses face a heavy regulatory burden Product market regulation indicator, index scale of 0 – 6 from least to most restrictive, latest available data Index 2.5 2.0 1.5 1.0
0.0
NLD GBR AUT DNK NZL ITA SVK AUS EST FIN DEU PRT HUN BEL CZE JPN CAN ESP IRL LUX NOR OECD FRA ISL CHE CHL SWE POL SVN GRC KOR MEX ISR TUR
0.5
Source: OECD PMR indicators database. 11
Securing fiscal sustainability
12
Gross public debt is now declining % of GDP 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: OECD 13
The fiscal deficit is still falling % of GDP 0.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
-2.0 -4.0 -6.0 -8.0 -10.0 -12.0 -14.0 -16.0 Source: OECD 14
Ageing endangers fiscal sustainability General government gross debt, % of GDP 200 180
Balanced budget scenario
1 % of GDP deficit
Without offsetting ageing-related costs
160 140 120 100 80 60 40 20 0
2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060 Source: OECD calculations based on OECD (2017), OECD Economic Outlook: Statistics and Projections (database), December; OECD (2017), Main Economic Indicators.
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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. 16
Raising wages and living standards by investing in capital and skills
17
Long-term unemployment remains high Share of long-term unemployed (over one year) in total unemployment 70
%
SVN
60
OECD
EU28
50 40 30 20
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
10
Source: OECD, Labor Force Survey - Sex and Age composition database
18
Older workers retire early, undermining inclusiveness Employment rate for older workers (aged 55-64), 2016 %
90 80 70 60 50 40 30 20
0
TUR GRC SVN LUX BEL POL SVK ESP AUT HUN FRA ITA PRT MEX IRL CZE OECD LVA FIN CAN USA AUS NLD GBR CHL EST KOR ISR DNK DEU JPN CHE NOR SWE NZL ISL
10
Source: OECD, Labor Force Survey - Sex and Age composition database 19
Older workers have low literacy skills Mean literacy and numeracy proficiency scores for 55 – 65 year-olds, 2015 Score Literacy
Numeracy ITA
300 250 200 150 100
JPN
NZL
SVK
UK1
USA
AUS
CZE
SWE
NOR
NLD
EST
CAN
FIN
UK2
BEL
DEU
DNK
IRL
OECD
AUT
POL
GRC
KOR
FRA
SVN
ITA
ISR
ESP
TUR
0
CHL
50
Source: OECD, Survey of Adult skills(PIAAC), Table A3.2 (L) and (N) 20
Better tertiary educational outcomes will boost investment in skill-intensive sectors Mean literacy and numeracy proficiency scores for adults with tertiary education, 2015 Literacy
Score
Numeracy
350 300 250 200 150 100
JPN
NLD
FIN
SWE
AUS
CZE
BEL
NOR
NZL
USA
POL
AUT
UK1
UK2
SVK
FRA
DEU
DNK
OECD
IRL
KOR
CAN
EST
SVN
ESP
ITA
ISR
GRC
TUR
0
CHL
50
Source: OECD, Survey of Adult skills(PIAAC), Table A3.2 (l) and (N). 22
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.
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Fostering productivity by improving regulation and enhancing competition
24
Regulatory quality could be improved 4
Transparency of ex post evaluation
3.5
Best
Systematic adoption of ex post evaluation
3
Oversight of ex post evaluation
2.5
Methodology of ex post evaluation
2 1.5 1
Worst
0
GRC TUR 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
0.5
Source: 2014 Regulatory Indicators Survey results 25
Entry barriers hinder investment in new technologies Real gross value added per worker in professional services is low, PPP, 2014
EUR thousand
Architecture EUR thousand
120
120
100
100
80
80
60
60
40
40
20
20 0 GRC LVA PRT HUN EST POL SVK SVN ITA FIN ESP SWE DNK AUT EU28 FRA NLD DEU LUX BEL GBR NOR
0
GRC LVA PRT HUN SVN ESP ITA POL SVK BEL IRL NLD EU28 FIN AUT DNK SWE DEU FRA LUX NOR GBR
Engineering
Source: Eurostat, "Structural business Statistics - Services", Eurostat Database.
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The competition authority has had few successful cases Enforcement outcomes, 2014
47%
5% 8%
CPA decisions partially upheld by court Cases remanded back to CPA for reconsideration Cases dismissed by the Court CPA decisions fully upheld by Court
40%
Source: The Slovenian Competition Protection Agency
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0 S - Other service activities
R - Arts, entertainment and recreation
Q - Human health and social work activities
P - Education
O - Public administration and defence; compulsory social security
N - Administrative and support service activities
M - Professional, scientific and technical activities
L - Real estate activities
K - Financial and insurance activities
J - Information and communication
I - Accommodation and food service activities
H - Transportation and storage
G - Wholesale and retail trade; repair of motor vehicles and motorcycles
F - Construction
E - Water supply; sewerage, waste management and remediation activities
D - Electricity, gas, steam and air conditioning supply
C - Manufacturing
B - Mining and quarrying
A - Agriculture, forestry and fishing
State owned enterprises are still present in many sectors
70
60
50
40
30
20
10
Number of SOEs
Source: Slovenian Sovereign Holding (http://www.sdh.si/sl-si/upravljanje-nalozb/seznam-nalozb# - February 2017); ORBIS data base. 28
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.
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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 thirdparty access to networks. Privatise competitive activities, except in sensitive sectors. Avoid technology biases in renewable-energy subsidies.
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