OECD Economic Survey of Slovenia 2020 - Presentation

2020 OECD ECONOMIC SURVEY OF SLOVENIA

20 July 2020, Paris – Ljubljana

http://www.oecd.org/economy/slovenia-economic-snapshot/ @OECDeconomy

@OECD

Key messages • Support the economy until the recovery becomes selfsustained.

• Then maintaining and strengthening growth requires: – Securing fiscal sustainability – Bolstering productivity growth

• The main challenges come from ageing: – Higher pension spending is not funded – Health will face increasing demand – The labour force will decline and become older

The outbreak was quickly contained, but led to a sharp economic contraction A. The spread of the pandemic was effectively contained B. GDP and employment New confirmed cases per day, 4-day moving average Y-o-y % change Thousand persons Thousands

60

Slovenia (left axis)

50

OECD (right axis)

40

90 75 60

30

45

20

30

10

15

0 01-Mar-20

0

01-Apr-20

01-May-20

01-Jun-20

10

940

5

890

0

840

-5

790

-10

Real GDP growth (left axis) Employment (right axis) 2008 2010 2012 2014 2016 2018 2020

Source: OECD calculations based on Ourworldindata; OECD Economic Outlook 107 database; and Statistical Office of Slovenia.

740

Before the pandemic, income convergence was progressing GDP per capita gaps to the upper half of OECD countries 0

Slovenia

Czech Republic

Hungary

Poland

Slovak Repulic

0

-10

-10

-20

-20

-30

-30

-40

-40

-50

-50

-60

-60

-70

-70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Note: Upper half is weighted by the population.

Source: OECD (2019) Going for Growth.

Slovenia preserves low inequality Changes in the Gini coefficient due to taxation and transfers, working age population, 2017 or latest year 0.60 0.55

Gini after taxes and transfers

Gini before taxes and transfers

0.60 0.55 0.50

0.45

0.45

0.40

0.40

0.35

0.35

0.30

0.30

0.25

0.25

0.20

0.20

SVK SVN CZE ISL DNK BEL NOR SWE FIN HUN AUT CHE NLD POL FRA EST DEU LUX IRL AUS CAN ISR PRT ITA JPN LVA KOR ESP GRC NZL GBR LTU USA TUR CHL MEX

0.50

Note: The Gini coefficient has a range from zero (when everybody has identical incomes) to one (when all income goes to only one person). An increasing Gini coefficient indicates higher inequality in the income distribution.

Source: OECD Income Distribution database.

Environmental performance has improved A. CO2 intensity (production based) CO per GDP kg/USD, 2010 2 0.4 Slovenia OECD 0.35

16

Slovenia OECD

12

0.3

8

0.25

0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

4 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

0.2

20

B. Renewable energy share % of primary energy supply

C. Population exposure to PM2.5 Slovenia (2017) Slovenia (2000) OECD (2017) OECD (2000) 0% [ 0-10] µg/m³ [15-25] µg/m³

50% 100% [10-15] µg/m³ [25-35] µg/m³

Source: OECD Green Growth Indicators database; OECD Environment Statistics database; OECD National Accounts database; IEA World Energy Statistics and Balances database; OECD Exposure to air pollution database.

Faster productivity growth is needed to catch up Real GDP per person employed, in USD thousand, constant prices, 2015 PPPs 110

Slovenia

Austria

Germany

EU28

CEEC

OECD

110

100

100

90

90

80

80

70

70

60

60

50

50

40

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Note: PPPs: purchasing power parities. CEEC is the unweighted average of Czech Republic, Hungary, Poland and Slovak Republic in all figures.

Source: OECD Productivity database.

Best-practice regulations would stimulate growth Product market regulation indicators, from 0 (best practice) to 6 (most stringent), 2018 2.5

Slovenia

OECD average

Least stringent regulation (five lowest)

2.5

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

Barriers in Barriers to trade Involvement in Simplification Overall product Admin. burden & investment business and evaluation on start-ups service & market operations of regulations network sectors regulation indicator Barriers to domestic and foreign entry

Source: OECD Product Market Regulation database.

Public ownership

Distortions induced by state involvement

More FDI would boost transfers of growth-enhancing new technologies Foreign Direct Investment (FDI), per cent of GDP, 2018 90 80 70 60 50 40 30 20 10 0

SVN

LTU

POL

OECD

Source: UNCTAD (2019); and OECD Economic Outlook database.

AUT

EURO zone

LVA

SVK

HUN

CZE

EST

90 80 70 60 50 40 30 20 10 0

To sustain growth: • Provide additional fiscal support as needed to support the recovery • Improve the efficiency of public spending • Focus on growth-enhancing investment projects • Continue privatisation of State-Owned Enterprises and further strengthen their corporate governance

Ageing is creating policy challenges

Ageing leads to a smaller and older work force A. The work force declines and ages

Millions 3.0 0-14 years 25-49 years 2.5 65-79 years

B. Old-age dependency ratio

15-24 years 50-64 years 80+ years

Slovenia

OECD median

70 60 50

2.0

40

1.5

30

1.0

20

0.5 0.0 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060

Per cent

10 2000

2010

2020

2030

2040

2050

0 2060

Note: In Panel B, the old-age dependency ratio is share of the population older than 65 over the working age population (20-64 years) and the shaded area denotes the 25th to 75th percentile range of available data for OECD countries.

Source: United Nations (2019), World Population Prospects: The 2019 Revision, Online Edition.

Resulting in large old-age spending increases Change in ageing cost between 2020 and 2060 in percentage points of GDP

12

Health expenditure

9

Pension expenditure

12

Long-term care expenditure

9

LUX

SVN

CZE

NOR

IRL

BEL

NLD

AUT

GBR

SVK

HUN

DEU

EU28

FIN

ITA

POL

SWE

PRT

-3

ESP

-3

DNK

0

LTU

0

EST

3

LVA

3

GRC

6

FRA

6

Note: Ageing Working Group (AWG) reference scenario.

Source: European Commission (2018), "The 2018 Ageing Report - Economic & Budgetary Projections for the 28 EU Member States (2016-2070)", Directorate-General for Economic and Financial Affairs, Institutional Paper 079, May, Luxembourg.

Potentially leading to much higher public debt General government debt, Maastricht definition, as a percentage of GDP Baseline

300

Consolidation scenario

Risk scenario

300

250

250

200

200

150

150

100

100

50

50

0

0

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060

Source: Adapted from OECD (2018), OECD Economic Outlook: Statistics and Projections (database), June; Guillemette, Y. and D. Turner (2018), "The Long View: Scenarios for the World Economy to 2060", OECD Economic Policy Paper No. 22., OECD Publishing, Paris; and European Commission (2018), "The 2018 Ageing Report - Economic and budgetary projections for the 28 EU Member States (2016-2070)" Directorate-General for Economic and Financial Affairs.

Securing the sustainability of the pension system

Slovenians effectively retire earlier than elsewhere 75

Effective retirement ages, 2018 Male

75

Female 70

65

65

60

60

55

55

SVK HUN GRC SVN BEL POL FRA AUT ESP LUX CZE ITA EU28 DNK NLD LTU FIN GBR DEU OECD CAN NOR IRL AUS LVA TUR CHE SWE PRT EST ISL ISR NZL MEX USA CHL JPN KOR

70

Source: OECD (2019), Pensions at a Glance 2019: OECD and G20 Indicators, OECD Publishing, Paris.

And spend more time in retirement than elsewhere A. Expected years on pension for men 35

Now¹

B. Expected years on pension for women 35

2070²

35 30

25

25

25

20

20

20

15

15

15

10

10

10

5

5

5

0

0

0

LVA IRL NLD DEU DNK ITA HUN SWE SVK PRT BEL CZE FIN CEEC LTU EST EU GBR ESP GRC POL LUX SVN FRA AUT

30

LTU POL HUN LVA CEEC ITA EST DEU NLD CZE IRL SVK PRT DNK EU FIN BEL AUT GBR SWE ESP SVN FRA GRC LUX

30

1. Expected years on pension for a person retiring now and who entered the labour market at the age of 22.

2. Expected years on pension for a person entering the labour market at the age of 22 with currently known changes in pension age and projected life expectancy at 65 in 2070.

Source: EU Ageing Report, OECD Pension at a Glance 2019, OECD Health Statistics database.

Recommendations to contain pension spending • Increase the statutory retirement age to 67. Link further increases, if needed, to gains in life expectancy • Adjust other parameters to better align contributions and benefits for all contributors • Index pension benefits to price developments • Apply a symmetric bonus/malus system to a fixed point, such as the statutory retirement age

Preparing the health and the long-term care systems for ageing

Health care spending is high compared with peers Expenditure on health, 2018

% of GDP 18 Voluntary schemes/household out-of-pocket payments 16 14 12 10 8 6 4 2 0

TUR LUX MEX LVA POL EST HUN SVK CEEC LTU IRL ISR CZE GRC SVN KOR ISL OECD ITA ESP CHL FIN PRT AUS NZL GBR NLD NOR AUT BEL DNK CAN JPN SWE FRA DEU CHE USA

% of GDP 18 Government/compulsory schemesยน 16 14 12 10 8 6 4 2 0

1. Public health spending refers to government schemes and compulsory health insurance. For Germany, the Netherlands and Switzerland, spending by private health insurers for compulsory insurance is also included in public health spending.

Source: OECD (2019), Pensions at a Glance 2019: OECD and G20 Indicators, OECD Publishing, Paris.

Waiting lists lead to unmet needs A. Waiting times for patients on the list Days

800 700 600

Cataract surgery Hip replacement Knee replacement Percutaneous transluminal coronary angioplasty (PTCA)

B. Share of adult population reporting unmet needs due to waiting lists Persons aged 16 and over, 2018ยน or latest available year

15

5 4

500

3

400 2

300 200

1

0

2011 2012 2013 2014 2015 2016 2017 2018

1. 2019 for Austria, Denmark, Finland, Hungary, Latvia and Poland.

Source: OECD Health Statistics database; and Eurostat EU SILC database.

BEL LUX TUR AUT CHE CZE DEU ESP NLD GRC HUN FRA ITA PRT ISL EU28 IRL NOR LVA DNK SWE LTU SVK POL SVN GBR FIN EST

100

0

High household spending is covered by complementary health insurance Households' direct health spending by type, as a percentage of total health spending 50 40

2018 or latest year available Household out-of-pocket payments

Voluntary health care payment schemes

50 40 30

20

20

10

10

0

0

NOR LUX USA DEU JPN DNK SWE FRA NLD CZE ISL SVK NZL GBR TUR BEL CEEC FIN EST ITA OECD IRL SVN POL ESP HUN CAN AUS AUT LTU PRT ISR CHE GRC KOR CHL LVA MEX

30

Source: OECD Health Statistics database; and OECD (2019), Health at a Glance 2019: OECD Indicators, OECD Publishing, Paris.

Long-term care is mostly in institutions Recipients as a percentage of the population aged +65, 2018 or latest available year 25

At home

25

In institutions (other than hospitals)

CHE

ISR

MEX

SWE

NOR

DEU

NZL

AUS

NLD

CAN

LUX

HUN

SVN

DNK

ESP

FIN

EST

0

FRA

0

USA

5 KOR

5 ITA

10

SVK

10

IRL

15

JPN

15

PRT

20

POL

20

Note: Data on institutional long-term care are not available for Denmark, Italy and Mexico; while data on domestic recipients ("At home") are not available for Ireland, Japan, Poland and Slovak Republic.

Source: OECD Health Statistics database.

Recommendations for more efficient health care • Make GPs’ per-patient payments and fees-for-services costreflective • For hospitals have minimum interventions for maintaining services • Introduce selective tendering for health services • Use updated reimbursements for all acute services • Ensure competitive salaries and performance incentives for doctors

Recommendations to develop long-term care (LTC)

• In LTC have common financing and eligibility criteria • Integrate community nursing and home help • Facilitate new entry in home care via quality and output-focussed tenders

Labour market institutions for an older and smaller labour force

Some older workers are exiting via social systems

25000

Breakdown of registered unemployment by age group, annual average B. Long-term unemployment by age group A. Total registered unemployment (one year and above) 40-44

45-49

50-54

55-59

60-64

15000

20000

12000

15000

9000

10000

6000

5000

3000

0

2013 2014 2015 2016 2017 2018 2019 2020

Note: The annual average for 2020 refers to the months from January to May. Source: Employment Service of Slovenia (ESS).

2013 2014 2015 2016 2017 2018 2019 2020

0

Better digital skills favour productivity growth Share of the population with more than basic skills, per cent, 2019 All

16-29 year-olds

POL ITA GRC TUR LVA HUN CZE FRA SVN PRT LTU BEL IRL EU28 ESP LUX EST AUT DEU SWE CHE GBR DNK FIN NLD NOR ISL

90 80 70 60 50 40 30 20 10 0

Source: Eurostat Digital Skills database.

90 80 70 60 50 40 30 20 10 0

Recommendations for better labour market institutions Improve work incentives for older workers Direct job and training support to job-seekers with high needs Introduce in-work benefits to help low-skilled job-seekers Reduce labour taxes via base broadening and higher property taxes In wage bargaining have more framework conditions determined at the sectoral level Use social partners more in wage determination at the firm level