Presentation of the 2019 OECD Economic Survey of Slovak Republic

2019 OECD ECONOMIC SURVEY OF THE SLOVAK REPUBLIC Towards an innovative and inclusive society Bratislava, 5 February 2019

www.oecd.org/economy/surveys/slovak-republic-economic-snapshot

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The economy is flourishing

2

Growth has been robust GDP index, volume 190 180

SVK

170

CZE

HUN

POL

OECD

160 150 140 130 120 110 100

2001

2003

2005

2007

2009

2011

2013

2015

2017

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

3

Public debt is low and stable Gross public debt, % of GDP 120

Slovak Republic, Maastricht definition

OECD

100 80 60 40 20 0

2001

2003

2005

2007

2009

2011

2013

2015

2017

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

4

The labour market is strong The unemployment is at historic lows Unemployment rate (%)

25 20 15 10 5 0

1995

2000

2005

2010

2015

2020

Source: OECD (2018), OECD Economic Outlook: Statistics and Projections (database).

5

Capacity constraints are beginning to bite Labour shortages are already limiting production

Share of manufacturing firms pointing to labour shortages as a factor limiting production, (%) 40 35 30 25 20 15 10 5 0

2012

2013

2014

2015

2016

2017

2018

Source: Eurostat, Industry Database.

6

Diversification and more innovation will help sustain Slovakia’s economic success

7

The production is narrowly specialised and based on downstream activities The economy is specialized in the car production with very little value added

SVK

HUN

CZE

DEU

SVN

POL

ESP

AUT

Share of car production in gross output

ITA

% 14 12 10 8 6 4 2 0

GBR

DEU

AUT

GBR

SVN

POL

ITA

CZE

ESP

HUN

FRA

SVK

35 30 25 20 15 10 5 0

Domestic value added ratio to gross output

FRA

%

Source: OECD STAN Database.

8

Slovakia’s employment looks vulnerable to the likely increase in automation More than 60% of jobs are at risk of automation Percent of jobs at risk by degree of risk

%

70

High risk of automation (>70%)

60

Risk of significant change (50-70%)

50 40 30 20

SVK

TUR

JPN

DEU

SVN

ESP

ITA

POL

FRA

CZE

AUT

OECD

ISR

KOR

EST

IRL

BEL

CAN

NLD

GBR

USA

SWE

0

NZL

10

Source:L. Nedelkoska and G. Quintini (2018), “Automation, skills use and training”.

9

The Slovak workforce is not sufficiently prepared for the digital transition Proportion of adults having high-level skills 16-65 year olds

%

30 25 20 15 10 0

GRC POL SVN IRL ISR KOR SVK EST USA CZE AUT OECD GBR³ DEU CAN BEL³ DNK AUS NOR NZL JPN NLD SWE FIN

5

Source: OECD (2017), Education at a Glance 2017: OECD Indicators.

10

Improving education outcomes should be a priority PISA average of mean scores in science, reading and mathematics 510

OECD

Slovak Republic

500 490 480 470 460

2006

2009

2012

2015

Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education.

11

Tertiary education needs to improve so fewer students choose to study abroad 20

Percentage of total tertiary students studying abroad, 2016 74

18 16 14 12 10 8 6 4 0

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

2

Source: OECD (2018), Education at a glance 2018: OECD Indicators.

12

Capacity to innovate and adopt new technologies should be strengthened Innovative large firms

High R&D spenders, % of all large businesses (250 employees or more) 100 80 60 40

0

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

20

Source: OECD (2017), OECD Science, Technology and Industry Scoreboard 2017.

13

Facilitate immigration of skilled workers Immigrants in population

Net flows, per 1000 inhabitants, 2016 7 6 5 4 3 2 1 0

OECD average

EST

CZE

HUN

SVK

Source: OECD International Migration Database.

14

Strengthen the quality of public services Low trust in the judicial system and courts

Share of "yes" answers to the question: Do you have confidence in judicial system and the courts?

100 90 80 70 60 50 40 30 20 10 0

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

%

Source: Gallup World Poll (database).

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Recommendation on moving up the global value chain  Increase the time spent on general and digital training in vocational education.  Strengthen initial and continuing teacher training.  Create larger, internationally visible research units and reorient tertiary education funding to foster research at high international standards.  Include research collaboration with innovative companies in the assessment of universities and public research institutions.  Continue to work with the ongoing Council of Europe project on judicial reform, and implement its suggestions.  Accelerate the handling of insolvency procedures.  Lower licensing restrictions for legal services, architects and engineers.  Continue to simplify work visa and residence procedures for highly skilled workers.

16

Making growth inclusive

17

The Slovak Republic has one of the continent's largest Roma populations Estimated number of Roma in the EU %

12 10 8 6 4 2 0

FRA

EU

GRC

ESP

CZE

HUN

ROM

SVK

BLG

Note: The shares represent the average of different estimates.

Source: Council of Europe, https://www.coe.int/en/web/portal/roma/

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Roma face social exclusion in almost every aspect of everyday life Selected indicators of Roma exclusion General population

Roma

At-risk-of-poverty rate (%)

13

87

Employment rate, 20-64, (%)

68

25

NEET rate - neither in work nor in education, aged 16-24, (%)

14

65

Drop-out rate from education, (%) Share of households living without a toilet, bathroom and shower inside the dwelling Share of households living in areas affected by crime, violence and

7

58

0.6

43

8.7

30

vandalism

Source: EU (2016), Second European Union Minorities and Discrimination Survey, Roma – Selected findings, European Union, Agency for Fundamental Rights; B. Gavurová et al. (2014), “Meranie zdravia a zdravotných rizík vo vybraných rómskych osadách na Slovensku – fakty a reflexie”, in Nerovnost’ a chudoba v Európskej únii a na Slovensku, 22-24 October, Košice.

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Social exclusion is exacerbated by mistrust between Roma and non-Roma groups More than half of the Roma felt discriminated when looking for job %

Discrimination based on Roma background in the past 5 years (%)

60 50 40 30 20 10 0

Education (self or as parent)

At work

Housing

Other public/ Looking for work private services

Note: Out of all Roma respondents at risk of discrimination on grounds of Roma background in at least one of the domains of daily life asked about in the survey in the past 5 years.

Source: EU (2016), Second European Union Minorities and Discrimination Survey, Roma – Selected findings, European Union, Agency for Fundamental Rights.

20

Roma can be trapped in a cycle of poverty for generations Probability of ending up in poverty according to parents' economic and ethnic status Probability, %

80 70 60 50 40 30 20 10 0

General population

General population - 5% of the poorest households

Roma from concentrated areas

Source: OECD calculation based on J. Rizman (2018), "Jablko padá ďaleko od stromu", Institute of Financial Policy, Ministry of Finance of the Slovak Republic, Policy Brief, No. 09.

21

Demographic trends underline the importance of Roma integration A. Roma population by age, 2015

101

Men

91

101

Women

81

71

71

61

61

51

51

41

41

31

31

21

21

11

11 -1.5

-0.5

0.5

Men

91

81

1 -2.5

B. Non-Roma population by age, 2015

1.5

2.5

1 -2.5

-1.5

Women

-0.5

0.5

1.5

2.5

Source: Šprocha, B. (2014), Reprodukcia rómskeho obyvateľstva na Slovensku a prognóza jeho populačného vývoja, INFOSTAT – Výskumné demografické centrum.

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Social inclusion of Roma will have positive effect on the economy Estimated effect of Roma integration by 2060 as a % of GDP Increasing the Roma employment rate and their productivity to the level of the general population % pts of GDP 14 12 10 8 6 4 2 0

Effect on GDP

Effects on fiscal revenues

Source: Geva, A., S. Hidas and G. Machlica (2018), “The benefits of social inclusion of Roma in the Slovak Republic”, Technical background paper, forthcoming.

23

The education system should become more inclusive Pre-school attendance is low, especially for Roma Share of children age 4-6 (%) who participate in pre-school education % 100 90 80 70 60 50 40 30 20 10 Roma

General population

EU 2020 target

0

Source: OECD Family database; EU (2016), Second European Union Minorities and Discrimination Survey, Roma – Selected findings, European Union, Agency for Fundamental Rights 24

Improving living conditions for Roma is key %

% of Roma vs Non-Roma living in substandard housing or slums

50

Non-Roma

Roma

40 30 20 10 0

CZE

HUN

SVK

Source: United Nations Development Programme (2016), Database on vulnerability of Roma based on UNDP/WB/EC Regional Roma Survey 2011 and Pilot survey 2011 conducted by the EU Agency for Fundamental Rights (FRA); EU (2016), Second European Union Minorities and Discrimination Survey, Roma – Selected findings, European Union, Agency for Fundamental Rights.

25

Access to health care should be bolstered Infant mortality is high for Roma Deaths per 1000 live births

14 12 10 8 6 4 0

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

2

Source: MoF (2018), “Spending Review on Groups at Risk of Poverty or Social Exclusion”, Expenditure reviews, (forthcoming); OECD Family database.

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Recommendation on enhancing the social integration of Roma  Give the office of the Plenipotentiary a bigger role in coordinating national policies and ensuring integrated provision of public services to Roma where they live.  Scale up successful EU-funded pilot programmes and ensure sustained financing through the national budget.  Continue expanding the provision of high-quality early education.  Provide more funding for disadvantaged schools and higher salaries for teachers teaching in disadvantaged schools.  Increase the number of teaching assistants speaking Roma, and provide Slovak language support for Roma children.  Expand health-care mediator programmes, with more mediators specialising in maternal health information and preventive check-ups for mothers.  Provide support to formalisation of Roma property rights, including legal, financial and technical support to municipalities and Roma households.

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