1. The European Commission’s Country-Specific Recommendations for Slovenia 2019
Julia Lendvai
Head of Unit: Economies of Member States: Finland, Hungary and Slovenia Directorate-General for Economic and Financial Affairs
Ljubljana, 11 June 2019

2. Topic and Outline Country-specific recommendations (CSRs) for Slovenia
Commission’s views on main challenges to the economy
Published under the European Semester:
Framework for coordination of economic policies across EU
Based on permanent dialogue with policy makers and stakeholders
CSRs derived from the analysis of the Country Report published 27 February 2019
Outline
Overview of recent economic developments
Present each CSR: rationale – perspective

3. Recent economic policies and development
Slovenia has recovered from a double-dip recession
Stabilisation of the financial sector
Structural reforms (pensions, labour market, product markets, SOEs)
Robust growth, elimination of imbalances
Real GDP growth 4.5% (2018)
Employment rate: 71.1% (2018)
Fiscal deficit eliminated
Public debt on downward path
Banks’ balance sheets significantly strengthened (NPL reduction), profitability restored
Challenges remain
Long-term sustainability of public finances (avoid pro-cyclical fiscal policies, social security system)
Sustain potential growth (labour shortages, bottlenecks to investment)

4. Overall strong implementation of
reforms over
Slovenia
European Union
Source: European Commission

5. However, 2018 CSRs: Limited progress
Some progress
Alternative sources of financing (Slovenia is preparing further EU- funded instruments to improve equity funding)
Barriers for market entry and administrative burden (Investment Promotion Act)
Privatisation
Limited progress
Older and low skilled workers’ employability
Public procurement with the action plan to professionalise procurement further
No progress
Health care
Long-term care
Pension system

6. Country-Specific Recommendations 2019
Fiscal, fiscal structural and labour market policies:
Achieve the medium-term budgetary objective in 2020
Fiscal sustainability: healthcare, long-term care, pension system
Increase the employability of low-skilled and older workers
Financial and product markets:
Equity markets
Business environment: regulatory restrictions, administrative burden
Public procurement: competition, professionalisation, oversight
Privatisation
Investment priorities (aligning EU semester with ESIF)
Research and innovation
Low carbon and energy transition
Sustainable transport, in particular rail
Environmental infrastructure

7. CSR 1 Fiscal and fiscal structural policies: What?
Achieve the medium-term objective in 2020
Reforms in healthcare and long-term care: ensure quality, accessibility and long-term fiscal sustainability
Pension system: long-term sustainability and adequacy

8. Fiscal position has significantly improved General government balance
Fiscal CSR: Why? Cont’d
Fiscal position has significantly improved
Debt/GDP
(% of GDP)
General government balance
(% of GDP)
Source: European Commission

9. Fiscal effort vs requirement
Fiscal CSR: Why?
Fiscal effort vs requirement
Good economic times could be used more to reduce debt and build fiscal buffers
Source: European Commission

10. Fiscal CSR: Why? Cont’d
Projected change in age-related public expenditure is over 6% of GDP over
Ageing puts a heavy burden on public finances
Mostly from pensions
Retirement age
Early retirement
Health-care and long-term care
Reduce fragmentation, increase efficiency, adequacy
Central public procurement
Reforms have been announced but details missing (including on financing)
Source: 2018 Ageing Report

11. Activity rate by age (2018, %)
CSR 1: Employment
Increase the employability of low-skilled and older workers
Activity rate by age (2018, %)
Strongest pattern for low-skilled
In addition: labour shortages
Policy measures:
Improve labour market relevance of education and training
Activation measures
Digital literacy
Source: Eurostat

12. CSR2: Business environment: Reduce regulatory and administrative burden
Long-term barriers to investment
Regulatory and administrative burden considered as key problem for doing business in SI
Good progress in recent years
Investment Promotion Act
SPOT portal
Single document
More can be done e.g.
simplify permits, reporting requirements, tax procedures
accelerate commercial court proceedings
Source: EIB Group Survey on Investment and Investment Finance Country Overview Slovenia

13. CSR 2: Public Procurement
Improve competition, professionalisation and independent oversight in public procurement
Some steps to improve the professionalism of those involved in public procurement – welcome and to be continued
Competition and transparency should be improved
High share of single bid procedures (over 35%), low average number of bids received
24% of the public contracts concluded through negotiated procedures without publication in 2018 (among the worst in the EU)
Independent oversight not yet addressed:
One-instance remedy system: National Review Commission
Members of the Commission do not benefit of same guarantees of independence as judges
Appointment of members also guarantees less independence from the executive or legislative branches

14. CSR 2: Financing
Support the development of equity markets – alternative sources of financing
Some progress in 2018 but scope for further improvement
Slovenia’s businesses still heavily rely on bank loans and cash flow to meet their funding needs
This is a growth barrier for innovative companies (but not only)
Measures to support the local capital market, amongst others
technical assistance and advisory support on listings and the issuance of bonds to SMEs – provided by Ljubljana Stock Exchange, welcome
raising awareness among potential investors (retail and wholesale) to the privatisation of SOE by going public

15. CSR 2: Privatisation
Carry out privatisations in line with the existing plans
Some progress has been made in recent years, but:
High share of state ownership in the economy restricts the unfolding of the capital market in Slovenia
State ownership in a sector represents a risk of distortion in competition and resource allocation
It is also a significant barrier for many investors.

16. Country-Specific Recommendation 3
Focus investment-related economic policy on:
research and innovation,
low carbon and energy transition,
sustainable transport (in particular rail) and
environmental infrastructure,
taking into account regional disparities.
Discussed in the next session

17. Investment still below the euro area average
Total investment in Slovenia
Total investment in the euro area
Machinery and equipment
Construction
Intellectual property products
Source: Eurostat

18. Thank you!