Share

OECD Secretary-General

Launch of the OECD Economic Survey Slovenia 2015

 

Remarks by Angel Gurría, OECD Secretary-General


4 May 2015 – Ljubljana, Slovenia



Prime Minister Miro Cerar,
Excellencies Ministers,
Ladies and Gentlemen,


It is a great pleasure to be here in Ljubljana to present the latest OECD Economic Survey of Slovenia.

Growth is positive again, and Slovenia continues to fare well on well-being indicators

Two years have passed since the release of the previous Economic Survey of Slovenia, and what a difference! When my colleagues were here in early 2013, Slovenia’s GDP had just dropped (in 2012) by 2.6%, and uncertainties in the banking sector were pushing the sovereign bond yield above 7%.

Today, Slovenia has just closed 2014 with 2.6% positive growth. The labour market is improving, and the government is able to borrow at low yields.

Several factors have contributed to this improvement – some more temporary than others. EU funding of public investments, the depreciation of the Euro, and low oil prices are all contributing to Slovenia’s recovery. But credit is also due for Slovenia’s own efforts to improve competitiveness and reform its economy.

Reforms have helped Slovenia to regain the trust of the markets, and the confidence needed to boost domestic activity. Fiscal consolidation has been important, as have major reform efforts in the areas of pensions, the labour market, the restructuring and recapitalisation of banks, and privatisation.

I should also mention that despite having one of the deepest and longest crises among OECD countries, Slovenia continues to rank favourably on well-being indicators, and it has succeeded in preserving one of the lowest levels of income inequality in the OECD.

Despite progress, Slovenia still faces challenges ahead

Excellencies, ladies and gentlemen,

While Slovenia’s return to growth is cause for celebration, there are still many challenges ahead. More needs to be done to lock Slovenia on the path to stronger growth. The OECD’s Economic Survey of Slovenia, which I am launching today, identifies three main areas where further policy action is needed:

  • First, we need to see further restructuring efforts in Slovenia’s banking and corporate sectors. Major restructuring of Slovenia’s banks began in December 2013. They have since been recapitalised by the state to the tune of 11% of GDP. However, Slovenia’s banks still have a high ratio of non-performing loans, and their profitability is low. Credit to enterprises is still falling.

    Slovenia’s corporate sector remains highly indebted and the cost of bank lending to corporates is significantly higher than in the euro area on average.

  • Second, further fiscal consolidation is needed to put Slovenia’s rising debt on a downward path. Public debt has risen rapidly from 22% of GDP in 2008 to over 80% of GDP in 2014. Slovenia will need to move from its one-off stop-gap measures to consolidation, towards structural efforts.

    Action in this area is particularly important given Slovenia’s ageing population. Slovenia is aging faster than many other OECD countries and the projected increases in age related public expenditure from pensions, health care and long-term care bring with them additional challenges. Recent pension reform efforts have gone some way to improving sustainability, but there is still more to be done.

  • Third, it will be crucial that Slovenia continues with its structural reform efforts. Unemployment has risen, especially among the young, and long-term unemployment remains a problem. In 2012, Slovenia spent only 0.3% of GDP on active labour market programmes – half the OECD average.

    Further steps are also needed to improve the business environment in Slovenia. Public ownership and state control are widespread, and corporate governance could be strengthened. Finally, Slovenia needs to take steps to reduce the regulatory burdens faced by businesses. Efforts here would help boost growth and attract much-needed capital and foreign investment.

Going forward, Slovenia’s reform momentum needs to be sustained

Excellencies, ladies and gentlemen,

The Economic Survey I am presenting today goes beyond the diagnosis to suggest some of the solutions. Allow me to highlight just a few of our recommendations:

  • First, Slovenia could enhance the role of the Bank Asset Management Company (BAMC) as part of a drive to restructure the financial and corporate sectors. This will involve both transferring more non-performing loans to BAMC; and also safeguarding BAMC’s independence, and high standards of corporate governance.

  • Second, Slovenia should undertake reforms in education, public administration and local government with a view to improving cost efficiency. I also mentioned pensions a moment ago: here, further reform is needed. The pension age in Slovenia should be increased and linked to life expectancy, and pension rights should be calculated over lifetime contributions. Population ageing will also put pressures on the health system, which is in urgent need of reform.

  • Third, we identify some of the areas in which structural reforms would help boost jobs and growth. For example, we recommend that Slovenia invests more in active labour market policies, and in turn suggest that efforts be made to target these programmes better on the long-term unemployed and the low-skilled.

Finally, when it comes to the business environment and the issues of regulatory burden that I mentioned a moment ago, further efforts to privatise state-owned enterprises in line with the planned programme will be important, as will further improvements in corporate governance. Slovenia should also introduce the ‘silence is consent’ rule for issuing the licences required to open up a business, and make it easier and quicker to obtain construction permits and to register property.

Excellencies, Ladies and Gentlemen:

Slovenia has made an impressive turnaround in a short time. And this has laid the foundations for better times to come. But a positive outlook should not lead to complacency: future growth will only come if reforms are completed, and implemented fully.

Earlier today, the Prime Minister and I exchanged views on how the OECD could better support Slovenia as it builds on its reform efforts to date. I am delighted by the appetite shown by Prime Minister Cerar and his government to strengthen our co-operation further.

Dear Prime Minister: rest assured that the OECD will continue to work with Slovenia and for Slovenia. Our common purpose is best summed up in five words: Better Policies for Better Lives.

Thank you.