Economic surveys and country surveillance

Economic Survey of the Slovak Republic 2009

 

Executive Summary | Contents | How to obtain this publication | Additional info

 

The next Economic Survey of the Slovak Republic will be prepared for 2010.

 

   

Published on 9 February 2009.

An Economic Survey is published every 1½-2 years for each OECD country. Read more about how Surveys are prepared .

The OECD assessment and recommendations on the main economic challenges faced by the Slovak Republic are available by clicking on each chapter heading below.

 

 

 

Bookmark this page: www.oecd.org/eco/surveys/slovakia

 

Contents

 

Chapter 1: Key Challenges

As in other catch-up countries inflation is likely to stay high going forward due to nominal convergence. To better cope with the risk of a too rapid pick up of wages during the convergence process on the one hand and to raise the adjustment potential of the economy to macroeconomic shocks on the other, labour and product market flexibility is essential. Three main areas for improvement are discussed in this chapter. First, wage flexibility should be safeguarded by avoiding significant increases in minimum wages and by abolishing legal extension of collective wage settlements. Second, competition needs to be strengthened, especially in the liberal professions where entry and conduct regulation should be eased. In addition, the points of single contact that already exist for small enterprises should be extended to entrepreneurs of the liberal professions. Third, a wider use of information and communication technology (ICT) could lead to important productivity gains. Removing obstacles to the spread of e-business and a swift implementation of e-government are imperative.

 

Chapter 2: Raising flexibility during the catch-up phase

As in other catch-up countries inflation is likely to stay high going forward due to nominal convergence. To better cope with the risk of a too rapid pick up of wages during the convergence process on the one hand and to raise the adjustment potential of the economy to macroeconomic shocks on the other, labour and product market flexibility is essential. Three main areas for improvement are discussed in this chapter. First, wage flexibility should be safeguarded by avoiding significant increases in minimum wages and by abolishing legal extension of collective wage settlements. Second, competition needs to be strengthened, especially in the liberal professions where entry and conduct regulation should be eased. In addition, the points of single contact that already exist for small enterprises should be extended to entrepreneurs of the liberal professions. Third, a wider use of information and communication technology (ICT) could lead to important productivity gains. Removing obstacles to the spread of e-business and a swift implementation of e-government are imperative.

 

Chapter 3: Achieving Fiscal Flexibility and Safeguarding Sustainability

Euro area entry calls for more fiscal flexibility to absorb cyclical shocks that cannot be dealt with by the common monetary policy. At the same time fiscal consolidation must not be put at risk, especially given rising ageing-related costs. The current fiscal framework could be improved by introducing multi-year expenditure ceilings and by removing pro-cyclical elements in fiscal rules. An adjustment account that serves to register breaches of fiscal rules and eliminates them over time could help in coping with projection errors. To ensure long-term sustainability of public finances it is essential not to dilute the substantial improvements in the long-term balance of the defined-benefit pillar associated with past pension reforms. The government should consider making participation in the defined-contribution pillar mandatory for new labour market entrants or, at the very least, make it the default option. For current workers the pillars should remain closed. Moreover, further parametric changes such as increasing the retirement age in line with life expectancy gains and reducing unsustainable elements in the pension formula would improve the balance of the defined-benefit pillar.

 

Chapter 4: Adjusting housing policies in light of euro adoption

House prices have risen strongly in past years, helped by rising incomes and declining interest rates. At the same time, construction of new dwellings has remained fairly muted and has only recently shown signs of picking up. A characteristic feature of the Slovak housing market, and a consequence of the privatization programme initiated in the early 1990s, is the virtual absence of a private rental market. As euro membership will most likely go along with easier financial conditions and also entails limited availability of national policy tools, current housing policies will have to be adjusted. The challenges are to avoid overheating of the housing market in the medium term, in part by making supply more reactive to demand, and to phase out the hurdles that are currently impeding the private rental market, which would facilitate labour mobility.

 

How to obtain this publication

 

The complete edition of the Economic Survey of the Slovak Republic 2009 is available from:

The Policy Brief (pdf format) can be downloaded in English or in Slovak language. It contains the OECD assessment and recommendations.

 

Additional information

For further information please contact the Slovak Republic Desk at the OECD Economics Department at eco.survey@oecd.org

The OECD Secretariat's report was prepared by Felix Hüfner and Isabell Koske under the supervision of Andreas Wörgötter. Research assistance was provided by Béatrice Guerard.

 

 

 

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