Remarks by Angel Gurría
Bratislava, Slovak Republic, 21 June 2017
(As prepared for delivery)
Dear Minister Drucker, Vice-Minister Nachtmannová, Ladies and Gentlemen,
It is a great pleasure for me to be back in Bratislava to present the OECD’s 2017 Economic Survey of the Slovak Republic. Let me begin by thanking you Minister Drucker, as well as the Mr. Kažimír, Minister of Finance, and Mr. Plavčan, Minister of Education, and their respective teams for their excellent support and input to this Survey.
Since joining the OECD in 2000, Slovakia has performed extremely well on many measures. With GDP growth averaging 4.0% over the last 16 years, it has been one of the best OECD performers in terms of economic growth. International competitiveness, financial stability and ample foreign direct investments have all contributed to a sustained rise in living standards, with the country’s GDP per capita gap with the OECD average halving since 2000.
Moreover, the economy is projected to stay strong in the next two years. Prices are expected to remain stable and the unemployment rate to continue declining to around 7.5%, a record low. The fiscal situation is also solid, with comparatively low and falling government debt.
Slovaks also do at least as well as the OECD average in several well-being dimensions. For example, at 8%, the poverty rate is low relative to the OECD average of 11% and in 2013, the income of the richest 10% was 6.6 times as high as that of the poorest 10%, well below the OECD average ratio of almost 10 times. Work-life balance and social connections indicators are also good, 92.3% of the population in the Slovak Republic report having friends or relatives that they can count on in times of trouble compared to the OECD average of 88%. And the country’s environmental footprint has improved markedly, with sharply lower CO2 emission and better air quality.
Challenges, however, persist in a number of areas. Slovakia's educational outcomes are below the OECD average and declining. The government has taken important steps to address this challenge with the development of a dual vocational education and training system relying on work-based learning.
Still, further efforts are needed. The poor education outcomes are in part due to weak motivation and training of teachers. Higher teacher salaries – particularly for teachers at the beginning of their careers – could help address this issue. They would, however, need to be conditional on improved teaching quality through better professional development and increased focus on disadvantaged pupils. Government efforts have not gone unnoticed: reforms have started in the area of vocational education and training to develop a dual system relying on work-based learning.
Support for students with disadvantaged backgrounds is also insufficient. Pre-school attendance of the poor, especially Roma children, could be raised through conditional cash transfers.
To improve the quality of tertiary education and motivate more students to study at home, rather than abroad, the government should make tertiary education more responsive to the labour market by introducing a graduate tracking system. In addition, promoting higher-quality research requires a more transparent and independent quality-assurance system and more funding for internationally recognised research.
In Slovakia 25% of adults are computer illiterate and unprepared to use ICTs, which is quite high compared to the OECD average of 10%. As such, the very poor problem-solving and IT skills of many adults call for encouraging greater participation in adult training programmes. In addition, when raising spending on training the unemployed, focus should be on programmes whose effectiveness has been clearly demonstrated.
Regarding health-care, despite substantially increased spending since 2000, Slovaks’ health status remains poor by international standards. For example, infant mortality is twice as high as in the Czech Republic; mortality which could be avoided through better health care is twice as high as in the EU average, and health inequalities between the Roma and non-Roma population are shockingly large. In fact, Roma’s life expectancy at birth is around 50 years, this is 20 years less than for the non-Roma population!
Steps have been taken to enhance public procurement procedures in hospitals, increasing efficiency and resource allocation in the health sector overall. Improving the health-care system would substantially increase average life expectancy and would bring avoidable mortality close to the EU-average level – therefore saving almost 5000 lives per year. The government is well aware of this challenge and efforts are underway to rationalise hospital care. They include phasing in a funding system that allocates funds according to the hospital’s needs, and cutting the excessive number of acute-care beds. Additional efforts are needed to end political appointments of hospital directors and to professionalise hospital management. Procurement also needs to be further centralised in hospitals and more flexible wage setting should be introduced, with a decoupling of doctors' salaries from the national average wage.
Last but not least, while Roma people’s poor health conditions only partly reflect failings in the health-care system, promoting better access to health-care services to segregated Roma communities would help improve health outcomes. Mobile medical units for regular visits to these communities could be deployed, with financial incentives for the providers offering these services.
Thanks to trained mediators from within the Roma communities, the authorities have already taken some welcome steps to raise awareness of the importance of hygiene and health and to improve their access to health-care providers. This programme, which is still relatively small in size, could be expanded as it seems to be bearing fruit.
The 2017 OECD Economic Survey also pays particular attention to the public sector. Tax evasion still undermines revenues and the system’s fairness. And although the authorities have considerably improved the collection of VAT since 2012, it remains much less efficient than in other EU countries.
To further curb evasion, several new measures were recently adopted to make tax payments easier and to promote voluntary compliance. These steps could be further strengthened by linking the IT systems of the tax administrations and banks and by merging the tax/customs office with the social security agency.
The government could also improve the mix of its tax revenues. Currently, there is a heavy reliance on social security taxes, which increases the cost of employing low-wage workers and harms the least skilled. The tax burden on labour was somewhat reduced in 2015 and the authorities have started to prepare a reform to raise local taxes. However, this will take several years given political and technical difficulties. Another option would be to further shift the tax burden from labour to environmental taxes, which would help reduce pollution and waste landfilling; an obvious additional measure would be to increase taxes on alcohol and sugary beverages, which would improve health outcomes.
Poor public managerial efficiency has also reduced the quality of public investment. In public transport, for example, the inadequate quantity and quality of infrastructure are hindering the reduction of regional disparities. GDP per capita in the Bratislava region is more than 3.5 times higher than in the lagging central and eastern regions – a gap that is similar in size to that of the richest and the poorest OECD countries. In this respect, the expenditure review (the so- called “Value-for-Money initiative”), launched in 2016, should be further expanded to address this issue.
Ministers, Ladies and Gentlemen,
Let me conclude by stressing Slovakia’s impressive growth trajectory. As you strive to develop a more sustainable and inclusive economy, it will be doubly important to remain on a steady reform path. And in this spirit, the OECD looks forward to strengthening our collaboration in the pursuit of better policies for better lives in Slovakia!