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The narrowing of the GDP per capita gap to the upper half of OECD countries has gathered pace. Nonetheless, the gap remains substantial and reflects low productivity and labour utilisation.

The long crisis increased income inequality and poverty. Nevertheless, income redistribution in the tax and benefit system ensures a lower disposable income inequality than in most other OECD countries. The strong recovery has enabled income inequality to return to its pre-crisis levels. Greenhouse gas emissions are lower than the OECD average. The population is exposed to particle pollution coming from high levels of road and transit transport, wood stoves and expansion of lignite fired power plants.

The reform momentum has slowed as the government has implemented most of its reform agenda. In late 2018, nearly two-thirds of the largest bank was privatised. Over the longer term, the government intend to keep a 25% stake.

Accelerating and expanding the scope for privatisation would improve corporate governance, further attract foreign investment and improve resource allocation. Labour productivity could be bolstered by better tertiary education outcomes. Further pension reform should aim to encourage older workers to stay in the labour market. This should be combined with increased work incentives for the unemployed, including reforms of unemployment benefits, social assistance and taxes. Moreover, labour shortages call for better allocation of resources through more decentralised wage setting. Such a reform package would enhance long-term growth and improve fiscal sustainability.

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Growth performance, inequality and environment indicators: Slovenia
Growth performance, inequality and environment indicators: Slovenia

Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases; United Nations Framework Convention on Climate Change (UNFCCC) Database and International Energy Agency (IEA), Energy Database; Panel C: OECD, National Accounts and Productivity Databases.

 StatLink https://doi.org/10.1787/888933955332

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Policy indicators: Slovenia
Policy indicators: Slovenia

Source: Panel A: OECD, Taxing Wages Database; Panel B: OECD, Pensions at a Glance Database.

 StatLink https://doi.org/10.1787/888933956206

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Beyond GDP per capita: Slovenia
Beyond GDP per capita: Slovenia

Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of Statistics; Panel B: OECD, Environment Database.

Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter.

 StatLink https://doi.org/10.1787/888933957080

Slovenia: Going for Growth 2019 priorities

Raise the statutory retirement age and reduce disincentives to work at older age. The population is ageing rapidly and the employment rate is among the lowest in the OECD.

  • Actions taken: No action taken.

  • Recommendations: Increase the official retirement age to 67. Raise the effective retirement age by closing pathways to early retirement and boost lifelong learning. Enhance incentives for continued work by allowing working pensioners to receive a larger future pension, or a full pension when they reach pension age, regardless of work status.

Reduce state involvement in the economy and enhance competition in product markets. Public ownership is widespread, corporate governance is weak, and significant entry barriers reduce competition, technological progress and foreign investment.

  • Actions taken: A number of state-owned enterprises (SOEs) has been privatised since 2015, including the partial privatisation of the largest bank in late 2018. In 2015-16, six professions have been deregulated. In the following two years, further deregulation of several other professions took place, particularly in the construction and tourism sectors.

  • Recommendations: Strengthen governance of SOEs by directing them to focus on core activities, allowing more management pay flexibility and strengthening supervisory boards. Step up privatisation and narrow the group of strategic SOEs. Simplify judicial proceedings and increase the competition authority's resources and staff expertise.

Reduce disincentives in the tax and transfer system. Inactivity and unemployment traps are high. High marginal tax rates for high-earners have large costs in terms of work incentives and can deter investment in skills.

  • Actions taken: A higher threshold for general tax relief and a new tax bracket were introduced in 2016.

  • Recommendations: Restructure unemployment benefits, social assistance and taxes to increase work incentives for the unemployed and inactive persons. Make the tax mix more growth conducive by reducing top tax rates on labour income and increasing recurrent taxes on real estate and secure social objectives through better targeted family benefits.

Improve tertiary education outcomes and boost innovation. Slovenia has high R&D spending, but a low number of innovative firms and patents. Efficiency should be raised in tertiary education and overall students' performance could be improved.

Actions taken: No action taken.

  • Recommendations: Equalise tuition fees for full- and part-time students on a per course basis, coupled with grants and loans for those from poor families. Link part of university funding to students' labour market outcome. Improve collaborative links between innovation stakeholders. Strengthen entrepreneurship education in schools.

1Decentralise wage determination. The labour market is characterised by centralised wage bargaining, which dampens the effectiveness of wage signals in the allocation of labour resources, which is becoming more important for sustaining growth as the economy nears full employment.

  • Recommendations: Maintain central negotiations for determining framework conditions and decentralise wage determination to the local level. Eliminate the legal requirement that wages increase automatically with age.

Note

← 1. New policy priorities identified in Going for Growth 2019 (with respect to Going for Growth 2017). No action can be reported for new priorities.

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https://doi.org/10.1787/aec5b059-en

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