OECD Economic Surveys Slovak Republic June 2017 OVERVIEW www.oecd.org/eco/surveys/economic-survey-Slovak-Republic.htm This Overview is extracted from the 2017 Economic Survey of the Slovak Republic. The Survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the economic situation of member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area OECD Economic Surveys: Slovak Republic © OECD 2017 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. OECD Economic Surveys: Slovak Republic © OECD 2017 Executive summary ● The Slovak economy has been growing strongly ● Inclusiveness needs to be improved ● Enhancing public-sector efficiency to raise living standards for all 9 EXECUTIVE SUMMARY The Slovak economy has been growing strongly Growth is strong, but will weaken The Slovak Republic continues to exhibit robust because of population ageing economic performance. International competitiveness GDP per capita is strong, fiscal and financial policies are prudent, 6 poverty and income inequality are low, and the OECD Slovak Republic 5 country’s environmental footprint has improved markedly. Employment is rising, prices have been 4 stable, and the external account is near balance. 3 However, population ageing, which is projected to be 2 one of the sharpest in the OECD, will pose a long-term 1 challenge for fiscal policy and higher living standards. 0 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060 Source: OECD (2017), OECD Economic Outlook: Statistics and Projections (database). 1 2 http://dx.doi.org/10.1787/888933499885 Inclusiveness needs to be improved Roma employment and health status The benefits of growth have not been equitably shared. The Roma are not well integrated in society. Their weak % Years 80 80 integration is reflected in poor health, education and employment outcomes, and poses an ongoing 60 60 challenge to the inclusiveness of economic 40 40 performance. Together with low regional labour 20 20 mobility, it contributes to large disparities between Bratislava and the eastern part of the country. Another 0 0 Overall Roma Non-Roma Roma social challenge concerns young mothers: they stay out population of the labour force too long because of lack of quality Employment rate, 2015 Life expectancy¹, 2013 childcare and of insufficient take-up of paternity leave. 1. Covers areas with Roma community representing 10 to 25% of the total population. This has negative effects on gender equity. Source: European Union Agency for Fundamental Rights (2016) and B. Gavurová et al. (2014). 1 2 http://dx.doi.org/10.1787/888933499895 Enhancing public-sector efficiency to raise living standards for all Students’ education outcomes Educational outcomes have declined, and the education are weak and deteriorating system does not do a good enough job preparing students Average of mean score in science, reading and mathematics for the labour market. Long-term unemployment is high, 510 despite a strong labour market. At the same time, many OECD Slovak Republic young talented Slovaks are studying and working abroad. 500 For its part productivity is hindered by a poor business 490 environment in the non-tradables sector, especially in 480 professional services and network industries. Important public-sector weaknesses, including low efficiency, 470 widespread corruption and inadequate infrastructure 460 hinder inclusive growth. Population ageing will put 2006 2009 2012 2015 increasing pressure on the health-care system, which Source: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education. already suffers from poor efficiency and generates 1 2 http://dx.doi.org/10.1787/888933499901 mediocre health-care outcomes. 10 OECD ECONOMIC SURVEYS: SLOVAK REPUBLIC © OECD 2017 EXECUTIVE SUMMARY MAIN FINDINGS KEY RECOMMENDATIONS Fiscal and financial policies and public-sector reforms The economy continues to expand but with growing tensions on Stand ready to further tighten macro-prudential policy settings if capacity and swiftly rising housing loans. financial-sector risks do not diminish. The fiscal situation is healthy, as strong growth and efforts to Pursue budget balance by 2019 as planned. boost tax collection are generating rapid revenue growth. Priority areas for improvement are education and Roma Increase public-spending efficiency by expanding and deepening integration. In the medium term population ageing will put spending reviews (“Value for Money” initiatives) to allow higher pressure on spending. spending in priority areas such as education and Roma integration. The existing debt ceiling is not an effective operational fiscal Supplement the current debt ceilings with a much lower non- rule and entails the risk of pro-cyclical policy when debt binding debt target, and implement the promised expenditure approaches the ceiling. ceilings. Despite considerable progress, tax evasion remains substantial. Merge the tax/customs and social security agencies to raise revenues. Link the IT systems of the tax administration and banks. The tax mix imposes too high a tax burden on low-skilled Further shift the tax burden from labour to less distortive bases workers. such as real estate, alcohol and environmental externalities such as air pollution. Air quality suffers from heavy use of brown coal in power Remove support for brown coal mining in electricity generation. generation. Corruption is still perceived to be a problem. Proceed with the OECD audit and integrity assessment of anti-corruption laws. Ensure proper implementation of all recommendations. Fostering inclusiveness and well-being The weak integration of Roma is a serious inclusiveness Raise pre-school attendance of the poor with conditional cash challenge. transfers. Promote Roma access to health care by increasing support for trained Roma mediator programmes. Develop statistics to monitor the effectiveness of support to the Roma. Weak geographic labour mobility contributes to regional Phase out financial incentives for homeownership. disparities and reflects in part an underdeveloped rental market. Develop long-term rental contracts better protecting landlords’ rights, while ensuring stability and predictability for tenants. Amenable mortality is high, reflecting poor primary health care Further increase medical school places for GPs, and expand their and a lack of general practitioners (GPs). prescription-writing authority. Expand fee-for-service payments for GPs primary care procedures. Hospital-care financing is deficient, and management is poor. Phase in the diagnosis-related-group-based hospital financing There are too many acute-care beds. system. Further centralise hospital procurement, professionalise their management and decouple salaries from national average wage. Further cut the number of acute-care beds. The supply of long-term care for dependent people is Create regional one-stop shops with well-trained personnel to underdeveloped and fragmented. coordinate and simplify access to long-term care services. Boosting skills, employment and productivity Educational outcomes are below the OECD average and Further increase teachers’ salaries, particularly for starting teachers, declining, in part due to poorly motivated and trained teachers. conditional on improved teaching quality through high-quality professional development and increased focus on disadvantaged pupils. There is substantial scope to raise the quality of university Increase the transparency and independence of the tertiary quality- research. Tertiary education does not properly prepare students assurance framework to international standards. for the labour market. Boost the funding of internationally recognised research. Introduce a graduate tracking system to improve the responsiveness of tertiary education to labour market needs. Skilled workers are in short supply. Emigration and young Simplify work visa and residence procedures for skilled workers. mothers’ work disincentives are reducing employment and harming inclusive growth. Expedite the expansion of high-quality early childcare. Make some of the currently long parental leave available only to fathers. Productivity in non-tradable sectors is hindered by barriers to Lower licencing restrictions for legal services, architects and entrepreneurship. engineers. Further reduce public-sector involvement in network industries. OECD ECONOMIC SURVEYS: SLOVAK REPUBLIC © OECD 2017 11 OECD Economic Surveys: Slovak Republic © OECD 2017 Assessment and recommendations ● Maintaining solid growth in living standards over the longer term will be challenging ● Improving labour market performance ● Improving