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Economic Policy Reforms 2023
Going for Growth
Report
Economic Policy Reforms
Table of contents
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Slovenia
Product and labour markets functioning
Performance gaps
Sectoral wage bargaining reduces the allocative efficiency of the labour market. Improving the functioning of labour reallocation will support productivity, and thus income convergence with richer OECD countries, by freeing up scarce labour resources in underperforming firms toward more productive ones.
High labour taxes deter labour market participation. A concern is the low labour force participation of older workers.
Widespread state-ownership is holding back business dynamism, as State-Owned Enterprises still account for a larger share of employment than elsewhere in the OECD.
Recommendations
Encourage wage-setting at the firm level and determine framework conditions, such as seniority bonuses and minimum wages, at the sectoral level.
Make the tax system more growth-friendly by further reducing labour taxes and increasing consumption and property taxes.
Continue privatisation efforts particularly in inherently competitive sectors such as tourism and strengthen the corporate governance of State-Owned Enterprises.
Digital transition
Performance gaps
The government has set the ambitious target to make Slovenia one of the five most digitalised EU countries. While the country performs well in mobile broadband coverage and young people’s digital skills, further efforts are needed to achieve the government’s objective. These include addressing the insufficient rollout of broadband in rural areas, the low use of e-government services among the population, and underdeveloped capital markets.
Recommendations
Align investment subsidies to reflect actual broadband deployment costs, particularly in underserved areas.
Move from opt-in (voluntary-based) to opt-out (compulsory-based) systems in e-government services.
Promote digitalisation in the financial sector through evaluating the regulatory burden, and a closer alignment of FinTech regulations with other European countries.
Inclusiveness, social protection, and ageing
Performance gaps
Pension reforms are needed to prepare for the fiscal challenges associated with population ageing. The effective retirement age is among the lowest in the EU. Together with recent unfunded increases in pension benefits, this makes for one of the highest projected pension spending increases in the OECD.
Recommendations
Develop a medium-term fiscal consolidation plan to address the long-run challenges of ageing.
Raise the minimum years of contributions required to retire and use lifetime incomes to determine pension benefits.
Climate transition
Performance gaps
Growth has become less CO2–intensive. Nonetheless, more concerted action is needed to achieve the ambitious net-zero target by 2050. Carbon pricing varies across sectors and activities, leading to varying abatement costs, and thus higher costs of achieving environmental targets.
Recommendations
Introduce and gradually align carbon taxes in residential, commercial and industrial sectors.
Phase out fossil fuel-based boilers and complement the replacement subsidy for older wood-based boilers with regulatory requirements and financial sanctions.