TAILIEUCHUNG - OECD Economic Surveys SLOVENIA 2011

This is important for two reasons. First, insofar as trade is driving GDP, it will not be negatively impacted by a fiscal adjustment. The demand from outside of the country will not be reduced by a country’s decision to raise taxes or cut spending. The second reason it is important is that the fiscal adjustment can actually boost trade. A lower deficit can lead to a decline in interest rates, which can in turn be expected to lead to a lower value for the country’s currency relative to that of its trading partners. This raises the final important. | OECD Economic Surveys SLOVENIA FEBRUARY 2011 OVERVIEW OECD Summary Slovenia has been deeply affected by the global crisis but is now recovering gradually along with the rest of the OECD area. As Slovenia is a small open economy within the euro area it is crucial for it to rapidly rebalance its economy and restore competitiveness. The proposed pension reform is a first step in the right direction to improve fiscal sustainability and boost labour supply. However a further comprehensive pension reform is needed. To get closer to the technology and efficiency frontiers reforms of the education system and policies to promote innovation labour market flexibility and a friendlier environment for foreign direct investment FDI would be helpful. A sustainable consolidation of public finances is necessary to maintain investor confidence. The fiscal targets of the government s consolidation plan are appropriate but all spending reductions planned through 2013 should be spelled out in full to foster market confidence and additional measures should be considered if needed. The introduction of an expenditure rule and the establishment of a fiscal council are welcome but the government should avoid inconsistency of macroeconomic forecasts by making the Institute of Macroeconomic Analysis and Development IMAD the only source of the macroeconomic assumptions used for the budget law as was the case prior to summer 2010. As the proposed pension reform falls well short of expected financing needs by 2060 a further more comprehensive reform is needed to reduce the generosity of the pension system and move it to actuarial neutrality. More resources should be shifted to tertiary education and spending efficiency should be enhanced at below upper-secondary education levels. Slovenia is the only OECD country where spending per student at the tertiary level is less than that at lower levels of education. Further resources need to be directed to tertiary education where there is room for .

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