Europe > Slovenia, Republic of

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International Monetary Fund. Fiscal Affairs Dept.
At the request of the Permanent Secretary of the Ministry of Finance (MOF) of Cyprus, a capacity development mission from the International Monetary Fund’s Fiscal Affairs Department (FAD) visited Nicosia during the period June 18 – July 1, 2024. The purpose of the mission was to review the levels and composition of government employment and compensation and identify policy options to ensure adequate and sustainable compensation spending.
Aleš Bulíř
and
Khyati Chauhan
No large European countries and only few small ones have met the so-called Bohn rule during the past 40 years or so. The Bohn rule specifies that past increases of public debt need to be systematically compensated with current and future fiscal surpluses to stabilize debt at some steady-state level. We find that post-1980 European fiscal primary balances have been driven by spending growth and consumption smoothing. The results change little between periods before and after the global financial crisis.
International Monetary Fund. Fiscal Affairs Dept.

Slovenia’s public investment management institutions, as assessed by the PIMA, perform well overall relative to European peers. Availability of funding for public investment, fiscal targets and rules, maintenance funding and monitoring of public assets are areas of strength. Key areas for improvement are appraisal and selection of projects, procurement, and portfolio management and oversight. The near-term challenge will be to address bottlenecks in the execution of capital projects. Over the medium to longer term, tighter fiscal constraints will raise the premium for stronger appraisal and selection processes.

International Monetary Fund. Fiscal Affairs Dept.
Slovenia’s public investment management institutions, as assessed by the PIMA, perform well overall relative to European peers. Availability of funding for public investment, fiscal targets and rules, maintenance funding and monitoring of public assets are areas of strength. Key areas for improvement are appraisal and selection of projects, procurement, and portfolio management and oversight. The near-term challenge will be to address bottlenecks in the execution of capital projects. Over the medium to longer term, tighter fiscal constraints will raise the premium for stronger appraisal and selection processes.
International Monetary Fund. European Dept.
The 2024 Article IV Consultation explains that the euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025. Increasing real wages together with some drawdown of household savings are contributing to consumption, while the projected easing of financing conditions is supporting a recovery in investment. A modest pickup in growth is projected for 2024, strengthening further in 2025. This primarily reflects expected stronger consumption on the back of rising real wages and higher investment supported by easing financing conditions. Inflation is projected to return to target in the second half of 2025. The economy is confronting important new challenges, layered on existing ones. Beyond returning inflation to target and ensuring credible fiscal consolidation in high-debt countries, the euro area must urgently focus on enhancing innovation and productivity. Higher growth is essential for creating policy space to tackle the fiscal challenges of aging, the green transition, energy security, and defense.
International Monetary Fund. European Dept.
The 2024 Article IV Consultation highlights that Slovenia’s economy recovered well from the pandemic, only to be hit by spillovers from the war in Ukraine, followed by severe flooding in 2023. After a strong recovery in 2021, growth slowed in 2022 because of adverse energy price spillovers from the war in Ukraine and supply chain disruptions. Growth is expected to accelerate, driven by a recovery in domestic demand. Inflation is projected to continue to decline. The outlook remains subject to high uncertainty, with risks stemming from an intensification of regional conflicts, renewed commodity price volatility, and lower trading partners’ demand on the external side and labor shortages and broader capacity constraints on the domestic side. Severe weather events also remain a risk. Given underlying increase in core public spending in recent years, age-related spending pressures, and relatively high public debt, sustained fiscal consolidation and fiscal reforms, including in taxation, the pension, public wage and health systems, are needed to underpin long-term public debt sustainability. Deeper structural reforms would help boost growth and foster income convergence. Longer-term limits on employment growth call for reforms enhancing productivity growth, including improving regulatory quality, building human capital, and deepening the financial sector.
International Monetary Fund. European Dept.
This Selected Issues paper focuses on boosting productivity in Slovenia. Slovenia’s ageing population sets a constraint on the contribution of labor to gross domestic product in the end.Only achieve sustained increases in income and living standards can, therefore, through investment in physical and human capital and, more importantly, through enhancing productivity, historically the key growth driver. This paper summarizes historical trends in growth and productivity in Slovenia, examines the country’s strengths and weaknesses in terms of key factors affecting productivity identified in the literature. Since the scope for future labor contributions to growth in Slovenia is limited for demographic reasons—apart from further improvements to labor quality—the focus of economic growth policies should be on reinvigorating private investment, which has been low over the past decade, and pursuing labor and product market reforms that boost total factor productivity growth.
International Monetary Fund. European Dept.

1. Slovenia is a high-income Eurozone member with strong human development and governance indicators. Slovenia has high per capita income and one of the lowest inequality rates in Europe. The country also scores highly on human development indicators and has effective institutions.