LJUBLJANA (Slovenia), November 13 (SeeNews) – Slovenia should keep expenditure growth under strict control to achieve its medium-term fiscal targets in light of still-high public debt levels, the European Bank for Reconstruction and Development (EBRD) said on Tuesday.
The country's ageing population highlights the need to reform the pension, health and long-term care systems, the EBRD said its 2018-2019 Transition Report.
“The budget balance improvement and strong nominal GDP growth led to a significant decline (around 4.5 percentage points) in the ratio of public debt to GDP in 2017,” the report noted, adding that despite falling further to 72.8% of GDP in June 2018, the debt level is still high.
The EBRD also said that simplifying corporate ownership structures in the state sector and stepping up privatisation would enhance competitiveness.
“Privatisations continue to lag behind schedule and need to be accelerated, while tackling cross-ownership among Slovenian companies would lead to better corporate governance,” the bank said.
Corporate over-indebtedness calls for more capital market financing (primarily equity) and governance improvements, the lender said, noting that Slovenia has one of the highest ratios of long-term debt of over-indebted companies to GDP among central and eastern European countries.
“Slovenia’s economy is projected to grow more slowly in 2018 and 2019, at 4.2 and 3.3 per cent, respectively, as temporary effects of the new EU funding cycle subside and the economy reaches its potential,” the EBRD said, adding that a stronger-than-envisaged government investment cycle and growth in private consumption could push up growth rates above projections in the short run.
Slovenia should also focus on improving some remaining problematic areas in business environment. According to the World Bank Doing Business 2019 report, Slovenia ranks 40th out of 190 countries, three places down from the year before.